[G.R. No. 148195.
May 16, 2005] In January 1995, the officers of the union and the management held a meeting,
LOPEZ SUGAR CORPORATION, petitioner, vs. LEONITO G. FRANCO,
ROGELIO R. PABALAN, ROMEO T. PERRIN and EDUARDO T. CANDELARIO,
respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of the Court of
Appeals (CA) in CA-G.R. SP No. 49964, which affirmed the decision of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-0138-97,
which, in turn, reversed the decision of the Labor Arbiter in RAB Case Nos. 06-
01-10047-96, 06-64-10164-96 and 06-07-10292-96.
The Antecedents
Private respondents Leonito G. Franco, Rogelio R. Pabalan, Romeo T. Perrin and
Eduardo T. Candelario were supervisory employees of the Lopez Sugar
Corporation (the Corporation, for brevity). Franco was barely 20 years old when
he was employed in 1974 as Fuel-in-Charge. His co-employee, Pabalan, was
about 28 years old when he was hired by the Corporation as Shift Supervisor in
the Sugar Storage Department in 1975.[2] On the other hand, Perrin and
Candelario were employed in 1975 and 1976, respectively, as Planter Service
Representatives (PSRs), who rose from the ranks and, by 1994, occupied
supervisory positions in the Corporations Cane Marketing Section.[3]
Franco supervised the fuel tenders, monitored fuel and lubricant requirements
of the central, as well as those of the planters who ordered their requirements
from the central. He also ensured the adequate supply of oil products. For his
part, Pabalan supervised the delivery of sugar and molasses to and from the
storage during his shift; he likewise supervised the regular, contractual and
casual employees who were engaged in handling sugar. Perrin and Candelario,
on the other hand, were tasked to convince planters to mill their canes using
the services of the Corporation, provide technical assistance to planters, and
attend to their various needs.[4]
By 1994, the supervisory employees of the Corporation, spearheaded by Franco,
Pabalan, Perrin and Candelario, decided to form a labor union called Lopez
Sugar Corporation Supervisors Association. On December 29, 1994, the
Department of Labor and Employment (DOLE) in Iloilo City, Regional Office No.
VI, issued a Certificate of Registration[5] to the union. During its organizational
meeting, Franco was elected president and Pabalan as treasurer. Perrin and
Candelario, on the other hand, were among its active members. Out of the 108
members, 105 had agreed to authorize the check-off[6] of union dues against
their salaries even before any Collective Bargaining Agreement (CBA) had been
executed by the union and management.
which led to the submission of the unions proposals for a CBA on July 24, 1995.
[7]
Meantime, on August 8, 1995, the Corporations president issued a
Memorandum[8] to the vice-president and department heads for the adoption
of a special retirement program for supervisory and middle level managers. He
emphasized that the management shall have the final say on who would be
covered, and that the program would be irrevocable once approved.
In a Letter[9] dated August 14, 1995, the Corporation requested for more time
to study the unions proposals for a CBA. The union was made to understand
that the managements counter-proposals would be presented during their
conference on August 30, 1995.
Perrin and Candelario were on leave when they were invited by Juan Masa, Jr.,
the head of the Cane Marketing Section, to the Northeast Beach Resort in
Escalante, Negros Occidental. The latter informed them that they were all
included in the special retirement program and would receive their respective
notices of dismissal shortly.[10]
True enough, Masa, Pabalan, Franco, Perrin and Candelario received copies of
the Memorandum dated August 25, 1995 from the Corporations Vice-President
for Administration and Finance, informing them that they were included in the
special retirement program for supervisors and middle level managers; hence,
their employment with the Corporation was to be terminated effective
September 29, 1995, and they would be paid their salaries until September 27,
1995, thus:
In line with the memorandum of the President dated August 8, 1995,
announcing the adoption of a special retirement program for the supervisors
and the middle level managers, and our earlier discussion with you, we wish to
formalize our advice that you are one of the employees who will be covered by
the Program. Your inclusion in the Program is primarily due to the fact that our
study of our current organizational set-up reveals that the organization is
presently over-staff[ed]. There are actually duplication of functions and
responsibilities, and some duties could actually be performed by just one
person. Management therefore had no choice but to reduce the present number
of employees and you were selected as among those who will be separated
from the service.
