THE APPLICABLE LAWS

1) G.R. No. 78909 June 30, 1989

MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA L. DORADO,
President, petitioner,
vs. THE HONORABLE SECRETARY OF LABOR AND THE REGIONAL DlRECTOR
OF LABOR, REGION X, respondents.
MEDIALDEA, J.:
This is a petition for certiorari seeking the annulment of the Decision of the
respondent Secretary of Labor dated September 24, 1986, affirming with
modification the Order of respondent Regional Director of Labor, Region X, dated
August 4, 1986, awarding salary differentials and emergency cost of living
allowances (ECOLAS) to employees of petitioner, and the Order denying petitioner's
motion for reconsideration dated May 13, 1987, on the ground of grave abuse of
discretion.
Petitioner is a semi-government hospital, managed by the Board of Directors of the
Cagayan de Oro Women's Club and Puericulture Center, headed by Mrs. Antera
Dorado, as holdover President. The hospital derives its finances from the club itself
as well as from paying patients, averaging 130 per month. It is also partly
subsidized by the Philippine Charity Sweepstakes Office and the Cagayan De Oro
City government.
Petitioner has forty-one (41) employees. Aside from salary and living allowances,
the employees are given food, but the amount spent therefor is deducted from their
respective salaries (pp. 77-78, Rollo).
On May 23, 1986, ten (10) employees of the petitioner employed in different
capacities/positions filed a complaint with the Office of the Regional Director of
Labor and Employment, Region X, for underpayment of their salaries and ECOLAS,
which was docketed as ROX Case No. CW-71-86.
On June 16, 1986, the Regional Director directed two of his Labor Standard and
Welfare Officers to inspect the records of the petitioner to ascertain the truth of the
allegations in the complaints (p. 98, Rollo). Payrolls covering the periods of May,
1974, January, 1985, November, 1985 and May, 1986, were duly submitted for
inspection.
On July 17, 1986, the Labor Standard and Welfare Officers submitted their report
confirming that there was underpayment of wages and ECOLAs of all the employees
by the petitioner, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, deficiency on wage and ecola as verified
and confirmed per review of the respondent payrolls and interviews
with the complainant workers and all other information gathered by the
team, it is respectfully recommended to the Honorable Regional
Director, this office, that Antera Dorado, President be ORDERED to pay
the amount of SIX HUNDRED FIFTY FOUR THOUSAND SEVEN HUNDRED
FIFTY SIX & 01/100 (P654,756.01), representing underpayment of
wages and ecola to the THIRTY SIX (36) employees of the said hospital
as appearing in the attached Annex "F" worksheets and/or whatever
action equitable under the premises. (p. 99, Rollo)
Based on this inspection report and recommendation, the Regional Director issued
an Order dated August 4, 1986, directing the payment of P723,888.58, representing

underpayment of wages and ECOLAs to all the petitioner's employees, the

dispositive portion of which reads:
WHEREFORE, premises considered, respondent Maternity and Children
Hospital is hereby ordered to pay the above-listed complainants the
total amount indicated opposite each name, thru this Office within ten
(10) days from receipt thereof. Thenceforth, the respondent hospital is
also ordered to pay its employees/workers the prevailing statutory
minimum wage and allowance.
SO ORDERED. (p. 34, Rollo)
Petitioner appealed from this Order to the Minister of Labor and Employment, Hon.
Augusto S. Sanchez, who rendered a Decision on September 24, 1986, modifying
the said Order in that deficiency wages and ECOLAs should be computed only from
May 23, 1983 to May 23, 1986, the dispositive portion of which reads:
WHEREFORE, the August 29, 1986 order is hereby MODIFIED in that
the deficiency wages and ECOLAs should only be computed from May
23, 1983 to May 23, 1986. The case is remanded to the Regional
Director, Region X, for recomputation specifying the amounts due each
the complainants under each of the applicable Presidential Decrees. (p.
40, Rollo)
On October 24, 1986, the petitioner filed a motion for reconsideration which was
denied by the Secretary of Labor in his Order dated May 13, 1987, for lack of merit
(p. 43 Rollo).
The instant petition questions the all-embracing applicability of the award involving
salary differentials and ECOLAS, in that it covers not only the hospital employees
who signed the complaints, but also those (a) who are not signatories to the
complaint, and (b) those who were no longer in the service of the hospital at the
time the complaints were filed.
Petitioner likewise maintains that the Order of the respondent Regional Director of
Labor, as affirmed with modifications by respondent Secretary of Labor, does not
clearly and distinctly state the facts and the law on which the award was based. In
its "Rejoinder to Comment", petitioner further questions the authority of the
Regional Director to award salary differentials and ECOLAs to private respondents,
(relying on the case of Encarnacion vs. Baltazar, G.R. No. L-16883, March 27, 1961,
1 SCRA 860, as authority for raising the additional issue of lack of jurisdiction at any
stage of the proceedings, p. 52, Rollo), alleging that the original and exclusive
jurisdiction over money claims is properly lodged in the Labor Arbiter, based on
Article 217, paragraph 3 of the Labor Code.
The primary issue here is whether or not the Regional Director had jurisdiction over
the case and if so, the extent of coverage of any award that should be forthcoming,
arising from his visitorial and enforcement powers under Article 128 of the Labor
Code. The matter of whether or not the decision states clearly and distinctly
statement of facts as well as the law upon which it is based, becomes relevant after
the issue on jurisdiction has been resolved.
This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as
amended by E.O. No. 111. Labor standards refer to the minimum requirements
prescribed by existing laws, rules, and regulations relating to wages, hours of work,

cost of living allowance and other monetary and welfare benefits, including
occupational, safety, and health standards (Section 7, Rule I, Rules on the
Disposition of Labor Standards Cases in the Regional Office, dated September 16,
1987). 1 Under the present rules, a Regional Director exercises both visitorial and
enforcement power over labor standards cases, and is therefore empowered to
adjudicate money claims, provided there still exists an employer-employee
relationship, and the findings of the regional office is not contested by the employer
concerned.
Prior to the promulgation of E.O. No. 111 on December 24, 1986, the Regional
Director's authority over money claims was unclear. The complaint in the present
case was filed on May 23, 1986 when E.O. No. 111 was not yet in effect, and the
prevailing view was that stated in the case of Antonio Ong, Sr. vs. Henry M. Parel, et
al., G.R. No. 76710, dated December 21, 1987, thus:
. . . the Regional Director, in the exercise of his visitorial and
enforcement powers under Article 128 of the Labor Code, has no
authority to award money claims, properly falling within the jurisdiction
of the labor arbiter. . . .
. . . If the inspection results in a finding that the employer has violated
certain labor standard laws, then the regional director must order the
necessary rectifications. However, this does not include adjudication of
money claims, clearly within the ambit of the labor arbiter's authority
under Article 217 of the Code.
The Ong case relied on the ruling laid down in Zambales Base Metals Inc. vs. The
Minister of Labor, et al., (G.R. Nos. 73184-88, November 26, 1986, 146 SCRA 50)
that the "Regional Director was not empowered to share in the original and
exclusive jurisdiction conferred on Labor Arbiters by Article 217."
We believe, however, that even in the absence of E. O. No. 111, Regional Directors
already had enforcement powers over money claims, effective under P.D. No. 850,
issued on December 16, 1975, which transferred labor standards cases from the
arbitration system to the enforcement system.
To clarify matters, it is necessary to enumerate a series of rules and provisions of
law on the disposition of labor standards cases.
Prior to the promulgation of PD 850, labor standards cases were an exclusive
function of labor arbiters, under Article 216 of the then Labor Code (PD No. 442, as
amended by PD 570-a), which read in part:
Art. 216. Jurisdiction of the Commission. The Commission shall have
exclusive appellate jurisdiction over all cases decided by the Labor
Arbiters and compulsory arbitrators.
The Labor Arbiters shall have exclusive jurisdiction to hear and decide
the following cases involving all workers whether agricultural or nonagricultural.
xxx xxx xxx
(c) All money claims of workers, involving non-payment or
underpayment of wages, overtime compensation,
separation pay, maternity leave and other money claims
arising from employee-employer relations, except claims
for workmen's compensation, social security and
medicare benefits;

(d) Violations of labor standard laws;

xxx xxx xxx
(Emphasis supplied)
The Regional Director exercised visitorial rights only under then Article 127 of the
Code as follows:
ART. 127. Visitorial Powers. The Secretary of Labor or his duly
authorized representatives, including, but not restricted, to the labor
inspectorate, shall have access to employers' records and premises at
any time of the day or night whenever work is being undertaken
therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to
determine violations or in aid in the enforcement of this Title and of
any Wage Order or regulation issued pursuant to this Code.
With the promulgation of PD 850, Regional Directors were given enforcement
powers, in addition to visitorial powers. Article 127, as amended, provided in part:
SEC. 10. Article 127 of the Code is hereby amended to read as follows:
Art. 127. Visitorial and enforcement powers.
xxx xxx xxx
(b) The Secretary of Labor or his duly
authorized representatives shall have the
power to order and administer, after due
notice and hearing, compliance with the
labor standards provisions of this Code based
on the findings of labor regulation officers or
industrial safety engineers made in the
course of inspection, and to issue writs of
execution to the appropriate authority for the
enforcement of their order.
xxx xxx xxx
Labor Arbiters, on the other hand, lost jurisdiction over labor standards cases.
Article 216, as then amended by PD 850, provided in part:
SEC. 22. Article 216 of the Code is hereby amended to read as follows:
Art. 216. Jurisdiction of Labor Arbiters and the
Commission. (a) The Labor Arbiters shall have
exclusive jurisdiction to hear and decide the following
cases involving all workers, whether agricultural or nonagricultural:
xxx xxx xxx
(3) All money claims of workers involving
non-payment or underpayment of wages,
overtime
or
premium
compensation,
maternity or service incentive leave,
separation pay and other money claims
arising from employer-employee relations,
except claims for employee's compensation,
social security and medicare benefits and as
otherwise provided in Article 127 of this
Code.
xxx xxx xxx
(Emphasis supplied)

Under the then Labor Code therefore (PD 442 as amended by PD 570-a, as further
amended by PD 850), there were three adjudicatory units: The Regional Director,
the Bureau of Labor Relations and the Labor Arbiter. It became necessary to clarify
and consolidate all governing provisions on jurisdiction into one document. 2 On
April 23, 1976, MOLE Policy Instructions No. 6 was issued, and provides in part (on
labor standards cases) as follows:
POLICY INSTRUCTIONS NO. 6
TO: All Concerned
SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR CASES
xxx xxx xxx
1. The following cases are under the exclusive original
jurisdiction of the Regional Director.
a) Labor standards cases arising from
violations of labor standard laws discovered
in the course of inspection or complaints
where employer-employee relations still
exist;
xxx xxx xxx
2. The following cases are under the exclusive original
jurisdiction of the Conciliation Section of the Regional
Office:
a) Labor standards cases where employeremployee relations no longer exist;
xxx xxx xxx
6. The following cases are certifiable to the Labor Arbiters:
a) Cases not settled by the Conciliation
Section of the Regional Office, namely:
1) labor standard cases where employeremployee relations no longer exist;
xxx xxx xxx
(Emphasis supplied)
MOLE Policy Instructions No. 7 (undated) was likewise subsequently issued,
enunciating the rationale for, and the scope of, the enforcement power of the
Regional Director, the first and second paragraphs of which provide as follows:
POLICY INSTRUCTIONS NO. 7
TO: All Regional Directors
SUBJECT: LABOR STANDARDS CASES
Under PD 850, labor standards cases have been taken from the
arbitration system and placed under the enforcement system, except
where a) questions of law are involved as determined by the Regional
Director, b) the amount involved exceeds P100,000.00 or over 40% of
the equity of the employer, whichever is lower, c) the case requires
evidentiary matters not disclosed or verified in the normal course of
inspection, or d) there is no more employer-employee relationship.
The purpose is clear: to assure the worker the rights and benefits due
to him under labor standards laws without having to go through
arbitration. The worker need not litigate to get what legally belongs to
him. The whole enforcement machinery of the Department of Labor
exists to insure its expeditious delivery to him free of charge.
(Emphasis supplied)

Under the foregoing, a complaining employee who was denied his rights and
benefits due him under labor standards law need not litigate. The Regional Director,
by virtue of his enforcement power, assured "expeditious delivery to him of his
rights and benefits free of charge", provided of course, he was still in the employ of
the firm.
After PD 850, Article 216 underwent a series of amendments (aside from being renumbered as Article 217) and with it a corresponding change in the jurisdiction of,
and supervision over, the Labor Arbiters:
1. PD 1367 (5-1-78) gave Labor Arbiters exclusive
jurisdiction over unresolved issues in collective
bargaining, etc., and those cases arising from employeremployee relations duly indorsed by the Regional
Directors. (It also removed his jurisdiction over moral or
other damages) In other words, the Labor Arbiter
entertained cases certified to him. (Article 228, 1978
Labor Code.)
2. PD 1391 (5-29-78) all regional units of the National
Labor Relations Commission (NLRC) were integrated into
the Regional Offices Proper of the Ministry of Labor;
effectively transferring direct administrative control and
supervision over the Arbitration Branch to the Director of
the Regional Office of the Ministry of Labor. "Conciliable
cases" which were thus previously under the jurisdiction
of the defunct Conciliation Section of the Regional Office
for purposes of conciliation or amicable settlement,
became immediately assignable to the Arbitration Branch
for joint conciliation and compulsory arbitration. In
addition, the Labor Arbiter had jurisdiction even over
termination and labor-standards cases that may be
assigned to them for compulsory arbitration by the
Director of the Regional Office. PD 1391 merged
conciliation and compulsory arbitration functions in the
person of the Labor Arbiter. The procedure governing the
disposition of cases at the Arbitration Branch paralleled
those in the Special Task Force and Field Services Division,
with one major exception: the Labor Arbiter exercised full
and untrammelled authority in the disposition of the case,
particularly in the substantive aspect, his decisions and
orders subject to review only on appeal to the NLRC. 3
3. MOLE Policy Instructions No. 37 Because of the
seemingly overlapping functions as a result of PD 1391,
MOLE Policy Instructions No. 37 was issued on October 7,
1978, and provided in part:
POLICY INSTRUCTIONS NO. 37
TO: All Concerned
SUBJECT: ASSIGNMENT OF CASES TO LABOR ARBITERS
Pursuant to the provisions of Presidential Decree No. 1391
and to insure speedy disposition of labor cases, the
following guidelines are hereby established for the
information and guidance of all concerned.