As stated in the memorandum, you will be entitled to a separation package
equivalent to two months pay for every year of service, in addition to the
conversion of your unused/earned sick leave and vacation leave credits and pro-
rated 13th month pay. This generous non-precedent setting separation package,
which is twice what the law provides, is being offered in consideration of your
acceptance of your separation, thereby relieving the company from the trouble
of any court litigation.[11]
The private respondents received their respective separation pays and executed
their respective Release Waiver and Quitclaim[12] after receiving their
clearances from the Corporation.
On August 31, 1995, the management wrote the union that its proposals for a
CBA had been referred to its counsel.
Thereafter, the private respondents filed separate complaints against the
corporation with the NLRC for illegal dismissal, unfair labor practice,
reinstatement and damages.[13]
In their position paper, the private respondents claimed that they were made to
understand that their employment was terminated on the ground of
redundancy; however, they were not informed of the criteria, guidelines or
standard in the implementation of the special retirement program. They were
thus led to conclude that their dismissal was capricious. They pointed out that
Perrin and Candelario, who had been with the corporation for already 20 years,
were included in the special program, while others who had been employed with
the corporation for only one to six years had been retained. Moreover, one year
before the program was implemented, the Corporation hired two more PSRs,
thus increasing their number; and even after the termination of Perrin and
Candelarios employment, the Corporation hired two more on a contractual
basis. Candelario was then rehired on a contractual basis only until January
1996 when the complaint was filed against the Corporation. Franco, on the
other hand, had rejected a similar offer to work on a contractual basis.
The private respondents also alleged that their inclusion in the said program
was resorted to in order to intimidate the union and its members from pursuing
their objective of institutionalizing a collective bargaining mechanism for
supervisory employees in the company, thus, aborting the birth of a labor
organization capable of bargaining with the management on the terms and
conditions of employment. The complainants averred that for all intents and
purposes, the collective bargaining process [was] over, having failed to progress
beyond the proposal stage, a pathetic end for an enterprise that started with
such great enthusiasm from 105 of the 108 supervisors.[14]
They further averred that the connection between the untimely demise of the
negotiations and the dismissal of 32 employees, who were officers and
members of the union, was too obvious to be ignored considering further that
the claim of redundancy was untenable. The complainants also averred that
they were all in their late 40s, and had served the petitioner for about 20 years;
although still in their productive years, their prospects for other employment
were very slim.[15]
In its position paper, the Corporation maintained that the termination of the
employment of the complainants was in response to the challenges brought
about by the General Agreement on Tariff and Trade (GATT), the AFTA and other
international trade agreements, which greatly affected the local sugar industry.
The respondent summarized its position, thus:
12.0 Complainants separation from employment was made pursuant to a
legitimate exercise by the Company of its prerogatives to adopt measures to cut
cost and to maintain its profitability and competitiveness.
13.0 The inclusion of the complainants in the special retirement or right sizing
program has nothing to do with their exercise of their right to self-organization;
hence, there is no unfair labor practice being committed by the Company.
14.0 Complainants separation from service was done in good faith and in
complete compliance with procedural and substantive legal requirements;
hence, legal and justified.
15.0 Complainants are barred by the release waiver and quitclaim that they
have executed in favor of the Company from further contesting the validity of
their separation from service.[16]
The Corporation also averred that in July 1995, it commissioned Sycip, Gorres,
Velayo and Company (SGV) to conduct a study of the Corporation and its
operations to identify changes that could be implemented to achieve cost
effectiveness and global competitiveness.
In their Reply-Affidavit, the complainants averred that they signed their
respective Release Waiver and Quitclaim because their employer had driven
them to the wall, and found themselves in no position to resist, as they were no
longer employed. They insisted that it was a case of adherence, not of choice.
They averred that they did not relent on their claim, nor did they waive any of
their rights.
They further emphasized that nowhere in the SGV study was it recommended
that they be dismissed from employment, or that their positions be abolished. In
the case of the Sugar and Molasses Storage Department (SMSD), for instance,
the recommendation to save cost was not implemented; instead Pabalan and
another shift supervisor who was also a union officer (Bitera), were dismissed,
and replacements were hired on December 1, 1996. As to the Cane Marketing
Department where Perrin and Candelario were assigned as PSRs, the study, in
fact, recommended the strengthening of the said unit; the respondent
dismissed such employees who had been employed from 13 to 25 years. The
private respondents pointed out that this was an evidence of the Corporations
intention to contract out the work of the PSRs, considering further that those
who had been employed for only one to six years were retained.[17]
On February 26, 1997, the Labor Arbiter rendered judgment in favor of the
Corporation and ordered the dismissal of the complainants. According to the
Labor Arbiter, there was a real and factual basis to declare redundancy, thus:
Based on this study, the position and functions of fuel-in-charge, held by
complainant Franco, are basically the same as that of Fuel Tenders and
therefore his activities could well be done by existing Fuel Tenders who would be
directly under the General Warehouse Supervisor. In the case of complainant
Pabalan, whose position was Shift-in-Charge/Supervisor, it was observed that his
tasks could be merged in the functions of the Property Warehouse Supervisor.