1. Conciliable Cases.
Cases which are conciliable per se i.e., (a) labor standards
cases where employer-employee relationship no longer
exists; (b) cases involving deadlock in collective
bargaining, except those falling under P.D. 823, as
amended; (c) unfair labor practice cases; and (d) overseas
employment cases, except those involving overseas
seamen, shall be assigned by the Regional Director to the
Labor Arbiter for conciliation and arbitration without
coursing them through the conciliation section of the
Regional Office.
2. Labor Standards Cases.
Cases involving violation of labor standards laws where
employer- employee relationship still exists shall be
assigned to the Labor Arbiters where:
a) intricate questions of law are involved; or
b) evidentiary matters not disclosed or
verified in the normal course of inspection by
labor regulations officers are required for
their proper disposition.
3. Disposition of Cases.
When a case is assigned to a Labor Arbiter, all issues
raised therein shall be resolved by him including those
which are originally cognizable by the Regional Director to
avoid multiplicity of proceedings. In other words, the
whole case, and not merely issues involved therein, shall
be assigned to and resolved by him.
xxx xxx xxx
(Emphasis supplied)
4. PD 1691(5-1-80) original and exclusive jurisdiction
over unresolved issues in collective bargaining and money
claims, which includes moral or other damages.
Despite the original and exclusive jurisdiction of labor arbiters over
money claims, however, the Regional Director nonetheless retained his
enforcement power, and remained empowered to adjudicate
uncontested money claims.
5. BP 130 (8-21-8l) strengthened voluntary arbitration.
The decree also returned the Labor Arbiters as part of the
NLRC, operating as Arbitration Branch thereof.
6. BP 227(6-1- 82) original and exclusive jurisdiction
over questions involving legality of strikes and lock-outs.
The present petition questions the authority of the Regional Director to issue the
Order, dated August 4, 1986, on the basis of his visitorial and enforcement powers
under Article 128 (formerly Article 127) of the present Labor Code. It is contended
that based on the rulings in the Ong vs. Parel (supra) and the Zambales Base
Metals, Inc. vs. The Minister of Labor (supra) cases, a Regional Director is precluded
from adjudicating money claims on the ground that this is an exclusive function of
the Labor Arbiter under Article 217 of the present Code.
On August 4, 1986, when the order was issued, Article 128(b) 4 read as follows:

(b) The Minister of Labor or his duly authorized

representatives shall have the power to order and
administer, after due notice and hearing, compliance with
the labor standards provisions of this Code based on the
findings of labor regulation officers or industrial safety
engineers made in the course of inspection, and to issue
writs of execution to the appropriate authority for the
enforcement of their order, except in cases where the
employer contests the findings of the labor regulations
officer and raises issues which cannot be resolved without
considering evidentiary matters that are not verifiable in
the normal course of inspection. (Emphasis supplied)
On the other hand, Article 217 of the Labor Code as amended by P.D. 1691,
effective May 1, 1980; Batas Pambansa Blg. 130, effective August 21, 1981; and
Batas Pambansa Blg. 227, effective June 1, 1982, inter alia, provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The
Labor Arbiters shall have the original and exclusive jurisdiction to hear
and decide within thirty (30) working days after submission of the case
by the parties for decision, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of
work and other terms and conditions of employment;
3. All money claims of workers, including those based on
non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided
by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and
maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this
Code, including questions involving the legality of strikes
and lock-outs. (Emphasis supplied)
The Ong and Zambales cases involved workers who were still connected with the
company. However, in the Ong case, the employer disputed the adequacy of the
evidentiary foundation (employees' affidavits) of the findings of the labor standards
inspectors while in the Zambales case, the money claims which arose from alleged
violations of labor standards provisions were not discovered in the course of normal
inspection. Thus, the provisions of MOLE Policy Instructions Nos. 6, (Distribution of
Jurisdiction Over Labor Cases) and 37 (Assignment of Cases to Labor Arbiters) giving
Regional Directors adjudicatory powers over uncontested money claims discovered
in the course of normal inspection, provided an employer-employee relationship still
exists, are inapplicable.
In the present case, petitioner admitted the charge of underpayment of wages to
workers still in its employ; in fact, it pleaded for time to raise funds to satisfy its
obligation. There was thus no contest against the findings of the labor inspectors.
Barely less than a month after the promulgation on November 26, 1986 of the
Zambales Base Metals case, Executive Order No. 111 was issued on December 24,
1986, 5 amending Article 128(b) of the Labor Code, to read as follows:

(b) THE PROVISIONS OF ARTICLE 217 OF THIS CODE TO

THE CONTRARY NOTWITHSTANDING AND IN CASES
WHERE THE RELATIONSHIP OF EMPLOYER-EMPLOYEE STILL
EXISTS, the Minister of Labor and Employment or his duly
authorized representatives shall have the power to order
and administer, after due notice and hearing, compliance
with the labor standards provisions of this Code AND
OTHER LABOR LEGISLATION based on the findings of labor
regulation officers or industrial safety engineers made in
the course of inspection, and to issue writs of execution to
the appropriate authority for the enforcement of their
orders, except in cases where the employer contests the
findings of the labor regulation officer and raises issues
which cannot be resolved without considering evidentiary
matters that are not verifiable in the normal course of
inspection. (Emphasis supplied)
As seen from the foregoing, EO 111 authorizes a Regional Director to order
compliance by an employer with labor standards provisions of the Labor Code and
other legislation. It is Our considered opinion however, that the inclusion of the
phrase, " The provisions of Article 217 of this Code to the contrary notwithstanding
and in cases where the relationship of employer-employee still exists" ... in Article
128(b), as amended, above-cited, merely confirms/reiterates the enforcement
adjudication authority of the Regional Director over uncontested money claims in
cases where an employer-employee relationship still exists. 6
Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions
Nos. 6, 7 and 37, it is clear that it has always been the intention of our labor
authorities to provide our workers immediate access (when still feasible, as where
an employer-employee relationship still exists) to their rights and benefits, without
being inconvenienced by arbitration/litigation processes that prove to be not only
nerve-wracking, but financially burdensome in the long run.
Note further the second paragraph of Policy Instructions No. 7 indicating that the
transfer of labor standards cases from the arbitration system to the enforcement
system is
. . to assure the workers the rights and benefits due to him under labor
standard laws, without having to go through arbitration. . .
so that
. . the workers would not litigate to get what legally belongs to him. ..
ensuring delivery . . free of charge.
Social justice legislation, to be truly meaningful and rewarding to our workers, must
not be hampered in its application by long-winded arbitration and litigation. Rights
must be asserted and benefits received with the least inconvenience. Labor laws
are meant to promote, not defeat, social justice.
This view is in consonance with the present "Rules on the Disposition of Labor
Standard Cases in the Regional Offices " 7 issued by the Secretary of Labor, Franklin
M. Drilon on September 16, 1987.
Thus, Sections 2 and 3 of Rule II on "Money Claims Arising from Complaint Routine
Inspection", provide as follows:
Section 2. Complaint inspection. All such complaints shall
immediately be forwarded to the Regional Director who shall refer the
case to the appropriate unit in the Regional Office for assignment to a

Labor Standards and Welfare Officer (LSWO) for field inspection. When
the field inspection does not produce the desired results, the Regional
Director shall summon the parties for summary investigation to
expedite the disposition of the case. . . .
Section 3. Complaints where no employer-employee relationship
actually exists. Where employer-employee relationship no longer
exists by reason of the fact that it has already been severed, claims for
payment of monetary benefits fall within the exclusive and original
jurisdiction of the labor arbiters. . . . (Emphasis supplied)
Likewise, it is also clear that the limitation embodied in MOLE Policy Instructions No.
7 to amounts not exceeding P100,000.00 has been dispensed with, in view of the
following provisions of pars. (b) and (c), Section 7 on "Restitution", the same Rules,
thus:
xxx xxx xxx
(b) Plant-level restitutions may be effected for money
claims not exceeding Fifty Thousand (P50,000.00). . . .
(c) Restitutions in excess of the aforementioned amount
shall be effected at the Regional Office or at the worksite
subject to the prior approval of the Regional Director.
which indicate the intention to empower the Regional Director to award money
claims in excess of P100,000.00; provided of course the employer does not contest
the findings made, based on the provisions of Section 8 thereof:
Section 8. Compromise agreement. Should the parties arrive at an
agreement as to the whole or part of the dispute, said agreement shall
be reduced in writing and signed by the parties in the presence of the
Regional Director or his duly authorized representative.
E.O. No. 111 was issued on December 24, 1986 or three (3) months after the
promulgation of the Secretary of Labor's decision upholding private respondents'
salary differentials and ECOLAs on September 24, 1986. The amendment of the
visitorial and enforcement powers of the Regional Director (Article 128-b) by said
E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to
empower the Regional Directors to resolve uncontested money claims in cases
where an employer-employee relationship still exists. This intention must be given
weight and entitled to great respect. As held in Progressive Workers' Union, et. al.
vs. F.P. Aguas, et. al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:
. . The interpretation by officers of laws which are entrusted to their
administration is entitled to great respect. We see no reason to detract
from this rudimentary rule in administrative law, particularly when
later events have proved said interpretation to be in accord with the
legislative intent. ..
The proceedings before the Regional Director must, perforce, be upheld on the basis
of Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this
executive order "to be considered in the nature of a curative statute with
retrospective application." (Progressive Workers' Union, et al. vs. Hon. F.P. Aguas, et
al. (Supra); M. Garcia vs. Judge A. Martinez, et al., G.R. No. L- 47629, May 28, 1979,
90 SCRA 331).
We now come to the question of whether or not the Regional Director erred in
extending the award to all hospital employees. We answer in the affirmative.

The Regional Director correctly applied the award with respect to those employees
who signed the complaint, as well as those who did not sign the complaint, but
were still connected with the hospital at the time the complaint was filed (See
Order, p. 33 dated August 4, 1986 of the Regional Director, Pedrito de Susi, p. 33,
Rollo).
The justification for the award to this group of employees who were not signatories
to the complaint is that the visitorial and enforcement powers given to the
Secretary of Labor is relevant to, and exercisable over establishments, not over the
individual members/employees, because what is sought to be achieved by its
exercise is the observance of, and/or compliance by, such firm/establishment with
the labor standards regulations. Necessarily, in case of an award resulting from a
violation of labor legislation by such establishment, the entire members/employees
should benefit therefrom. As aptly stated by then Minister of Labor Augusto S.
Sanchez:
. . It would be highly derogatory to the rights of the workers, if after
categorically finding the respondent hospital guilty of underpayment of
wages and ECOLAs, we limit the award to only those who signed the
complaint to the exclusion of the majority of the workers who are
similarly situated. Indeed, this would be not only render the
enforcement power of the Minister of Labor and Employment nugatory,
but would be the pinnacle of injustice considering that it would not only
discriminate but also deprive them of legislated benefits.
. . . (pp. 38-39, Rollo).
This view is further bolstered by the provisions of Sec. 6, Rule II of the "Rules on the
Disposition of Labor Standards cases in the Regional Offices" (supra) presently
enforced, viz:
SECTION 6. Coverage of complaint inspection. A complaint
inspection shall not be limited to the specific allegations or violations
raised by the complainants/workers but shall be a thorough inquiry into
and verification of the compliance by employer with existing labor
standards and shall cover all workers similarly situated. (Emphasis
supplied)
However, there is no legal justification for the award in favor of those employees
who were no longer connected with the hospital at the time the complaint was filed,
having resigned therefrom in 1984, viz:
1. Jean (Joan) Venzon (See Order, p. 33, Rollo)
2. Rosario Paclijan
3. Adela Peralta
4. Mauricio Nagales
5. Consesa Bautista
6. Teresita Agcopra
7. Felix Monleon
8. Teresita Salvador
9. Edgar Cataluna; and
10. Raymond Manija ( p.7, Rollo)

The enforcement power of the Regional Director cannot legally be upheld in cases of
separated employees. Article 129 of the Labor Code, cited by petitioner (p. 54,
Rollo) is not applicable as said article is in aid of the enforcement power of the
Regional Director; hence, not applicable where the employee seeking to be paid
underpayment of wages is already separated from the service. His claim is purely a
money claim that has to be the subject of arbitration proceedings and therefore
within the original and exclusive jurisdiction of the Labor Arbiter.
Petitioner has likewise questioned the order dated August 4, 1986 of the Regional
Director in that it does not clearly and distinctly state the facts and the law on which
the award is based.
We invite attention to the Minister of Labor's ruling thereon, as follows:
Finally, the respondent hospital assails the order under appeal as null
and void because it does not clearly and distinctly state the facts and
the law on which the awards were based. Contrary to the pretensions
of the respondent hospital, we have carefully reviewed the order on
appeal and we found that the same contains a brief statement of the
(a) facts of the case; (b) issues involved; (c) applicable laws; (d)
conclusions and the reasons therefor; (e) specific remedy granted
(amount awarded). (p. 40, Rollo)
ACCORDINGLY, this petition should be dismissed, as it is hereby DISMISSED, as
regards all persons still employed in the Hospital at the time of the filing of the
complaint, but GRANTED as regards those employees no longer employed at that
time.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Cortes, Grio-Aquino and Regalado, JJ., concur.
Separate Opinions
SARMIENTO, J., concurring:
Subject to my opinion in G.R. Nos. 82805 and 83205.
MELENCIO-HERRERA, J., concurring:
I concur, with the observation that even as reconciled, it would seem inevitable to
state that the conclusion in the Zambales and Ong cases that, prior to Executive
Order No. 111, Regional Directors were not empowered to share the original and
exclusive jurisdiction conferred on Labor Arbiters over money claims, is now
deemed modified, if not superseded.
It may not be amiss to state either that under Section 2, Republic Act No. 6715,
which amends further the Labor Code of the Philippines (PD No. 442), Regional
Directors have also been granted adjudicative powers, albeit limited, over monetary
claims and benefits of workers, thereby settling any ambiguity on the matter. Thus:
SEC. 2. Article 129 of the Labor Code of the Philippines, as amended, is
hereby further amended to read as follows:
Art. 129. Recovery of wages, simple money claims and
other benefits. Upon complaint of any interested party,
the Regional Director of the Department of Labor and
Employment or any of the duly authorized hearing officers
of the Department is empowered, through summary

proceeding and after due notice, to hear and decide any

matter involving the recovery of wages and other
monetary claims and benefits, including legal interest,
owing to an employee or person employed in domestic or
household service or househelper under this Code, arising
from employer-employee relations: Provided, That such
complaint does not include a claim for reinstatement:
Provided, further, That the aggregate money claims of
each employee or househelper do not exceed five
thousand pesos (P5,000.00). The Regional Director or
hearing officer shall decide or resolve the complaint
within thirty (30) calendar days from the date of the filing
of the same. ...
Separate Opinions
SARMIENTO, J., concurring:
Subject to my opinion in G.R. Nos. 82805 and 83205.
MELENCIO-HERRERA, J., concurring:
I concur, with the observation that even as reconciled, it would seem inevitable to
state that the conclusion in the Zambales and Ong cases that, prior to Executive
Order No. 111, Regional Directors were not empowered to share the original and
exclusive jurisdiction conferred on Labor Arbiters over money claims, is now
deemed modified, if not superseded.
It may not be amiss to state either that under Section 2, Republic Act No. 6715,
which amends further the Labor Code of the Philippines (PD No. 442), Regional
Directors have also been granted adjudicative powers, albeit limited, over monetary
claims and benefits of workers, thereby settling any ambiguity on the matter. Thus:
SEC. 2. Article 129 of the Labor Code of the Philippines, as amended, is
hereby further amended to read as follows:
Art. 129. Recovery of wages, simple money claims and
other benefits. Upon complaint of any interested party,
the Regional Director of the Department of Labor and
Employment or any of the duly authorized hearing officers
of the Department is empowered, through summary
proceeding and after due notice, to hear and decide any
matter involving the recovery of wages and other
monetary claims and benefits, including legal interest,
owing to an employee or person employed in domestic or
household service or househelper under this Code, arising
from employer-employee relations: Provided, That such
complaint does not include a claim for reinstatement:
Provided, further, That the aggregate money claims of
each employee or househelper do not exceed five
thousand pesos (P5,000.00). The Regional Director or
hearing officer shall decide or resolve the complaint
within thirty (30) calendar days from the date of the filing
of the same. ...

2) G.R. No. 167217

February 4, 2008

P.I. MANUFACTURING, INCORPORATED, petitioner, vs. P.I. MANUFACTURING

SUPERVISORS AND FOREMAN ASSOCIATION and the NATIONAL LABOR
UNION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
The Court has always promoted the policy of encouraging employers to grant wage
and allowance increases to their employees higher than the minimum rates of
increases prescribed by statute or administrative regulation. Consistent with this,
the Court also adopts the policy that requires recognition and validation of wage
increases given by employers either unilaterally or as a result of collective
bargaining negotiations in an effort to correct wage distortions.1
Before us is a motion for reconsideration of our Resolution dated April 18, 2005
denying the present petition for review on certiorari for failure of the petitioner to
show that a reversible error has been committed by the Court of Appeals in its (a)
Decision dated July 21, 2004 and (b) Resolution dated February 18, 2005.
The facts are:
Petitioner P.I. Manufacturing, Incorporated is a domestic corporation engaged in the
manufacture and sale of household appliances. On the other hand, respondent P.I.
Manufacturing Supervisors and Foremen Association (PIMASUFA) is an organization
of petitioners supervisors and foremen, joined in this case by its federation, the
National Labor Union (NLU).
On December 10, 1987, the President signed into law Republic Act (R.A.) No.
66402 providing, among others, an increase in the statutory minimum wage and
salary rates of employees and workers in the private sector. Section 2 provides:
SEC. 2. The statutory minimum wage rates of workers and employees in the
private sector, whether agricultural or non-agricultural, shall be increased by
ten pesos (P10.00) per day, except non-agricultural workers and employees
outside Metro Manila who shall receive an increase of eleven pesos (P11.00)
per day: Provided, That those already receiving above the minimum
wage up to one hundred pesos (P100.00) shall receive an increase of
ten pesos (P10.00) per day. Excepted from the provisions of this Act are
domestic helpers and persons employed in the personal service of another.
Thereafter, on December 18, 1987, petitioner and respondent PIMASUFA entered
into a new Collective Bargaining Agreement (1987 CBA) whereby the supervisors
were granted an increase of P625.00 per month and the foremen, P475.00 per
month. The increases were made retroactive to May 12, 1987, or prior to the
passage of R.A. No. 6640, and every year thereafter until July 26, 1989. The
pertinent portions of the 1987 CBA read:
ARTICLE IV
SALARIES AND OVERTIME
Section 1. The COMPANY shall grant to all regular supervisors and foremen
within the coverage of the unit represented by the ASSOCIATION, wage or
salary increases in the amount set forth as follows:

A. For FOREMEN
Effective May 12, 1987, an increase of P475,00 per month to all qualified
regular foremen who are in the service of the COMPANY as of said date and
who are still in its employ on the signing of this Agreement, subject to the
conditions set forth in sub-paragraph (d) hereunder;
a) Effective July 26, 1988, an increase of P475.00 per month/employee to all
covered foremen;
b) Effective July 26, 1989, an increase of P475.00 per month/per employee to
all covered foremen;
c) The salary increases from May 12, 1987 to November 30, 1987 shall be
excluding and without increment on fringe benefits and/or premium and shall
solely be on basic salary.
B. For SUPERVISORS
a) Effective May 12, 1987, an increase of P625.00 per month/employee to all
qualified regular supervisors who are in the service of the COMPANY as of
said date and who are still in its employ on the signing of the Agreement,
subject to the conditions set forth in subparagraph (d) hereunder;
b) Effective July 26, 1988, an increase of P625.00 per month/employee to all
covered supervisors;
c) Effective July 26, 1989, an increase of P625.00 per month/employee to all
covered supervisors;
d) The salary increase from May 12, 1987 to November 30, 1987 shall be
excluding and without increment on fringe benefits and/or premiums and
shall solely be on basic salary.
On January 26, 1989, respondents PIMASUFA and NLU filed a complaint with the
Arbitration Branch of the National Labor Relations Commission (NLRC), docketed as
NLRC-NCR Case No. 00-01-00584, charging petitioner with violation of R.A. No.
6640.3 Respondents attached to their complaint a numerical illustration of wage
distortion resulting from the implementation of R.A. No. 6640.
On March 19, 1990, the Labor Arbiter rendered his Decision in favor of respondents.
Petitioner was ordered to give the members of respondent PIMASUFA wage
increases equivalent to 13.5% of their basic pay they were receiving prior to
December 14, 1987. The Labor Arbiter held:
As regards the issue of wage distortion brought about by the implementation
of R.A. 6640 It is correctly pointed out by the union that employees cannot
waive future benefits, much less those mandated by law. That is against
public policy as it would render meaningless the law. Thus, the waiver in the
CBA does not bar the union from claiming adjustments in pay as a result of
distortion of wages brought about by the implementation of R.A. 6640.
Just how much are the supervisors and foremen entitled to correct such
distortion is now the question. Pursuant to the said law, those who on
December 14, 1987 were receiving less than P100.00 are all entitled to an
automatic across- the-board increase of P10.00 a day. The percentage in
increase given those who received benefits under R.A. 6640 should
be the same percentage given to the supervisors and foremen.
The statutory minimum pay then was P54.00 a day. With the addition of
P10.00 a day, the said minimum pay raised to P64.00 a day. The increase of
P10.00 a day is P13.5% of the minimum wage prior to December 14, 1987.

The same percentage of the pay of members of petitioner prior to December

14, 1987 should be given them.
Finally, the claim of respondent that the filing of the present case, insofar as
the provision of R.A. 6640 is concerned, is premature does not deserve much
consideration considering that as of December 1988, complainant submitted
in grievance the aforementioned issue but the same was not settled. 4
On appeal by petitioner, the NLRC, in its Resolution dated January 8, 1991, affirmed
the Labor Arbiters judgment.
Undaunted, petitioner filed a petition for certiorari with this Court. However, we
referred the petition to the Court of Appeals pursuant to our ruling in St. Martin
Funeral Homes v. NLRC.5 It was docketed therein as CA-G.R. SP No. 54379.
On July 21, 2004, the appellate court rendered its Decision affirming the Decision of
the NLRC with modification by raising the 13.5% wage increase to 18.5%. We
quote the pertinent portions of the Court of Appeals Decision, thus:
Anent the fourth issue, petitioner asseverates that the wage distortion issue
is already barred by Sec. 2 Article IV of the Contract denominated as "The
Company and Supervisors and Foremen Contract" dated December 18, 1987
declaring that it "absolves, quit claims and releases the COMPANY for
any monetary claim they have, if any there might be or there might
have been previous to the signing of this agreement." Petitioner
interprets this as absolving it from any wage distortion brought about by the
implementation of the new minimum wage law. Since the contract was signed
on December 17, 1987, or after the effectivity of Republic Act No. 6640,
petitioner claims that private respondent is deemed to have waived any
benefit it may have under the new law.
We are not persuaded.
Contrary to petitioners stance, the increase resulting from any wage
distortion caused by the implementation of Republic Act 6640 is not waivable.
As held in the case of Pure Foods Corporation vs. National Labor Relations
Commission, et al.:
"Generally, quitclaims by laborers are frowned upon as contrary to
public policy and are held to be ineffective to bar recovery for the full
measure of the workers rights. The reason for the rule is that the
employer and the employee do not stand on the same footing."
Moreover, Section 8 of the Rules Implementing RA 6640 states:
No wage increase shall be credited as compliance with the increase
prescribed herein unless expressly provided under valid individual
written/collective agreements; and provided further that such wage
increase was granted in anticipation of the legislated wage increase
under the act. But such increases shall not include anniversary wage
increases provided in collective bargaining agreements.
Likewise, Article 1419 of the Civil Code mandates that:
When the law sets, or authorizes the setting of a minimum wage for
laborers, and a contract is agreed upon by which a laborer accepts a
lower wage, he shall be entitled to recover the deficiency.
Thus, notwithstanding the stipulation provided under Section 2 of the
Company and Supervisors and Foremen Contract, we find the members of
private respondent union entitled to the increase of their basic pay due to
wage distortion by reason of the implementation of RA 6640.

On the last issue, the increase of 13.5% in the supervisors and foremens
basic salary must further be increased to 18.5% in order to correct the wage
distortion brought about by the implementation of RA 6640. It must be
recalled that the statutory minimum pay before RA 6640 was P54.00 a day.
The increase of P10.00 a day under RA 6640 on the prior minimum pay of
P54.00 is 18.5% and not 13.5%. Thus, petitioner should be made to pay the
amount equivalent to 18.5% of the basic pay of the members or private
respondent union in compliance with the provisions of Section 3 of RA 6640."
Petitioner filed a motion for reconsideration but it was denied by the appellate court
in its Resolution dated February 18, 2005.
Hence, the present recourse, petitioner alleging that the Court of Appeals erred:
1) In awarding wage increase to respondent supervisors and foremen to cure
an alleged wage distortion that resulted from the implementation of R.A. No.
6640.
2) In disregarding the wage increases granted under the 1987 CBA correcting
whatever wage distortion that may have been created by R.A. No. 6640.
3) In awarding wage increase equivalent to 18.5% of the basic pay of the
members of respondent PIMASUFA in violation of the clear provision of R.A.
No. 6640 excluding from its coverage employees receiving wages higher than
P100.00.
4) In increasing the NLRCs award of wage increase from 13.5% to 18.5%,
which increase is very much higher than the P10.00 daily increase mandated
by R.A. No. 6640.
Petitioner contends that the findings of the NLRC and the Court of Appeals as to the
existence of a wage distortion are not supported by evidence; that Section 2 of R.A.
No. 6640 does not provide for an increase in the wages of employees receiving
more than P100.00; and that the 1987 CBA has obliterated any possible wage
distortion because the increase granted to the members of respondent PIMASUFA in
the amount of P625.00 and P475.00 per month substantially widened the gap
between the foremen and supervisors and as against the rank and file employees.
Respondents PIMASUFA and NLU, despite notice, failed to file their
respective comments.
In a Minute Resolution dated April 18, 2005, we denied the petition for petitioners
failure to show that the Court of Appeals committed a reversible error.
Hence, this motion for reconsideration.
We grant the motion.
In the ultimate, the issue here is whether the implementation of R.A. No. 6640
resulted in a wage distortion and whether such distortion was cured or remedied by
the 1987 CBA.
R.A. No. 6727, otherwise known as the Wage Rationalization Act, explicitly defines
"wage distortion" as:
x x x a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such
wage structure based on skills, length of service, or other logical bases of
differentiation.
Otherwise stated, wage distortion means the disappearance or virtual
disappearance of pay differentials between lower and higher positions in an
enterprise because of compliance with a wage order. 6

In this case, the Court of Appeals correctly ruled that a wage distortion occurred due
to the implementation of R.A. No. 6640. The numerical illustration submitted by
respondents7 shows such distortion, thus:
II WAGE DISTORTION REGARDING RA-6640 (P10.00 per day increase effective
December 31, 1987)
Illustration of Wage Distortion and corresponding wage adjustments as
provided in RA-6640
NAME
OF RATE
RATE
P109.01
P118.80
P128.08
SUPERVISOR
(S) BEFORE
AFTER
OVEROVEROVERAND
INCREASE INCREASE PASSED
PASSED
PASSED
FOREMAN (F)
OF
OF
P108.80
P118.08
P123.76
RA-6640
RA-6640
RATE AFTER RATE AFTER RATE AFTER
P10.00
P10.00
ADJUSTMENT ADJUSTMENT ADJUSTMENT
P10.00
P10.00
P10.00
1. ALCANTARA, V (S)

P 99.01

P 109.01

2. MORALES, A (F)

94.93

104.93

3. SALVO, R (F)

96.45

106.45

Note: No. 1 to 3 with increase of RA-6640

4.BUENCUCHILLO,
(S)

C 102.38

102.38

P 112.38

5. MENDOZA, D (F)

107.14

107.14

117.14

6. DEL PRADO, M (S)

108.80

108.80

118.80

7. PALENSO, A (F)

109.71

109.71

P 119.71

8. OJERIO, E (S)

111.71

111.71

121.71

9. REYES, J (S)

114.98

114.98

124.98

10. PALOMIQUE, S (F) 116.79

116.79

126.79

11. PAGLINAWAN, A 116.98

(S)

116.98

126.98

12. CAMITO, M (S)

117.04

117.04

127.04

13. TUMBOCON, P (S) 117.44

117.44

127.44

14. SISON JR., B (S)

118.08

118.08

128.08

15. BORJA, R (S)

119.80

119.80

P 129.80

16. GINON, D (S)

123.76

123.76

133.76

17. GINON, T (S)

151. 49

151.49

18. ANDRES, M (S)

255.72

255.72

Note: No. 4 to 18 no increase in R.A. No. 6640

Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00 in
the wage rates of Alcantara, supervisor, and Morales and Salvo, both
foremen. They are petitioners lowest paid supervisor and foremen. As a
consequence, the increased wage rates of foremen Morales and Salvo exceeded
that of supervisor Buencuchillo. Also, the increased wage rate of supervisor
Alcantara exceeded those of supervisors Buencuchillo and Del Prado.
Consequently, the P9.79 gap or difference between the wage rate of supervisor Del

Prado and that of supervisor Alcantara was eliminated. Instead, the latter gained a
P.21 lead over Del Prado. Like a domino effect, these gaps or differences between
and among the wage rates of all the above employees have been substantially
altered and reduced. It is therefore undeniable that the increase in the wage
rates by virtue of R.A. No. 6640 resulted in wage distortion or the elimination of the
intentional quantitative differences in the wage rates of the above employees.
However, while we find the presence of wage distortions, we are convinced that the
same were cured or remedied when respondent PIMASUFA entered into the 1987
CBA with petitioner after the effectivity of R.A. No. 6640. The 1987 CBA increased
the monthly salaries of the supervisors by P625.00 and the foremen, by P475.00,
effective May 12, 1987. These increases re-established and broadened the
gap, not only between the supervisors and the foremen, but also between them and
the rank-and-file employees. Significantly, the 1987 CBA wage increases almost
doubled that of the P10.00 increase under R.A. No. 6640. The P625.00/month
means P24.03 increase per day for the supervisors, while the P475.00/month
means P18.26 increase per day for the foremen. These increases were to be
observed every year, starting May 12, 1987 until July 26, 1989. Clearly, the gap
between the wage rates of the supervisors and those of the foremen was inevitably
re-established. It continued to broaden through the years.
Interestingly, such gap as re-established by virtue of the CBA is more than a
substantial compliance with R.A. No. 6640. We hold that the Court of Appeals erred
in not taking into account the provisions of the CBA viz-a-viz the wage increase
under the said law. In National Federation of Labor v. NLRC,8 we held:
We believe and so hold that the re-establishment of a significant gap or
differential between regular employees and casual employees by operation of
the CBA was more than substantial compliance with the requirements of the
several Wage Orders (and of Article 124 of the Labor Code). That this reestablishment of a significant differential was the result of collective
bargaining negotiations, rather than of a special grievance
procedure, is not a legal basis for ignoring it. The NLRC En Banc was in
serious error when it disregarded the differential of P3.60 which had been
restored by 1 July 1985 upon the ground that such differential "represent[ed]
negotiated wage increase[s] which should not be considered covered and in
compliance with the Wage Orders. x x x"
In Capitol Wireless, Inc. v. Bate,9 we also held:
x x x The wage orders did not grant across-the-board increases to all
employees in the National Capital Region but limited such increases only to
those already receiving wage rates not more than P125.00 per day under
Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day under Wage
Order No. NCR-02. Since the wage orders specified who among the
employees are entitled to the statutory wage increases, then the increases
applied only to those mentioned therein. The provisions of the CBA
should be read in harmony with the wage orders, whose benefits
should be given only to those employees covered thereby.
It has not escaped our attention that requiring petitioner to pay all the members of
respondent PIMASUFA a wage increase of 18.5%, over and above the
negotiated wage increases provided under the 1987 CBA, is highly unfair and
oppressive to the former. Obviously, it was not the intention of R.A. No. 6640 to
grant an across-the-board increase in pay to all the employees of petitioner. Section
2 of R.A. No. 6640 mandates only the following increases in the private sector: (1)

P10.00 per day for the employees in the private sector, whether agricultural or nonagricultural, who are receiving the statutory minimum wage rates; (2) P11.00 per
day for non-agricultural workers and employees outside Metro Manila; and (3)
P10.00 per day for those already receiving the minimum wage up to
P100.00. To be sure, only those receiving wages P100.00 and below are entitled to
the P10.00 wage increase. The apparent intention of the law is only to
upgrade the salaries or wages of the employees specified therein.10 As the
numerical illustration shows, almost all of the members of respondent PIMASUFA
have been receiving wage rates above P100.00 and, therefore, not entitled to the
P10.00 increase. Only three (3) of them are receiving wage rates below P100.00,
thus, entitled to such increase. Now, to direct petitioner to grant an across-theboard increase to all of them, regardless of the amount of wages they are already
receiving, would be harsh and unfair to the former. As we ruled in Metropolitan Bank
and Trust Company Employees Union ALU-TUCP v. NLRC:11
x x x To compel employers simply to add on legislative increases in
salaries or allowances without regard to what is already being paid,
would be to penalize employers who grant their workers more than
the statutory prescribed minimum rates of increases. Clearly, this
would be counter-productive so far as securing the interests of labor
is concerned.
Corollarily, the Court of Appeals erred in citing Pure Foods Corporation v. National
Labor Relations Commission12 as basis in disregarding the provisions of the 1987
CBA. The case involves, not wage distortion, but illegal dismissal of employees from
the service. The Release and Quitclaim executed therein by the Pure Foods
employees were intended to preclude them from questioning the termination of
their services, not their entitlement to wage increase on account of a wage
distortion.
At this juncture, it must be stressed that a CBA constitutes the law between the
parties when freely and voluntarily entered into.13 Here, it has not been shown
that respondent PIMASUFA was coerced or forced by petitioner to sign the 1987
CBA. All of its thirteen (13) officers signed the CBA with the assistance of
respondent NLU. They signed it fully aware of the passage of R.A. No. 6640. The
duty to bargain requires that the parties deal with each other with open and fair
minds. A sincere endeavor to overcome obstacles and difficulties that may arise, so
that employer-employee relations may be stabilized and industrial strife eliminated,
must be apparent.14 Respondents cannot invoke the beneficial provisions of the
1987 CBA but disregard the concessions it voluntary extended to petitioner. The
goal of collective bargaining is the making of agreements that will stabilize business
conditions and fix fair standards of working conditions. 15 Definitely, respondents
posture contravenes this goal.
In fine, it must be emphasized that in the resolution of labor cases, this Court has
always been guided by the State policy enshrined in the Constitution that the rights
of workers and the promotion of their welfare shall be protected. However,
consistent with such policy, the Court cannot favor one party, be it labor or
management, in arriving at a just solution to a controversy if the party concerned
has no valid support to its claim, like respondents here.
WHEREFORE, we GRANT petitioners motion for reconsideration and REINSTATE
the petition we likewise GRANT. The assailed Decision of the Court of Appeals in
CA-G.R. SP No. 54379 is REVERSED.
SO ORDERED.

Puno, C.J., Chairperson, Corona, Azcuna, Leonardo-de Castro, JJ., concur.

3) G.R. No. 81958 June 30, 1988

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,
vs. HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and
TOMAS D. ACHACOSO, as Administrator of the Philippine Overseas
Employment Administration, respondents.
Gutierrez & Alo Law Offices for petitioner.
SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a
firm "engaged principally in the recruitment of Filipino workers, male and female, for
overseas placement," 1 challenges the Constitutional validity of Department Order
No. 1, Series of 1988, of the Department of Labor and Employment, in the character
of "GUIDELINES GOVERNING THE TEMPORARY SUSPENSION OF DEPLOYMENT OF
FILIPINO DOMESTIC AND HOUSEHOLD WORKERS," in this petition for certiorari and
prohibition. Specifically, the measure is assailed for "discrimination against males or
females;" 2 that it "does not apply to all Filipino workers but only to domestic
helpers and females with similar skills;" 3 and that it is violative of the right to
travel. It is held likewise to be an invalid exercise of the lawmaking power, police
power being legislative, and not executive, in character.
In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the
Constitution, providing for worker participation "in policy and decision-making
processes affecting their rights and benefits as may be provided by law." 4
Department Order No. 1, it is contended, was passed in the absence of prior
consultations. It is claimed, finally, to be in violation of the Charter's nonimpairment clause, in addition to the "great and irreparable injury" that PASEI
members face should the Order be further enforced.
On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of
Labor and Administrator of the Philippine Overseas Employment Administration,
filed a Comment informing the Court that on March 8, 1988, the respondent Labor
Secretary lifted the deployment ban in the states of Iraq, Jordan, Qatar, Canada,
Hongkong, United States, Italy, Norway, Austria, and Switzerland. * In submitting
the validity of the challenged "guidelines," the Solicitor General invokes the police
power of the Philippine State.
It is admitted that Department Order No. 1 is in the nature of a police power
measure. The only question is whether or not it is valid under the Constitution.
The concept of police power is well-established in this jurisdiction. It has been
defined as the "state authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare." 5 As defined, it consists
of (1) an imposition of restraint upon liberty or property, (2) in order to foster the
common good. It is not capable of an exact definition but has been, purposely,
veiled in general terms to underscore its all-comprehensive embrace.
"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate
the future where it could be done, provides enough room for an efficient and flexible
response to conditions and circumstances thus assuring the greatest benefits." 6

It finds no specific Constitutional grant for the plain reason that it does not owe its
origin to the Charter. Along with the taxing power and eminent domain, it is inborn
in the very fact of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital functions of governance.
Marshall, to whom the expression has been credited, 7 refers to it succinctly as the
plenary power of the State "to govern its citizens." 8
"The police power of the State ... is a power coextensive with self- protection, and it
is not inaptly termed the "law of overwhelming necessity." It may be said to be that
inherent and plenary power in the State which enables it to prohibit all things
hurtful to the comfort, safety, and welfare of society." 9
It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is
"rooted in the conception that men in organizing the state and imposing upon its
government limitations to safeguard constitutional rights did not intend thereby to
enable an individual citizen or a group of citizens to obstruct unreasonably the
enactment of such salutary measures calculated to ensure communal peace, safety,
good order, and welfare." 10 Significantly, the Bill of Rights itself does not purport to
be an absolute guaranty of individual rights and liberties "Even liberty itself, the
greatest of all rights, is not unrestricted license to act according to one's will." 11 It is
subject to the far more overriding demands and requirements of the greater
number.
Notwithstanding its extensive sweep, police power is not without its own limitations.
For all its awesome consequences, it may not be exercised arbitrarily or
unreasonably. Otherwise, and in that event, it defeats the purpose for which it is
exercised, that is, to advance the public good. Thus, when the power is used to
further private interests at the expense of the citizenry, there is a clear misuse of
the power. 12
In the light of the foregoing, the petition must be dismissed.
As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of clear
and convincing evidence to the contrary, the presumption logically stands.
The petitioner has shown no satisfactory reason why the contested measure should
be nullified. There is no question that Department Order No. 1 applies only to
"female contract workers," 14 but it does not thereby make an undue discrimination
between the sexes. It is well-settled that "equality before the law" under the
Constitution 15 does not import a perfect Identity of rights among all men and
women. It admits of classifications, provided that (1) such classifications rest on
substantial distinctions; (2) they are germane to the purposes of the law; (3) they
are not confined to existing conditions; and (4) they apply equally to all members of
the same class. 16
The Court is satisfied that the classification made-the preference for female workers
rests on substantial distinctions.
As a matter of judicial notice, the Court is well aware of the unhappy plight that has
befallen our female labor force abroad, especially domestic servants, amid
exploitative working conditions marked by, in not a few cases, physical and personal
abuse. The sordid tales of maltreatment suffered by migrant Filipina workers, even
rape and various forms of torture, confirmed by testimonies of returning workers,
are compelling motives for urgent Government action. As precisely the caretaker of
Constitutional rights, the Court is called upon to protect victims of exploitation. In
fulfilling that duty, the Court sustains the Government's efforts.
The same, however, cannot be said of our male workers. In the first place, there is
no evidence that, except perhaps for isolated instances, our men abroad have been

afflicted with an Identical predicament. The petitioner has proffered no argument

that the Government should act similarly with respect to male workers. The Court,
of course, is not impressing some male chauvinistic notion that men are superior to
women. What the Court is saying is that it was largely a matter of evidence (that
women domestic workers are being ill-treated abroad in massive instances) and not
upon some fanciful or arbitrary yardstick that the Government acted in this case. It
is evidence capable indeed of unquestionable demonstration and evidence this
Court accepts. The Court cannot, however, say the same thing as far as men are
concerned. There is simply no evidence to justify such an inference. Suffice it to
state, then, that insofar as classifications are concerned, this Court is content that
distinctions are borne by the evidence. Discrimination in this case is justified.
As we have furthermore indicated, executive determinations are generally final on
the Court. Under a republican regime, it is the executive branch that enforces policy.
For their part, the courts decide, in the proper cases, whether that policy, or the
manner by which it is implemented, agrees with the Constitution or the laws, but it
is not for them to question its wisdom. As a co-equal body, the judiciary has great
respect for determinations of the Chief Executive or his subalterns, especially when
the legislature itself has specifically given them enough room on how the law should
be effectively enforced. In the case at bar, there is no gainsaying the fact, and the
Court will deal with this at greater length shortly, that Department Order No. 1
implements the rule-making powers granted by the Labor Code. But what should be
noted is the fact that in spite of such a fiction of finality, the Court is on its own
persuaded that prevailing conditions indeed call for a deployment ban.
There is likewise no doubt that such a classification is germane to the purpose
behind the measure. Unquestionably, it is the avowed objective of Department
Order No. 1 to "enhance the protection for Filipino female overseas workers" 17 this
Court has no quarrel that in the midst of the terrible mistreatment Filipina workers
have suffered abroad, a ban on deployment will be for their own good and welfare.
The Order does not narrowly apply to existing conditions. Rather, it is intended to
apply indefinitely so long as those conditions exist. This is clear from the Order itself
("Pending review of the administrative and legal measures, in the Philippines and in
the host countries . . ." 18), meaning to say that should the authorities arrive at a
means impressed with a greater degree of permanency, the ban shall be lifted. As a
stop-gap measure, it is possessed of a necessary malleability, depending on the
circumstances of each case. Accordingly, it provides:
9. LIFTING OF SUSPENSION. The Secretary of Labor and Employment
(DOLE) may, upon recommendation of the Philippine Overseas
Employment Administration (POEA), lift the suspension in countries
where there are:
1. Bilateral agreements or understanding with the Philippines, and/or,
2. Existing mechanisms providing for sufficient safeguards to ensure
the welfare and protection of Filipino workers. 19
The Court finds, finally, the impugned guidelines to be applicable to all female
domestic overseas workers. That it does not apply to "all Filipina workers" 20 is not
an argument for unconstitutionality. Had the ban been given universal applicability,
then it would have been unreasonable and arbitrary. For obvious reasons, not all of
them are similarly circumstanced. What the Constitution prohibits is the singling out
of a select person or group of persons within an existing class, to the prejudice of
such a person or group or resulting in an unfair advantage to another person or
group of persons. To apply the ban, say exclusively to workers deployed by A, but

not to those recruited by B, would obviously clash with the equal protection clause
of the Charter. It would be a classic case of what Chase refers to as a law that "takes
property from A and gives it to B." 21 It would be an unlawful invasion of property
rights and freedom of contract and needless to state, an invalid act. 22 (Fernando
says: "Where the classification is based on such distinctions that make a real
difference as infancy, sex, and stage of civilization of minority groups, the better
rule, it would seem, is to recognize its validity only if the young, the women, and the
cultural minorities are singled out for favorable treatment. There would be an
element of unreasonableness if on the contrary their status that calls for the law
ministering to their needs is made the basis of discriminatory legislation against
them. If such be the case, it would be difficult to refute the assertion of denial of
equal protection." 23 In the case at bar, the assailed Order clearly accords protection
to certain women workers, and not the contrary.)
It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas
deployment. From scattered provisions of the Order, it is evident that such a total
ban has hot been contemplated. We quote:
5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and
workers of similar skills defined herein to the following [sic] are
authorized under these guidelines and are exempted from the
suspension.
5.1 Hirings by immediate members of the family of Heads
of State and Government;
5.2 Hirings by Minister, Deputy Minister and the other
senior government officials; and
5.3 Hirings by senior officials of the diplomatic corps and
duly accredited international organizations.
5.4 Hirings by employers in countries with whom the
Philippines have [sic] bilateral labor agreements or
understanding.
xxx xxx xxx
7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR
SKILLS--Vacationing domestic helpers and/or workers of similar skills
shall be allowed to process with the POEA and leave for worksite only if
they are returning to the same employer to finish an existing or
partially served employment contract. Those workers returning to
worksite to serve a new employer shall be covered by the suspension
and the provision of these guidelines.
xxx xxx xxx
9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment
(DOLE) may, upon recommendation of the Philippine Overseas
Employment Administration (POEA), lift the suspension in countries
where there are:
1. Bilateral agreements or understanding with the
Philippines, and/or,
2. Existing mechanisms providing for sufficient safeguards
to ensure the welfare and protection of Filipino workers. 24
xxx xxx xxx
The consequence the deployment ban has on the right to travel does not impair the
right. The right to travel is subject, among other things, to the requirements of
"public safety," "as may be provided by law." 25 Department Order No. 1 is a valid

implementation of the Labor Code, in particular, its basic policy to "afford protection
to labor," 26 pursuant to the respondent Department of Labor's rule-making
authority vested in it by the Labor Code. 27 The petitioner assumes that it is
unreasonable simply because of its impact on the right to travel, but as we have
stated, the right itself is not absolute. The disputed Order is a valid qualification
thereto.
Neither is there merit in the contention that Department Order No. 1 constitutes an
invalid exercise of legislative power. It is true that police power is the domain of the
legislature, but it does not mean that such an authority may not be lawfully
delegated. As we have mentioned, the Labor Code itself vests the Department of
Labor and Employment with rulemaking powers in the enforcement whereof. 28
The petitioners's reliance on the Constitutional guaranty of worker participation "in
policy and decision-making processes affecting their rights and benefits" 29 is not
well-taken. The right granted by this provision, again, must submit to the demands
and necessities of the State's power of regulation.
The Constitution declares that:
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all. 30
"Protection to labor" does not signify the promotion of employment alone. What
concerns the Constitution more paramountly is that such an employment be above
all, decent, just, and humane. It is bad enough that the country has to send its sons
and daughters to strange lands because it cannot satisfy their employment needs at
home. Under these circumstances, the Government is duty-bound to insure that our
toiling expatriates have adequate protection, personally and economically, while
away from home. In this case, the Government has evidence, an evidence the
petitioner cannot seriously dispute, of the lack or inadequacy of such protection,
and as part of its duty, it has precisely ordered an indefinite ban on deployment.
The Court finds furthermore that the Government has not indiscriminately made use
of its authority. It is not contested that it has in fact removed the prohibition with
respect to certain countries as manifested by the Solicitor General.
The non-impairment clause of the Constitution, invoked by the petitioner, must yield
to the loftier purposes targetted by the Government. 31 Freedom of contract and
enterprise, like all other freedoms, is not free from restrictions, more so in this
jurisdiction, where laissez faire has never been fully accepted as a controlling
economic way of life.
This Court understands the grave implications the questioned Order has on the
business of recruitment. The concern of the Government, however, is not
necessarily to maintain profits of business firms. In the ordinary sequence of events,
it is profits that suffer as a result of Government regulation. The interest of the State
is to provide a decent living to its citizens. The Government has convinced the Court
in this case that this is its intent. We do not find the impugned Order to be tainted
with a grave abuse of discretion to warrant the extraordinary relief prayed for.
WHEREFORE, the petition is DISMISSED. No costs.
SO ORDERED.
Yap, C.J., Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco,
Padilla, Bidin, Cortes and Grio-Aquino, JJ., concur.
Gutierrez, Jr. and Medialdea, JJ., are on leave.

4) G.R. No. L-48926 December 14, 1987

MANUEL SOSITO, petitioner, vs. AGUINALDO DEVELOPMENT CORPORATION,
respondent.
CRUZ, J.:
We gave due course to this petition and required the parties to file simultaneous
memoranda on the sole question of whether or not the petitioner is entitled to
separation pay under the retrenchment program of the private respondent.
The facts are as follows:
Petitioner Manuel Sosito was employed in 1964 by the private respondent, a logging
company, and was in charge of logging importation, with a monthly salary of
P675.00, 1 when he went on indefinite leave with the consent of the company on
January 16, 1976. 2 On July 20, 1976, the private respondent, through its president,
announced a retrenchment program and offered separation pay to employees in the
active service as of June 30, 1976, who would tender their resignations not later
than July 31, 1976. The petitioner decided to accept this offer and so submitted his
resignation on July 29, 1976, "to avail himself of the gratuity benefits" promised. 3
However, his resignation was not acted upon and he was never given the separation
pay he expected. The petitioner complained to the Department of Labor, where he
was sustained by the labor arbiter. 4 The company was ordered to pay Sosito the
sum of P 4,387.50, representing his salary for six and a half months. On appeal to
the National Labor Relations Commission, this decision was reversed and it was held
that the petitioner was not covered by the retrenchment program. 5 The petitioner
then came to us.
For a better understanding of this case, the memorandum of the private respondent
on its retrenchment program is reproduced in full as follows:
July 20, 1976
Memorandum To: ALL EMPLOYEES
Re: RETRENCHMENT PROGRAM
As you are all aware, the operations of wood-based industries in the
Philippines for the last two (2) years were adversely affected by the
worldwide decline in the demand for and prices of logs and wood
products. Our company was no exception to this general decline in the
market, and has suffered tremendous losses. In 1975 alone, such
losses amounted to nearly P20,000,000.00.
The company has made a general review of its operations and has
come to the unhappy decision of the need to make adjustments in its
manpower strength if it is to survive. This is indeed an unfortunate and
painful decision to make, but it leaves the company no alternative but
to reduce its tremendous and excessive overhead expense in order to
prevent an ultimate closure.
Although the law allows the Company, in a situation such as this, to
drastically reduce it manpower strength without any obligation to pay
separation benefits, we recognize the need to provide our employees
some financial assistance while they are looking for other jobs.
The Company therefore is adopting a retrenchment program whereby
employees who are in the active service as of June 30, 1976 will be
paid separation benefits in an amount equivalent to the employee's
one-half (1/2) month's basic salary multiplied by his/her years of

service with the Company. Employees interested in availing of the

separation benefits offered by the Company must manifest such
intention by submitting written letters of resignation to the
Management not later than July 31, 1976. Those whose resignations
are accepted shall be informed accordingly and shall be paid their
separation benefits.
After July 31, 1976, this offer of payment of separation benefits will no
longer be available. Thereafter, the Company shall apply for a
clearance to terminate the services of such number of employees as
may be necessary in order to reduce the manpower strength to such
desired level as to prevent further losses.
(SGD.) JOSE G. RICAFORT
President
N.B.
For additional information
and/or resignation forms,
please see Mr. Vic Maceda
or Atty. Ben Aritao. 6
It is clear from the memorandum that the offer of separation pay was extended only
to those who were in the active service of the company as of June 30, 1976. It is
equally clear that the petitioner was not eligible for the promised gratuity as he was
not actually working with the company as of the said date. Being on indefinite
leave, he was not in the active service of the private respondent although, if one
were to be technical, he was still in its employ. Even so, during the period of
indefinite leave, he was not entitled to receive any salary or to enjoy any other
benefits available to those in the active service.
It seems to us that the petitioner wants to enjoy the best of two worlds at the
expense of the private respondent. He has insulated himself from the insecurities of
the floundering firm but at the same time would demand the benefits it offers.
Being on indefinite leave from the company, he could seek and try other
employment and remain there if he should find it acceptable; but if not, he could go
back to his former work and argue that he still had the right to return as he was only
on leave.
There is no claim that the petitioner was temporarily laid off or forced to go on
leave; on the contrary, the record shows that he voluntarily sought the indefinite
leave which the private respondent granted. It is strange that the company should
agree to such an open-ended arrangement, which is obviously one-sided. The
company would not be free to replace the petitioner but the petitioner would have a
right to resume his work as and when he saw fit.
We note that under the law then in force the private respondent could have validly
reduced its work force because of its financial reverses without the obligation to
grant separation pay. This was permitted under the original Article 272(a), of the
Labor Code, 7 which was in force at the time. To its credit, however, the company
voluntarily offered gratuities to those who would agree to be phased out pursuant to
the terms and conditions of its retrenchment program, in recognition of their loyalty
and to tide them over their own financial difficulties. The Court feels that such
compassionate measure deserves commendation and support but at the same time
rules that it should be available only to those who are qualified therefore. We hold
that the petitioner is not one of them.

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 labor dispute will be
automatically decided in favor of labor. Management also has its own rights which,
as such, are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for those with less privileges in life, this Court has inclined more
often than not toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded us 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.
WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED, with
costs against the petitioner.
SO ORDERED.
Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.

5) G.R. No. 155421

July 7, 2004

ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF LUCBAN, respondent.

DECISION
PANGANIBAN, J.:
The law protects both the welfare of employees and the prerogatives of
management. Courts will not interfere with business judgments of employers,
provided they do not violate the law, collective bargaining agreements, and general
principles of fair play and justice. The transfer of personnel from one area of
operation to another is inherently a managerial prerogative that shall be upheld if
exercised in good faith -- for the purpose of advancing business interests, not of
defeating or circumventing the rights of employees.
The Case
The Court applies these principles in resolving the instant Petition for Review 1 under
Rule 45 of the Rules of Court, assailing the June 14, 2002 Decision 2 and September
25, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68030. The
assailed Decision disposed as follows:
"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of
merit."4
The challenged Resolution denied petitioner's Motion for Reconsideration.
The Facts
On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued
Board Resolution Nos. 99-52 and 99-53, which read:
"Board Res. No. 99-52
"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the
bank to familiarize bank employees with the various phases of bank
operations and further strengthen the existing internal control system[,] all
officers and employees are subject to reshuffle of assignments. Moreover,
this resolution does not preclude the transfer of assignment of bank officers
and employees from the branch office to the head office and vice-versa."

"Board Res. No. 95-53

"Pursuant to Resolution No. 99-52, the following branch employees are
hereby reshuffled to their new assignments without changes in their
compensation and other benefits.
NAME OF EMPLOYEES

PRESENT
ASSIGNMENT

NEW ASSIGNMENT

JOYCE V. ZETA

Bank Teller

C/A Teller

CLODUALDO ZAGALA

C/A Clerk

Actg. Appraiser

ELMER L. MENDOZA

Appraiser

Clerk-Meralco
Collection

CHONA R. MENDOZA

Clerk-Meralco
Collection

Bank Teller"5

In a letter dated April 30, 1999, Alejo B. Daya, the bank's board chairman, directed
Briccio V. Cada, the manager of the bank's Tayabas branch, to implement the
reshuffle.6 The new assignments were to "be effective on May 1, 1999 without
changes in salary, allowances, and other benefits received by the aforementioned
employees."7
On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza
expressed his opinion on the reshuffle, as follows:
"RE:
The
recent
reshuffle
of
employees
as
per
Board Resolution dated April 25, 1999
"Dear Sir:
"This is in connection with the aforementioned subject matter and which the
undersigned received on April 25, 1999.
"Needless to state, the reshuffling of the undersigned from the present
position as Appraiser to Clerk-Meralco Collection is deemed to be a demotion
without any legal basis. Before this action on your part[,] the undersigned has
been besieged by intrigues due to [the] malicious machination of a certain
public official who is bruited to be your good friend. These malicious
insinuations were baseless and despite the fact that I have been on my job as
Appraiser for the past six (6) years in good standing and never involved in
any anomalous conduct, my being reshuffled to [C]lerk-[M]eralco [C]ollection
is a blatant harassment on your part as a prelude to my termination in due
time. This will constitute an unfair labor practice.
"Meanwhile, may I beseech your good office that I may remain in my position
as Appraiser until the reason [for] my being reshuffled is made clear.
"Your kind consideration on this request will be highly appreciated." 8
On May 10, 1999, Daya replied:
"Dear Mr. Mendoza,
"Anent your undated letter expressing your resentment/comments on the
recent management's decision to reshuffle the duties of bank employees,
please be informed that it was never the intention (of management) to
downgrade your position in the bank considering that your due compensation
as Bank Appraiser is maintained and no future reduction was intended.
"Aside from giving bank employees a wider experience in various banking
operations, the reshuffle will also afford management an effective tool in

providing the bank a sound internal control system/check and balance and a
basis in evaluating the performance of each employee. A continuing
bankwide reshuffle of employees shall be made at the discretion of
management which may include bank officers, if necessary as expressed in
Board Resolution No. 99-53, dated April 25, 1999. Management merely
shifted the duties of employees, their position title [may be] retained if
requested formally.
"Being a standard procedure in maintaining an effective internal control
system recommended by the Bangko Sentral ng Pilipinas, we believe that the
conduct of reshuffle is also a prerogative of bank management." 9
On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a
letter in which he applied for a leave of absence from work:
"Dear Sir:
"I wish I could continue working but due to the ailment that I always feel
every now and then, I have the honor to apply for at least ten (10) days sick
leave effective June 7, 1999.
"Hoping that this request [merits] your favorable and kind consideration and
understanding."10
On June 21, 1999, petitioner again submitted a letter asking for another leave of
absence for twenty days effective on the same date. 11
On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint
before Arbitration Branch No. IV of the National Labor Relations Commission (NLRC).
The Complaint -- for illegal dismissal, underpayment, separation pay and damages
-- was filed against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and
its Tayabas branch manager, Briccio V. Cada. The case was docketed as NLRC Case
SRAB-IV-6-5862-99-Q.12
The labor arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:
"WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring respondents guilty of illegal dismissal.
2. Ordering respondents to reinstate complainant to his former position
without loss of seniority rights with full backwages from date of
dismissal to actual reinstatement in the amount of P55,000.00 as of
June 30, 2000.
3. Ordering the payment of separation pay if reinstatement is not
possible in the amount of P30,000.00 in addition to 13th month pay of
P5,000.00 and the usual P10,000.00 annual bonus afforded the
employees.
4. Ordering the payment of unpaid salary for the period covering July
1-30, 1999 in the amount of P5,000.00
5. Ordering the payment of moral damages in the amount of
P50,000.00.
6. Ordering the payment of exemplary damages in the amount of
P25,000.00
7. Ordering the payment of Attorney's fees in the amount of
P18,000.00 which is 10% of the monetary award." 13
On appeal, the NLRC reversed the labor arbiter. 14 In its July 18, 2001 Resolution, it
held:
"We can conceive of no reason to ascribe bad faith or malice to the
respondent bank for its implementation of its Board Resolution directing the
reshuffle of employees at its Tayabas branch to positions other than those

they were occupying. While at first the employees thereby affected would
experience difficulty in adjusting to their new jobs, it cannot be gainsaid that
the objective for the reshuffle is noble, as not only would the employees
obtain additional knowledge, they would also be more well-rounded in the
operations of the bank and thus help the latter further strengthen its already
existing internal control system.
"The only inconvenience, as [w]e see it, that the [petitioner] may have
experienced is that from an appraiser he was made to perform the work of a
clerk in the collection of Meralco payments, which he may have considered as
beneath him and his experience, being a pioneer employee. But it cannot be
discounted either that other employees at the Tayabas branch were similarly
reshuffled. The only logical conclusion therefore is that the Board Resolution
was not aimed solely at the [petitioner], but for all the other employees of the
x x x bank as well. Besides, the complainant has not shown by clear,
competent and convincing evidence that he holds a vested right to the
position of Appraiser. x x x.
"How and by what manner a business concern conducts its affairs is not for
this Commission to interfere with, especially so if there is no showing, as in
the case at bar, that the reshuffle was motivated by bad faith or ill-will. x x
x."15
After the NLRC denied his Motion for Reconsideration, 16 petitioner brought before
the CA a Petition for Certiorari17 assailing the foregoing Resolution.
Ruling of the Court of Appeals
Finding that no grave abuse of discretion could be attributed to the NLRC, the CA
Decision ruled thus:
"The so-called 'harassment' which Mendoza allegedly experienced in the
aftermath of the reshuffling of employees at the bank is but a figment of his
imagination as there is no evidence extant on record which substantiates the
same. His alleged demotion, the 'cold shoulder' stance, the things about his
chair and table, and the alleged reason for the harassment are but
allegations bereft of proof and are perforce inadmissible as self-serving
statements and can never be considered repositories of truth nor serve as
foundations of court decisions anent the resolution of the litigants' rights.
"When Mendoza was reshuffled to the position of clerk at the bank, he was
not demoted as there was no [diminution] of his salary benefits and rank. He
could even retain his position title, had he only requested for it pursuant to
the reply of the Chairman of the bank's board of directors to Mendoza's letter
protesting the reshuffle. There is, therefore, no cause to doubt the reasons
which the bank propounded in support of its move to reshuffle its employees,
viz:
1. to 'familiarize bank employees with the various phases of bank
operations,' and
2. to 'further strengthen the existing internal control system' of the
bank.
"The reshuffling of its employees was done in good faith and cannot be made
the basis of a finding of constructive dismissal.
"The fact that Mendoza was no longer included in the bank's payroll for July 1
to 15, 1999 does not signify that the bank has dismissed the former from its
employ. Mendoza separated himself from the bank's employ when, on June

24, 1999, while on leave, he filed the illegal dismissal case against his
employer for no apparent reason at all."18
Hence, this Petition.19
The Issues
Petitioner raises the following issues for our consideration:
"I. Whether or not the petitioner is deemed to have voluntarily separated
himself from the service and/or abandoned his job when he filed his
Complaint for constructive and consequently illegal dismissal;
"II. Whether or not the reshuffling of private respondent'[s] employees was
done in good faith and cannot be made as the basis of a finding of
constructive dismissal, even as the [petitioner's] demotion in rank is admitted
by both parties;
"III. Whether or not the ruling in the landmark case of Ruben Serrano vs.
NLRC [and Isetann Department Store (323 SCRA 445)] is applicable to the
case at bar;
"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's
money claims, damages, and unpaid salaries for the period July 1-30, 1999,
although this was not disputed by the private respondent; and
"V. Whether or not the entire proceedings before the Honorable Court of
Appeals and the NLRC are a nullity since the appeal filed by private
respondent before the NLRC on August 5, 2000 was on the 15 th day or five (5)
days beyond the reglem[e]ntary period of ten (10) days as provided for by
law and the NLRC Rules of Procedure." 20
In short, the main issue is whether petitioner was constructively dismissed from his
employment.
The Court's Ruling
The Petition has no merit.
Main
Issue:
Constructive Dismissal
Constructive dismissal is defined as an involuntary resignation resorted to when
continued employment is rendered impossible, unreasonable or unlikely; when there
is a demotion in rank or a diminution of pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee. 21
Petitioner argues that he was compelled to file an action for constructive dismissal,
because he had been demoted from appraiser to clerk and not given any work to
do, while his table had been placed near the toilet and eventually removed. 22 He
adds that the reshuffling of employees was done in bad faith, because it was
designed primarily to force him to resign.23
Management
Prerogative
to Transfer Employees
Jurisprudence recognizes the exercise of management prerogatives. For this reason,
courts often decline to interfere in legitimate business decisions of employers. 24
Indeed, labor laws discourage interference in employers' judgments concerning the
conduct of their business.25 The law must protect not only the welfare of employees,
but also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to
transfer or assign employees from one office or area of operation to another --

provided there is no demotion in rank or diminution of salary, benefits, and other

privileges; and the action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient cause. 26 This
privilege is inherent in the right of employers to control and manage their enterprise
effectively.27 The right of employees to security of tenure does not give them vested
rights to their positions to the extent of depriving management of its prerogative to
change their assignments or to transfer them. 28
Managerial prerogatives, however, are subject to limitations provided by law,
collective bargaining agreements, and general principles of fair play and justice. 29
The test for determining the validity of the transfer of employees was explained in
Blue Dairy Corporation v. NLRC 30 as follows:
"[L]ike other rights, there are limits thereto. The managerial prerogative to
transfer personnel must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair play. Having the right
should not be confused with the manner in which that right is exercised.
Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that the
transfer is not unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries, privileges
and other benefits. Should the employer fail to overcome this burden of proof,
the employee's transfer shall be tantamount to constructive dismissal, which
has been defined as a quitting because continued employment is rendered
impossible, unreasonable or unlikely; as an offer involving a demotion in rank
and diminution in pay. Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an employer has become so
unbearable to the employee leaving him with no option but to forego with his
continued employment."31
Petitioner's Transfer Lawful
The employer bears the burden of proving that the transfer of the employee has
complied with the foregoing test. In the instant case, we find no reason to disturb
the conclusion of the NLRC and the CA that there was no constructive dismissal.
Their finding is supported by substantial evidence -- that amount of relevant
evidence that a reasonable mind might accept as justification for a conclusion. 32
Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank
employees with the various phases of bank operations and further strengthen the
existing internal control system"33 of all officers and employees. We have previously
held that employees may be transferred -- based on their qualifications, aptitudes
and competencies -- to positions in which they can function with maximum benefit
to the company.34 There appears no justification for denying an employer the right
to transfer employees to expand their competence and maximize their full potential
for the advancement of the establishment. Petitioner was not singled out; other
employees were also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his
salary, privileges and other benefits. This fact is clear in respondent's Board
Resolutions, the April 30, 1999 letter of Bank President Daya to Branch Manager
Cada, and the May 10, 1999 letter of Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his
allegations. Given no credence by both lower tribunals was his bare and self-serving
statement that he had been positioned near the comfort room, made to work

without a table, and given no work assignment. 35 Purely conjectural is his claim that
the reshuffle of personnel was a harassment in retaliation for an alleged falsification
case filed by his relatives against a public official. 36 While the rules of evidence
prevailing in courts of law are not controlling in proceedings before the NLRC, 37
parties must nonetheless submit evidence to support their contentions.
Secondary Issues:
Serrano v. NLRC Inapplicable
Serrano v. NLRC38 does not apply to the present factual milieu. The Court ruled
therein that the lack of notice and hearing made the dismissal of the employee
ineffectual, but not necessarily illegal. 39 Thus, the procedural infirmity was remedied
by ordering payment of his full back wages from the time of his dismissal. 40 The
absence of constructive dismissal in the instant case precludes the application of
Serrano. Because herein petitioner was not dismissed, then he is not entitled to his
claimed monetary benefits.
Alleged
Nullity
of
NLRC
and CA Proceedings
Petitioner argues that the proceedings before the NLRC and the CA were void, since
respondent's appeal before the NLRC had allegedly been filed beyond the
reglementary period.41 A careful scrutiny of his Petition for Review 42 with the
appellate court shows that this issue was not raised there. Inasmuch as the instant
Petition challenges the Decision of the CA, we cannot rule on arguments that were
not brought before it. This ruling is consistent with the due-process requirement that
no question shall be entertained on appeal, unless it has been raised in the court
below.43
WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the
September 25, 2002 Resolution of the Court of Appeals are AFFIRMED. Costs against
petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

6) G.R. No. 156515

October 19, 2004

CHINA
BANKING
CORPORATION,
vs. MARIANO M. BORROMEO, respondent.

petitioner,

DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by China Banking
Corporation seeking the reversal of the Decision 1 dated July 19, 2002 of the Court of
Appeals in CA-G.R. SP No. 57365, remanding to the Labor Arbiter for further
hearings the complaint for payment of separation pay, mid-year bonus, profit share
and damages filed by respondent Mariano M. Borromeo against the petitioner Bank.
Likewise, sought to be reversed is the appellate courts Resolution dated January 6,
2003, denying the petitioner Banks motion for reconsideration.
The factual antecedents of the case are as follows:

Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989

as Manager assigned at the latters Regional Office in Cebu City. He then had
the rank of Manager Level I. Subsequently, the respondent was laterally
transferred to Cagayan de Oro City as Branch Manager of the petitioner
Banks branch thereat.
For the years 1989 and 1990, the respondent received a "highly satisfactory"
performance
rating
and
was
given
the
corresponding
profit
sharing/p>erformance bonus. From 1991 up to 1995, he consistently received
a "very good" performance rating for each of the said years and again
received the corresponding profit sharing/p>erformance bonus. Moreover, in
1992, he was promoted from Manager Level I to Manager Level II. In 1994, he
was promoted to Senior Manager Level I. Then again, in 1995, he was
promoted to Senior Manager Level II. Finally, in 1996, with a "highly
satisfactory" performance rating, the respondent was promoted to the
position of Assistant Vice-President, Branch Banking Group for the Mindanao
area effective October 16, 1996. Each promotion had the corresponding
increase in the respondents salary as well as in the benefits he received from
the petitioner Bank.
However, prior to his last promotion and then unknown to the petitioner Bank, the
respondent, without authority from the Executive Committee or Board of Directors,
approved several DAUD/BP accommodations amounting to P2,441,375 in favor of
Joel Maniwan, with Edmundo Ramos as surety. DAUD/BP is the acronym for checks
"Drawn Against Uncollected Deposits/Bills Purchased." Such checks, which are not
sufficiently funded by cash, are generally not honored by banks. Further, a DAUD/BP
accommodation is a credit accommodation granted to a few and select bank clients
through the withdrawal of uncollected or uncleared check deposits from their
current account. Under the petitioner Banks standard operating procedures,
DAUD/BP accommodations may be granted only by a bank officer upon express
authority from its Executive Committee or Board of Directors.
As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten outof-town checks (7 PCIB checks and 3 UCPB checks) of various dates amounting to
P2,441,375 were returned unpaid from September 20, 1996 to October 17, 1996.
Each of the returned checks was stamped with the notation "Payment
Stopped/Account Closed."
On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks
senior management requesting for the grant of a P2.4 million loan to Maniwan. The
memorandum stated that the loan was "to regularize/liquidate subjects (referring to
Maniwan) DAUD availments." It was only then that the petitioner Bank came to
know of the DAUD/BP accommodations in favor of Maniwan. The petitioner Bank
further learned that these DAUD/BP accommodations exceeded the limit granted to
clients, were granted without proper prior approval and already past due. Acting on
this information, Samuel L. Chiong, the petitioner Banks First Vice- President and
Head-Visayas Mindanao Division, in his Memorandum dated November 19, 1996 for
the respondent, sought clarification from the latter on the following matters:
1) When DAUD/BP accommodations were allowed, what efforts, if any, were
made to establish the identity and/or legitimacy of the alleged broker or
drawers of the checks accommodated?

2) Did the branch follow and comply with operating procedure which require
that all checks accommodated for DAUD/BP should be previously verified with
the drawee bank and history if not outright balances determined if enough to
cover the checks?
3) How did the accommodations reach P2,441,375.00 when our records
indicate that the borrowers B/p>-DAUD line is only for P500,000.00? When
did the accommodations start exceeding the limit of P500,000.00 and under
whose authority?
4) When did the accommodated checks start bouncing?
5) What is the status of these checks now and what has the branch done so
far to protect/ensure collectibility of the returned checks?
6) What about client Joel Maniwan and surety Edmund Ramos, what steps
have they done to pay the checks returned? 2
In reply thereto, the respondent, in his Letter dated December 5, 1996, answered
the foregoing queries in seriatim and explained, thus:
1. None
2. No
3. The accommodations reach P2.4 million upon the request of Mr. Edmund
Ramos, surety, and this request was subsequently approved by undersigned.
The excess accommodations started in July 96 without higher management
approval.
4. Checks started bouncing on September 20, 1996.
5. Checks have remained unpaid. The branch sent demand letters to Messrs.
Maniwan and Ramos and referred the matter to our Legal Dept. for filing of
appropriate legal action.
6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention
to settle by Feb. 1997.
Justification for lapses committed (Item nos. 1 to 3).
The account was personally endorsed and referred to us by Mr. Edmund Ramos,
Branch Manager of Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA
account was opened jointly as &/or (Maniwan &/or Ramos). Mr. Ramos gave us his
full assurance that the checks that we intend to purchase are the same drawee that
Metrobank has been purchasing for the past one (1) year already. He even disclosed
that these checks were verified by his own branch accountant and that Mr.
Maniwans loan account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose
Tan Yao Tin of CIFC. To show his sincerity, Mr. Ramos signed as surety for Mr.
Maniwan for P2.5MM. Corollary to this, Mr. Ramos applied for a loan with us
mortgaging his house, lot and duplex with an estimated market value of P4.508MM.
The branch, therefore, is not totally negligent as officer to officer bank checking was
done. In fact, it is also for the very same reason that other banks granted DAUD to
subject account and, likewise, the checks returned unpaid, namely:
Solidbank
Allied Bank
Far East Bank

P1.8 Million
.8
2.0

MBTC
5.0
The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself.
Further to this, undersigned conferred with the acting BOH VSYap if these
checks are legitimate 3rd party checks.

On the other hand, Atty. Musni continues to insist that Mr. Maniwan was
gypped by a broker in the total amount of P10.00 Million.
Undersigned accepts full responsibility for committing an error in judgment,
lapses in control and abuse of discretion by relying solely on the word,
assurance, surety and REM of Mr. Edmund Ramos, a friend and a co-bank
officer. I am now ready to face the consequence of my action. 3
In another Letter dated April 8, 1997, the respondent notified Chiong of his intention
to resign from the petitioner Bank and apologized "for all the trouble I have caused
because of the Maniwan case." 4 The respondent, however, vehemently denied
benefiting therefrom. In his Letter dated April 30, 1997, the respondent formally
tendered his irrevocable resignation effective May 31, 1997. 5
In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D.
Yang, the petitioner Banks Senior Vice-President and Head-Branch Banking Group,
informed the former that his approval of the DAUD/BP accommodations in favor of
Maniwan without authority and/or approval of higher management violated the
petitioner Banks Code of Ethics. As such, he was directed to restitute the amount of
P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the
petitioner Bank. However, in view of his resignation and considering the years of
service in the petitioner Bank, the management earmarked only P836,637.08 from
the respondents total separation benefits or pay. The memorandum addressed to
the respondent stated:
After a careful review and evaluation of the facts surrounding the above case,
the following have been conclusively established:
1. The branch granted various BP/DAUD accommodations to clients Joel
Maniwan/Edmundo Ramos in excess of approved lines through the following
out-of-town checks which were returned for the reason "Payment
Stopped/Account Closed":
1. PCIB Cebu Check No. 86256 P251,816.00
2. PCIB Cebu Check No. 86261 235,880.00
3. PCIB Cebu Check No. 8215 241,443.00
4. UCPB Tagbilaran Check No. 277,630.00
5. PCIB Bogo, Cebu Check No. 6117 267,418.00
6. UCPB Tagbilaran Check No. 216070 197,467.00
7. UCPB Tagbilaran Check No. 216073 263,920.00
8. PCIB Bogo, Cebu Check No. 6129 253,528.00
9. PCIB Bogo, Cebu Check No. 6122 198,615.00
10. PCIB Bogo, Cebu Check No. 6134 253,658.00
2. The foregoing checks were accommodated through your approval which
was in excess of your authority.
3. The branch failed to follow the fundamental and basic procedures in
handling BP/DAUD accommodations which made the accommodations
basically flawed.
4. The accommodations were attended by lapses in control consisting of
failure to report the exception and failure to cover the account of Joel
Maniwan with the required Credit Line Agreement.
Since the foregoing were established by your own admissions in your letter
explanation dated 5 December 1996, and the Audit Report and findings of the
Region Head, Management finds your actions in violation of the Banks Code of
Ethics:

Table 6.2., no. 1: Compliance with Standard Operating Procedures

- "Infraction of Bank procedures in handling any bank transactions or
work assignment which results in a loss or probable loss."
Table 6.3., no. 6: Proper Conduct and Behavior "Willful misconduct in the performance of duty whether or not the bank
suffers a loss," and/or
Table 6.5., no. 1: Work Responsibilities "Dereliction of duty whether or not the Bank suffers a loss," and/or
Table 6.6., no. 2: Authority and Subordination "Failure to carry out lawful orders or instructions of superiors."
Your approval of the accommodations in excess of your authority without
prior authority and/or approval from higher management is a violation of the
above cited Rules.
In view of these, you are directed to restitute the amount of P1,507,736.79
representing 90% of the total loss of P1,675,263.10 incurred by the Bank as
your proportionate share. However, in light of your voluntary separation from
the Bank effective May 31, 1997, in view of the years of service you have
given to the Bank, management shall earmark and segregate only the
amount of P836,637.08 from your total separation benefits/p>ay. The Bank
further directs you to fully assist in the effort to collect from Joel Maniwan and
Edmundo Ramos the sums due to the Bank.6
In the Letter dated May 26, 1997 addressed to the respondent, Remedios
Cruz, petitioner Banks Vice-President of the Human Resources Division, again
informed him that the management would withhold the sum of P836,637.08
from his separation pay, mid-year bonus and profit sharing. The amount
withheld represented his proportionate share in the accountability vis--vis
the DAUD/BP accommodations in favor of Maniwan. The said amount would
be released upon recovery of the sums demanded from Maniwan in Civil Case
No. 97174 filed against him by the petitioner Bank with the Regional Trial
Court in Cagayan de Oro City.
Consequently, the respondent, through counsel, made a demand on the
petitioner Bank for the payment of his separation pay and other benefits. The
petitioner Bank maintained its position to withhold the sum of P836,637.08.
Thus, the respondent filed with the National Labor Relations Commission
(NLRC), Regional Arbitration Branch No. 10, in Cagayan de Oro City, the
complaint for payment of separation pay, mid-year bonus, profit share and
damages against the petitioner Bank.
The parties submitted their respective position papers to the Labor Arbiter.
Thereafter, the respondent filed a motion to set case for trial or hearing.
Acting thereon, the Labor Arbiter, in the Order dated January 29, 1999,
denied the same stating that:
... This Branch views that if complainant finds the necessity to
controvert the allegations in the respondents pleadings, then he may
file a supplemental position paper and adduce thereto evidence and
additional supporting documents, the soonest possible time. All the
evidence will be evaluated by the Branch to determine whether or not
a clarificatory hearing shall be conducted. 7

On February 26, 1999, the Labor Arbiter issued another Order submitting the
case for resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing.
On even date, the Labor Arbiter promulgated the Decision 8 dismissing the
respondents complaint. According to the Labor Arbiter, the respondent, an
officer of the petitioner Bank, had committed a serious infraction when, in
blatant violation of the banks standard operating procedures and policies, he
approved the DAUD/BP accommodations in favor of Maniwan without
authorization by senior management. Even the respondent himself had
admitted this breach in the letters that he wrote to the senior officers of the
petitioner Bank.
The Labor Arbiter, likewise, made the finding that the respondent offered to
assign or convey a property that he owned to the petitioner Bank as well as
proposed the withholding of the benefits due him to answer for the losses
that the petitioner Bank incurred on account of unauthorized DAUD/BP
accommodations. But even if the respondent had not given his consent, the
Labor Arbiter held that the petitioner Banks act of withholding the benefits
due the respondent was justified under its Code of Ethics. The respondent, as
an officer of the petitioner Bank, was bound by the provisions of the said
Code.
Aggrieved, the respondent appealed to the National Labor Relations
Commission. After the parties had filed their respective memoranda, the
NLRC, in the Decision dated October 20, 1999, dismissed the appeal as it
affirmed in toto the findings and conclusions of the Labor Arbiter. The NLRC
preliminarily ruled that the Labor Arbiter committed no grave abuse of
discretion when he decided the case on the basis of the position papers
submitted by the parties. On the merits, the NLRC, like the Labor Arbiter,
gave credence to the petitioner Banks allegation that the respondent offered
to pledge his property to the bank and proposed the withholding of his
benefits in acknowledgment of the serious infraction he committed against
the bank. Further, the NLRC concurred with the Labor Arbiter that the
petitioner Bank was justified in withholding the benefits due the respondent.
Being a responsible bank officer, the respondent ought to know that, based
on the petitioner Banks Code of Ethics, restitution may be imposed on erring
employees apart from any other penalty for acts resulting in loss or damage
to the bank. The decretal portion of the NLRC decision reads:
WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal
is Dismissed for lack of merit.
SO ORDERED.9
The respondent moved for a reconsideration of the said decision but the
NLRC, in the Resolution of December 20, 1999, denied his motion.
The respondent then filed a petition for certiorari with the Court of Appeals
alleging that the NLRC committed grave abuse of discretion when it affirmed
the findings and conclusions of the Labor Arbiter. He vehemently denied
having offered to pledge his property to the bank or proposed the withholding
of his separation pay and other benefits. Further, he argued that the
petitioner Bank deprived him of his right to due process because it
unilaterally imposed the penalty of restitution on him. The DAUD/BP

accommodations in favor of Maniwan allegedly could not be considered as a

"loss" to the bank as the amounts may still be recovered. The respondent,
likewise, maintained that the Labor Arbiter should not have decided the case
on the basis of the parties position papers but should have conducted a fullblown hearing thereon.
On July 19, 2002, the CA rendered the Decision 10 now being assailed by the
petitioner Bank. The CA found merit in the respondents contention that he
was deprived of his right to due process by the petitioner Bank as no
administrative investigation was conducted by it prior to its act of withholding
the respondents separation pay and other benefits. The respondent was not
informed of any charge against him in connection with the Maniwan DAUD/BP
accommodations nor afforded the right to a hearing or to defend himself
before the penalty of restitution was imposed on him. This, according to the
appellate court, was contrary not only to the fundamental principle of due
process but to the petitioner Banks Code of Ethics as well.
The CA further held that the Labor Arbiter, likewise, failed to afford the
respondent due process when it denied his motion to set case for trial or
hearing. While the authority of the Labor Arbiter to decide a case based on
the parties position papers and documents is indubitable, the CA opined that
factual issues attendant to the case, including whether or not the respondent
proposed the withholding of his benefits or pledged the same to the
petitioner Bank, necessitated the conduct of a full-blown trial. The appellate
court explained that:
Procedural due process, as must be remembered, has two main
concerns, the prevention of unjustified or mistaken deprivation and the
promotion of participation and dialogue by affected individuals in the
decision-making process. Truly, the magnitude of the case and the
withholding of Borromeos property as well as the willingness of the
parties to conciliate, make a hearing imperative. As manifested by the
bank, it did not contest Borromeos motion for hearing or trial
inasmuch as the bank itself wanted to fully ventilate its side. 11
Accordingly, the CA set aside the decision of the NLRC and ordered that the
records of the case be remanded to the Labor Arbiter for further hearings on
the factual issues involved.
The petitioner Bank filed a motion for reconsideration of the said decision but
the CA, in the assailed Resolution of January 6, 2003, denied the same as it
found no compelling ground to warrant reconsideration. 12 Hence, its recourse
to this Court alleging that the assailed CA decision is contrary to law and
jurisprudence in that:
I.
THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED BY THE
NATIONAL LABOR RELATIONS COMMISSION ARE SUPPORTED BY
SUBSTANTIAL EVIDENCE AND SHOULD HAVE BEEN ACCORDED
RESPECT AND FINALITY BY THE COURT OF APPEALS IN ACCORDANCE
WITH GOVERNING JURISPRUDENCE.
II.

AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE WITH THE

REQUIREMENTS OF DUE PROCESS IN THE PROCEEDINGS A QUO.
III.
THERE WAS NO VIOLATION BY PETITIONER BANK OF RESPONDENTS
RIGHT TO DUE PROCESS AS NO ADMINISTRATIVE INVESTIGATION WAS
NEEDED TO BE CONDUCTED ON HIS ADMITTED MISCONDUCT. 13
The petitioner Bank posits that the sole factual issue that remained in dispute
was whether the respondent pledged his benefits as guarantee for the losses
the bank incurred resulting from the unauthorized DAUD/BP accommodations
in favor of Maniwan. On this issue, both the Labor Arbiter and the NLRC found
that the respondent had indeed pledged his benefits to the bank. According
to the petitioner Bank, this factual finding should have been accorded respect
by the CA as the same is supported by the evidence on record. By ordering
the remand of the case to the Labor Arbiter, the CA allegedly unjustifiably
analyzed and weighed all over again the evidence presented.
The petitioner Bank insists that the Labor Arbiter acted within his authority
when he denied the respondents motion to set case for hearing or trial and
instead decided the case on the basis of the position papers and evidence
submitted by the parties. Due process simply demands an opportunity to be
heard and the respondent was not denied of this as he was even given the
opportunity to file a supplemental position paper and other supporting
documents, but he did not do so.
The petitioner Bank takes exception to the findings of the appellate court that
the respondent was not afforded the right to a hearing or to defend himself
by the petitioner Bank as it did not conduct an administrative investigation.
The petitioner Bank points out that it was poised to conduct one but was
preempted by the respondents resignation. In any case, respondent himself
in his Letter dated December 5, 1996, in reply to the clarificatory queries of
Chiong, admitted that the DAUD/BP accommodations were granted "without
higher management approval" and that he (the respondent) "accepts full
responsibility for committing an error of judgment, lapses in control and
abuse of discretion ..." Given the respondents admission, the holding of a
formal investigation was no longer necessary.
For his part, the respondent, in his Comment, maintains that the DAUD/BP
accommodations in favor of Maniwan were approved, albeit not expressly, by
the senior management of the petitioner Bank. He cites the regular reports
he made to Chiong, his superior, regarding the DAUD/BP transactions made
by the branch, including that of Maniwan, and Chiong never called his
attention thereto nor stopped or reprimanded him therefor. These reports
further showed that he did not conceal these transactions to the
management.
The respondent vehemently denies having offered the withholding of his
benefits or pledged the same to the petitioner Bank. The findings of the Labor
Arbiter and the NLRC that what he did are allegedly not supported by the
evidence on record.

The respondent is of the view that restitution is not proper because the
petitioner Bank has not, as yet, incurred any actual loss as the amount owed
by Maniwan may still be recovered from him. In fact, the petitioner Bank had
already instituted a civil case against Maniwan for the recovery of the sum
and the RTC rendered judgment in the petitioner Banks favor. The case is still
pending appeal. In any case, the respondent argues that the petitioner Bank
could not properly impose the accessory penalty of restitution on him without
imposing the principal penalty of "Written Reprimand/Suspension" as
provided under its Code of Ethics. He, likewise, vigorously avers that, in
contravention of its own Code of Ethics, he was denied due process by the
petitioner Bank as it did not conduct any administrative investigation relative
to the unauthorized DAUD/BP accommodations. He was not informed in
writing of any charge against him nor was he given the opportunity to defend
himself.
The petition is meritorious.
The Court shall first resolve the procedural issue raised in the petition, i.e.,
whether the CA erred in remanding the case to the Labor Arbiter. The Court
rules in the affirmative. It is settled that administrative bodies like the NLRC,
including the Labor Arbiter, are not bound by the technical niceties of the law
and procedure and the rules obtaining in courts of law. 14 Rules of evidence are
not strictly observed in proceedings before administrative bodies like the
NLRC, where decisions may be reached on the basis of position papers. 15 The
holding of a formal hearing or trial is discretionary with the Labor Arbiter and
is something that the parties cannot demand as a matter of right. 16 As a
corollary, trial-type hearings are not even required as the cases may be
decided based on verified position papers, with supporting documents and
their affidavits.17
Hence, the Labor Arbiter acted well within his authority when he issued the
Order dated February 26, 1999 submitting the case for resolution upon
finding that he could judiciously pass on the merits without the necessity of
further hearing. On the other hand, the assailed CA decisions directive
requiring him to conduct further hearings constitutes undue interference with
the Labor Arbiters discretion. Moreover, to require the conduct of hearings
would be to negate the rationale and purpose of the summary nature of the
proceedings mandated by the Rules and to make mandatory the application
of the technical rules of evidence. 18 The appellate court, therefore, committed
reversible error in ordering the remand of the case to the Labor Arbiter for
further hearings.
Before delving on the merits of the case, it is well to remember that factual
findings of the NLRC affirming those of the Labor Arbiter, both bodies being
deemed to have acquired expertise in matters within their jurisdiction, when
sufficiently supported by evidence on record, are accorded respect, if not
finality, and are considered binding on this Court. 19 As long as their decisions
are devoid of any arbitrariness in the process of their deduction from the
evidence proffered by the parties, all that is left is for the Court to stamp its
affirmation.20

In this case, the factual findings of the Labor Arbiter and those of the NLRC
concur on the following material points: the respondent was a responsible
officer of the petitioner Bank; by his own admission, he granted DAUD/BP
accommodations in excess of the authority given to him and in violation of
the banks standard operating procedures; the petitioner Banks Code of
Ethics provides that restitution/forfeiture of benefits may be imposed on the
employees for, inter alia, infraction of the banks standard operating
procedures; and, the respondent resigned from the petitioner Bank on May
31, 1998. These factual findings are amply supported by the evidence on
record.
Indeed, it had been indubitably shown that the respondent admitted that he
violated the petitioner Banks standard operating procedures in granting the
DAUD/BP accommodations in favor of Maniwan without higher management
approval. The respondents replies to the clarificatory questions propounded
to him by way of the Memorandum dated November 19, 1996 were
particularly significant. When the respondent was asked whether efforts were
made to establish the identity and/or legitimacy of the drawers of the checks
before the DAUD/BP accommodations were allowed, 21 he replied in the
negative.22 To the query "did the branch follow and comply with operating
procedure which require that all checks accommodated for DAUD/BP should
be previously verified with the drawee bank and history, if not outright
balances, determined if enough to cover the checks?" 23 again, the respondent
answered "no."24 When asked under whose authority the excess DAUD/BP
accommodations were granted,25 the respondent expressly stated that they
were "approved by undersigned (referring to himself)" and that the excess
accommodation was granted "without higher management approval." 26 More
telling, however, is the respondents statement that he "accepts full
responsibility for committing an error in judgment, lapses in control and
abuse of discretion by relying solely on the word, assurance, surety and REM
of Mr. Edmundo Ramos."27 The respondent added that he was "ready to face
the consequence of [his] action."28
The foregoing sufficiently establish that the respondent, by his own
admissions, had violated the petitioner Banks standard operating
procedures. Among others, the petitioner Banks Code of Ethics provides:
Table
6.2
COMPLIANCE
WITH
STANDARD
OPERATING
PROCEDURES
VIOLATIONS
1. Infraction of
Bank
procedures in
handling any
Bank
transaction
or
work
assignment

PENALTIES
1st

2nd

Written
Suspension/
Reprimand Dismissal*
/
Suspensio
n*

3rd
Dismissal*

4th

which results
in a loss or
probable loss
*
With restitution, if warranted.
Further, the said Code states that:
7.2.5. Restitution/Forfeiture of Benefits
Restitution may be imposed independently or together with any other penalty in
case of loss or damage to the property of the Bank, its employees, clients or other
parties doing business with the Bank. The Bank may recover the amount involved
by means of salary deduction or whatever legal means that will prompt offenders to
pay the amount involved. But restitution shall in no way mitigate the penalties
attached to the violation or infraction.
Forfeiture of benefits/p>rivileges may also be effected in cases where infractions or
violations were incurred in connection with or arising from the application/availment
thereof.
It is well recognized that company policies and regulations are, unless shown to be
grossly oppressive or contrary to law, generally binding and valid on the parties and
must be complied with until finally revised or amended unilaterally or preferably
through negotiation or by competent authority. 29 Moreover, management has the
prerogative to discipline its employees and to impose appropriate penalties on
erring workers pursuant to company rules and regulations. 30 With more reason
should these truisms apply to the respondent, who, by reason of his position, was
required to act judiciously and to exercise his authority in harmony with company
policies.31
Contrary to the respondents contention that the petitioner Bank could not properly
impose the accessory penalty of restitution on him without imposing the principal
penalty of "Written Reprimand/Suspension," the latters Code of Ethics expressly
sanctions the imposition of restitution/forfeiture of benefits apart from or
independent of the other penalties. Obviously, in view of his voluntary separation
from the petitioner Bank, the imposition of the penalty of reprimand or suspension
would be futile. The petitioner Bank was left with no other recourse but to impose
the ancillary penalty of restitution. It was certainly within the petitioner Banks
prerogative to impose on the respondent what it considered the appropriate penalty
under the circumstances pursuant to its company rules and regulations.
Anent the issue that the respondents right to due process was violated by the
petitioner Bank since no administrative investigation was conducted prior to the
withholding of his separation benefits, the Court rules that, under the circumstances
obtaining in this case, no formal administrative investigation was necessary. Due
process simply demands an opportunity to be heard and this opportunity was not
denied the respondent.32
Prior to the respondents resignation, he was furnished with the Memorandum 33
dated November 19, 1996 in which several clarificatory questions were propounded
to him regarding the DAUD/BP accommodations in favor of Maniwan. Among others,
the respondent was asked whether the banks standard operating procedures were
complied with and under whose authority the accommodations were granted. From

the tenor thereof, it could be reasonably gleaned that the said memorandum
constituted notice of the charge against the respondent.
Replying to the queries, the respondent, in his Letter 34 dated December 5, 1996,
admitted, inter alia, that he approved the DAUD/BP accommodations in favor of
Maniwan and the amount in excess of the credit limit of P500,000 was approved by
him without higher management approval. The respondent, likewise, admitted noncompliance with the banks standard operating procedures, specifically, that which
required that all checks accommodated for DAUD/BP be previously verified with the
drawee bank and history, if not outright balances determined if enough to cover the
checks. In the same letter, the respondent expressed that he "accepts full
responsibility for committing an error in judgment, lapses in control and abuse of
discretion" and that he is "ready to face the consequence of his action."
Contrary to his protestations, the respondent was given the opportunity to be heard
and considering his admissions, it became unnecessary to hold any formal
investigation.35 More particularly, it became unnecessary for the petitioner Bank to
conduct an investigation on whether the respondent had committed an "[I]nfraction
of Bank procedures in handling any Bank transaction or work assignment which
results in a loss or probable loss" because the respondent already admitted the
same. All that was needed was to inform him of the findings of the management 36
and this was done by way of the Memorandum 37 dated May 23, 1997 addressed to
the respondent. His claim of denial of due process must perforce fail.
Significantly, the respondent is not wholly deprived of his separation benefits. As
the Labor Arbiter stressed in his decision, "the separation benefits due the
complainant (the respondent herein) were merely withheld." 38 The NLRC made the
same conclusion and was even more explicit as it opined that the respondent "is
entitled to the benefits he claimed in pursuance to the Collective Bargaining
Agreement but, in the meantime, such benefits shall be deposited with the bank by
way of pledge."39 Even the petitioner Bank itself gives "the assurance that as soon
as the Bank has satisfied a judgment in Civil Case No. 97174, the earmarked portion
of his benefits will be released without delay." 40
It bears stressing that the respondent was not just a rank and file employee. At the
time of his resignation, he was the Assistant Vice- President, Branch Banking Group
for the Mindanao area of the petitioner Bank. His position carried authority for the
exercise of independent judgment and discretion, characteristic of sensitive posts in
corporate hierarchy.41 As such, he was, as earlier intimated, required to act
judiciously and to exercise his authority in harmony with company policies. 42
On the other hand, the petitioner Banks business is essentially imbued with public
interest and owes great fidelity to the public it deals with. 43 It is expected to exercise
the highest degree of diligence in the selection and supervision of their
employees.44 As a corollary, and like all other business enterprises, its prerogative to
discipline its employees and to impose appropriate penalties on erring workers
pursuant to company rules and regulations must be respected. 45 The law, in
protecting the rights of labor, authorized neither oppression nor self-destruction of
an employer company which itself is possessed of rights that must be entitled to
recognition and respect.46

WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the
Court of Appeals and its Resolution dated January 6, 2003 in CA-G.R. SP No. 57365
are REVERSED AND SET ASIDE. The Resolution dated October 20, 1999 of the
NLRC, affirming the Decision dated February 26, 1999 of the Labor Arbiter, is
REINSTATED.
SO ORDERED.
Puno, Austria-Martinez, Tinga, and Chico-Nazario*, JJ., concur.
7) G.R. No. 85279 July 28, 1989
SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T.
BAYLON, RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA, VIRGILIO
DE ALDAY, SERGIO ARANETA, PLACIDO AGUSTIN, VIRGILIO MAGPAYO,
petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C.
PERALEJO, RTC, BRANCH 98, QUEZON CITY, respondents.
Vicente T. Ocampo & Associates for petitioners.
CORTES, J:
Primarily, the issue raised in this petition is whether or not the Regional Trial Court
can enjoin the Social Security System Employees Association (SSSEA) from striking
and order the striking employees to return to work. Collaterally, it is whether or not
employees of the Social Security System (SSS) have the right to strike.
The antecedents are as follows:
On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a
complaint for damages with a prayer for a writ of preliminary injunction against
petitioners, alleging that on June 9, 1987, the officers and members of SSSEA
staged an illegal strike and baricaded the entrances to the SSS Building, preventing
non-striking employees from reporting for work and SSS members from transacting
business with the SSS; that the strike was reported to the Public Sector Labor Management Council, which ordered the strikers to return to work; that the strikers
refused to return to work; and that the SSS suffered damages as a result of the
strike. The complaint prayed that a writ of preliminary injunction be issued to enjoin
the strike and that the strikers be ordered to return to work; that the defendants
(petitioners herein) be ordered to pay damages; and that the strike be declared
illegal.
It appears that the SSSEA went on strike after the SSS failed to act on the union's
demands, which included: implementation of the provisions of the old SSS-SSSEA
collective bargaining agreement (CBA) on check-off of union dues; payment of
accrued overtime pay, night differential pay and holiday pay; conversion of
temporary or contractual employees with six (6) months or more of service into
regular and permanent employees and their entitlement to the same salaries,
allowances and benefits given to other regular employees of the SSS; and payment
of the children's allowance of P30.00, and after the SSS deducted certain amounts

from the salaries of the employees and allegedly committed acts of discrimination
and unfair labor practices [Rollo, pp. 21-241].
The court a quo, on June 11, 1987, issued a temporary restraining order pending
resolution of the application for a writ of preliminary injunction [Rollo, p. 71.] In the
meantime, petitioners filed a motion to dismiss alleging the trial court's lack of
jurisdiction over the subject matter [Rollo, pp. 72-82.] To this motion, the SSS filed
an opposition, reiterating its prayer for the issuance of a writ of injunction [Rollo, pp.
209-222]. On July 22,1987, in a four-page order, the court a quo denied the motion
to dismiss and converted the restraining order into an injunction upon posting of a
bond, after finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners'
motion for the reconsideration of the aforesaid order was also denied on August 14,
1988 [Rollo, p. 94], petitioners filed a petition for certiorari and prohibition with
preliminary injunction before this Court. Their petition was docketed as G.R. No.
79577. In a resolution dated October 21, 1987, the Court, through the Third
Division, resolved to refer the case to the Court of Appeals. Petitioners filed a
motion for reconsideration thereof, but during its pendency the Court of Appeals on
March 9,1988 promulgated its decision on the referred case [Rollo, pp. 130-137].
Petitioners moved to recall the Court of Appeals' decision. In the meantime, the
Court on June 29,1988 denied the motion for reconsideration in G.R. No. 97577 for
being moot and academic. Petitioners' motion to recall the decision of the Court of
Appeals was also denied in view of this Court's denial of the motion for
reconsideration [Rollo, pp. 141- 143]. Hence, the instant petition to review the
decision of the Court of Appeals [Rollo, pp. 12-37].
Upon motion of the SSS on February 6,1989, the Court issued a temporary
restraining order enjoining the petitioners from staging another strike or from
pursuing the notice of strike they filed with the Department of Labor and
Employment on January 25, 1989 and to maintain the status quo [Rollo, pp. 151152].
The Court, taking the comment as answer, and noting the reply and supplemental
reply filed by petitioners, considered the issues joined and the case submitted for
decision.
The position of the petitioners is that the Regional Trial Court had no jurisdiction to
hear the case initiated by the SSS and to issue the restraining order and the writ of
preliminary injunction, as jurisdiction lay with the Department of Labor and
Employment or the National Labor Relations Commission, since the case involves a
labor dispute.
On the other hand, the SSS advances the contrary view, on the ground that the
employees of the SSS are covered by civil service laws and rules and regulations,
not the Labor Code, therefore they do not have the right to strike. Since neither the
DOLE nor the NLRC has jurisdiction over the dispute, the Regional Trial Court may
enjoin the employees from striking.
In dismissing the petition for certiorari and prohibition with preliminary injunction
filed by petitioners, the Court of Appeals held that since the employees of the SSS,
are government employees, they are not allowed to strike, and may be enjoined by
the Regional Trial Court, which had jurisdiction over the SSS' complaint for damages,
from continuing with their strike.

Thus, the sequential questions to be resolved by the Court in deciding whether or

not the Court of Appeals erred in finding that the Regional Trial Court did not act
without or in excess of jurisdiction when it took cognizance of the case and enjoined
the strike are as follows:
1. Do the employees of the SSS have the right to strike?
2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the
SSS and to enjoin the strikers from continuing with the strike and to order them to
return to work?
These shall be discussed and resolved seriatim
I
The 1987 Constitution, in the Article on Social Justice and Human Rights, provides
that the State "shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted activities, including
the right to strike in accordance with law" [Art. XIII, Sec. 31].
By itself, this provision would seem to recognize the right of all workers and
employees, including those in the public sector, to strike. But the Constitution itself
fails to expressly confirm this impression, for in the Sub-Article on the Civil Service
Commission, it provides, after defining the scope of the civil service as "all
branches, subdivisions, instrumentalities, and agencies of the Government,
including government-owned or controlled corporations with original charters," that
"[t]he right to self-organization shall not be denied to government employees" [Art.
IX(B), Sec. 2(l) and (50)]. Parenthetically, the Bill of Rights also provides that "[tlhe
right of the people, including those employed in the public and private sectors, to
form unions, associations, or societies for purposes not contrary to law shall not
abridged" [Art. III, Sec. 8]. Thus, while there is no question that the Constitution
recognizes the right of government employees to organize, it is silent as to whether
such recognition also includes the right to strike.
Resort to the intent of the framers of the organic law becomes helpful in
understanding the meaning of these provisions. A reading of the proceedings of the
Constitutional Commission that drafted the 1987 Constitution would show that in
recognizing the right of government employees to organize, the commissioners
intended to limit the right to the formation of unions or associations only, without
including the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that
"[tlhe right to self-organization shall not be denied to government employees" [Art.
IX(B), Sec. 2(5)], in answer to the apprehensions expressed by Commissioner
Ambrosio B. Padilla, Vice-President of the Commission, explained:
MR. LERUM. I think what I will try to say will not take that long. When
we proposed this amendment providing for self-organization of
government employees, it does not mean that because they have the
right to organize, they also have the right to strike. That is a different
matter. We are only talking about organizing, uniting as a union. With
regard to the right to strike, everyone will remember that in the Bill of
Rights, there is a provision that the right to form associations or
societies whose purpose is not contrary to law shall not be abridged.
Now then, if the purpose of the state is to prohibit the strikes coming
from employees exercising government functions, that could be done

because the moment that is prohibited, then the union which will go on
strike will be an illegal union. And that provision is carried in Republic
Act 875. In Republic Act 875, workers, including those from the
government-owned and controlled, are allowed to organize but they
are prohibited from striking. So, the fear of our honorable VicePresident is unfounded. It does not mean that because we approve this
resolution, it carries with it the right to strike. That is a different matter.
As a matter of fact, that subject is now being discussed in the
Committee on Social Justice because we are trying to find a solution to
this problem. We know that this problem exist; that the moment we
allow anybody in the government to strike, then what will happen if the
members of the Armed Forces will go on strike? What will happen to
those people trying to protect us? So that is a matter of discussion in
the Committee on Social Justice. But, I repeat, the right to form an
organization does not carry with it the right to strike. [Record of the
Constitutional Commission, vol. 1, p. 569].
It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by
the Labor Code (P.D. 442) in 1974, expressly banned strikes by employees in the
Government, including instrumentalities exercising governmental functions, but
excluding entities entrusted with proprietary functions:
.Sec. 11. Prohibition Against Strikes in the Government. The terms
and conditions of employment in the Government, including any
political subdivision or instrumentality thereof, are governed by law
and it is declared to be the policy of this Act that employees therein
shall not strike for the purpose of securing changes or modification in
their terms and conditions of employment. Such employees may
belong to any labor organization which does not impose the obligation
to strike or to join in strike: Provided, however, That this section shall
apply only to employees employed in governmental functions and not
those employed in proprietary functions of the Government including
but not limited to governmental corporations.
No similar provision is found in the Labor Code, although at one time it recognized
the right of employees of government corporations established under the
Corporation Code to organize and bargain collectively and those in the civil service
to "form organizations for purposes not contrary to law" [Art. 244, before its
amendment by B.P. Blg. 70 in 1980], in the same breath it provided that "[t]he
terms and conditions of employment of all government employees, including
employees of government owned and controlled corporations, shall be governed by
the Civil Service Law, rules and regulations" [now Art. 276]. Understandably, the
Labor Code is silent as to whether or not government employees may strike, for
such are excluded from its coverage [Ibid]. But then the Civil Service Decree [P.D.
No. 807], is equally silent on the matter.
On June 1, 1987, to implement the constitutional guarantee of the right of
government employees to organize, the President issued E.O. No. 180 which
provides guidelines for the exercise of the right to organize of government
employees. In Section 14 thereof, it is provided that "[t]he Civil Service law and
rules governing concerted activities and strikes in the government service shall be

observed, subject to any legislation that may be enacted by Congress." The

President was apparently referring to Memorandum Circular No. 6, s. 1987 of the
Civil Service Commission under date April 21, 1987 which, "prior to the enactment
by Congress of applicable laws concerning strike by government employees ...
enjoins under pain of administrative sanctions, all government officers and
employees from staging strikes, demonstrations, mass leaves, walk-outs and other
forms of mass action which will result in temporary stoppage or disruption of public
service." The air was thus cleared of the confusion. At present, in the absence of
any legislation allowing government employees to strike, recognizing their right to
do so, or regulating the exercise of the right, they are prohibited from striking, by
express provision of Memorandum Circular No. 6 and as implied in E.O. No. 180. [At
this juncture, it must be stated that the validity of Memorandum Circular No. 6 is not
at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under the 1987
Constitution
"[t]he
civil
service
embraces
all
branches,
subdivisions,
instrumentalities, and agencies of the Government, including government-owned or
controlled corporations with original charters" [Art. IX(B), Sec. .2(l) see also Sec. 1 of
E.O. No. 180 where the employees in the civil service are denominated as
"government employees"] and that the SSS is one such government-controlled
corporation with an original charter, having been created under R.A. No. 1161, its
employees are part of the civil service [NASECO v. NLRC, G.R. Nos. 69870 & 70295,
November 24,1988] and are covered by the Civil Service Commission's
memorandum prohibiting strikes. This being the case, the strike staged by the
employees of the SSS was illegal.
The statement of the Court in Alliance of Government Workers v. Minister of Labor
and Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it
furnishes the rationale for distinguishing between workers in the private sector and
government employees with regard to the right to strike:
The general rule in the past and up to the present is that 'the terms
and conditions of employment in the Government, including any
political subdivision or instrumentality thereof are governed by law"
(Section 11, the Industrial Peace Act, R.A. No. 875, as amended and
Article 277, the Labor Code, P.D. No. 442, as amended). Since the
terms and conditions of government employment are fixed by law,
government workers cannot use the same weapons employed by
workers in the private sector to secure concessions from their
employers. The principle behind labor unionism in private industry is
that industrial peace cannot be secured through compulsion by law.
Relations between private employers and their employees rest on an
essentially voluntary basis. Subject to the minimum requirements of
wage laws and other labor and welfare legislation, the terms and
conditions of employment in the unionized private sector are settled
through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given
delegated power, the administrative heads of government which fix
the terms and conditions of employment. And this is effected through
statutes or administrative circulars, rules, and regulations, not through
collective bargaining agreements. [At p. 13; Emphasis supplied].

Apropos is the observation of the Acting Commissioner of Civil Service, in his

position paper submitted to the 1971 Constitutional Convention, and quoted with
approval by the Court in Alliance, to wit:
It is the stand, therefore, of this Commission that by reason of the
nature of the public employer and the peculiar character of the public
service, it must necessarily regard the right to strike given to unions in
private industry as not applying to public employees and civil service
employees. It has been stated that the Government, in contrast to the
private employer, protects the interest of all people in the public
service, and that accordingly, such conflicting interests as are present
in private labor relations could not exist in the relations between
government and those whom they employ. [At pp. 16-17; also quoted
in National Housing Corporation v. Juco, G.R. No. 64313, January
17,1985,134 SCRA 172,178-179].
E.O. No. 180, which provides guidelines for the exercise of the right to organize of
government employees, while clinging to the same philosophy, has, however,
relaxed the rule to allow negotiation where the terms and conditions of employment
involved are not among those fixed by law. Thus:
.SECTION 13. Terms and conditions of employment or improvements
thereof, except those that are fixed by law, may be the subject of
negotiations between duly recognized employees' organizations and
appropriate government authorities.
The same executive order has also provided for the general mechanism for the
settlement of labor disputes in the public sector to wit:
.SECTION 16. The Civil Service and labor laws and procedures,
whenever applicable, shall be followed in the resolution of complaints,
grievances and cases involving government employees. In case any
dispute remains unresolved after exhausting all the available remedies
under existing laws and procedures, the parties may jointly refer the
dispute to the [Public Sector Labor- Management] Council for
appropriate action.
Government employees may, therefore, through their unions or associations, either
petition the Congress for the betterment of the terms and conditions of employment
which are within the ambit of legislation or negotiate with the appropriate
government agencies for the improvement of those which are not fixed by law. If
there be any unresolved grievances, the dispute may be referred to the Public
Sector Labor - Management Council for appropriate action. But employees in the
civil service may not resort to strikes, walk-outs and other temporary work
stoppages, like workers in the private sector, to pressure the Govemment to accede
to their demands. As now provided under Sec. 4, Rule III of the Rules and
Regulations to Govern the Exercise of the Right of Government- Employees to SelfOrganization, which took effect after the instant dispute arose, "[t]he terms and
conditions of employment in the government, including any political subdivision or
instrumentality thereof and government- owned and controlled corporations with
original charters are governed by law and employees therein shall not strike for the
purpose of securing changes thereof."
II
The strike staged by the employees of the SSS belonging to petitioner union being
prohibited by law, an injunction may be issued to restrain it.

It is futile for the petitioners to assert that the subject labor dispute falls within the
exclusive jurisdiction of the NLRC and, hence, the Regional Trial Court had no
jurisdiction to issue a writ of injunction enjoining the continuance of the strike. The
Labor Code itself provides that terms and conditions of employment of government
employees shall be governed by the Civil Service Law, rules and regulations [Art.
276]. More importantly, E.O. No. 180 vests the Public Sector Labor - Management
Council with jurisdiction over unresolved labor disputes involving government
employees [Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the exercise of its
general jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction
over the SSS's complaint for damages and issuing the injunctive writ prayed for
therein. Unlike the NLRC, the Public Sector Labor - Management Council has not
been granted by law authority to issue writs of injunction in labor disputes within its
jurisdiction. Thus, since it is the Council, and not the NLRC, that has jurisdiction over
the instant labor dispute, resort to the general courts of law for the issuance of a
writ of injunction to enjoin the strike is appropriate.
Neither could the court a quo be accused of imprudence or overzealousness, for in
fact it had proceeded with caution. Thus, after issuing a writ of injunction enjoining
the continuance of the strike to prevent any further disruption of public service, the
respondent judge, in the same order, admonished the parties to refer the
unresolved controversies emanating from their employer- employee relationship to
the Public Sector Labor - Management Council for appropriate action [Rollo, p. 86].
III
In their "Petition/Application for Preliminary and Mandatory Injunction," and
reiterated in their reply and supplemental reply, petitioners allege that the SSS
unlawfully withheld bonuses and benefits due the individual petitioners and they
pray that the Court issue a writ of preliminary prohibitive and mandatory injunction
to restrain the SSS and its agents from withholding payment thereof and to compel
the SSS to pay them. In their supplemental reply, petitioners annexed an order of
the Civil Service Commission, dated May 5, 1989, which ruled that the officers of
the SSSEA who are not preventively suspended and who are reporting for work
pending the resolution of the administrative cases against them are entitled to their
salaries, year-end bonuses and other fringe benefits and affirmed the previous order
of the Merit Systems Promotion Board.
The matter being extraneous to the issues elevated to this Court, it is Our view that
petitioners' remedy is not to petition this Court to issue an injunction, but to cause
the execution of the aforesaid order, if it has already become final.
WHEREFORE, no reversible error having been committed by the Court of Appeals,
the instant petition for review is hereby DENIED and the decision of the appellate
court dated March 9, 1988 in CA-G.R. SP No. 13192 is AFFIRMED. Petitioners'
"Petition/Application for Preliminary and Mandatory Injunction" dated December
13,1988 is DENIED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.