With respect to complainants Perrin and Candelario, who were Planters Service
Representatives, it was observed that the job was more complementary to the
marketing aspect, wherein they are tasked to maintain good and harmonious
relations with the companys sugar planters, to ensure continued patronage of
the mills services. It was found that these PSR functions could well be handled
by agents or consultants, who would be paid on commission basis.[18]
The Labor Arbiter noted that the complainants received their separation pay
and other monetary benefits from the Corporation, and thereafter, voluntarily
executed their respective Deeds of Release Waiver and Quitclaim[19] in its
favor.
The complainants appealed to the NLRC which rendered judgment on December
9, 1997 granting their appeal and reversing the decision of the Labor Arbiter.
The NLRC ruled that there was no factual and legal basis for the termination of
the employment of the private respondents based on retrenchment or
redundancy, and that the Deeds of Release Waiver and Quitclaim executed by
the complainants were ineffective. The Corporation filed a motion for
reconsideration of the decision, which was denied by the NLRC.
Unsatisfied, the Corporation filed a petition for certiorari with the CA, insisting
that:
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT SET
ASIDE AND OVERRULED THE DECISION OF THE LABOR ARBITER ON THE BASIS
OF COINCIDENCES AND BASELESS ACCUSATION OF BAD FAITH, COMPLETELY
MISAPPRECIATING THE SUBSTANTIAL EVIDENCE WHICH SUPPORTED THE LABOR
ARBITERS DECISION.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
OVERRIDING THE LEGITIMATE EXERCISE BY THE PETITIONER OF ITS
MANAGEMENT PREROGATIVE OF REDUCING ITS WORK FORCE TO ADDRESS
CURRENT BUSINESS AND ECONOMIC REALITIES.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING BASIC PRINCIPLES OF LAW AND JURISPRUDENCE LAID DOWN BY
THE SUPREME COURT TO THE EFFECT THAT:
i. The matter of evaluating the merits of the issues presented in a labor case is
primarily addressed to the sound discretion of the Labor Arbiter. Thus, when the
decision of the Labor Arbiter is amply supported by substantial evidence, his
findings and conclusions should not be disturbed but must be accorded with
respect by the NLRC and even by the Supreme Court.
ii. The determination that a position is redundant and therefore legally
terminable, is basically an exercise of management prerogative, and for as long
as it is done in good faith, the wisdom or soundness thereof is beyond the
review power of the Labor Arbiter nor of the NLRC, which by law and
jurisprudence are not vested with managerial functions.
Iii Termination on ground of redundancy is anchored on the superfluity of a
position and not on the fact that actual loss is incurred by a company.
iv. A waiver and quitclaim, when voluntarily and intelligently executed, is
binding upon the employee, more so if he is not just an ordinary employee.[20]
On April 28, 2000, the CA rendered judgment dismissing the petition, on the
ground that the NLRC did not commit grave abuse of discretion in rendering
judgment against the Corporation. The Corporations motion for reconsideration
thereof was, likewise, denied by the CA.
The Corporation, now the petitioner, assails the ruling of the CA, contending
that the decision of the Labor Arbiter should prevail, as it is supported by
substantial evidence and the law. The petitioner, thus, maintains that the Labor
Arbiter correctly ruled that
(1) the separation of the Respondents from employment was for a valid and
authorized cause;
(2) the positions of the Respondents were redundant;
(3) there was a real and factual basis to declare redundancy;
(4) there is no evidence to show that the right sizing program was deliberately
intended to stifle union activities;
(5) the confluence of events was just a coincidence;
(6) there is no evidence of deviousness in the right sizing program;
(7) the Respondents received their individual separation benefits, and there is
no evidence that either moral or physical compulsion or both made them accept
the benefits offered; and
(8) Petitioner Company has complied with the legal requisites of terminating the
employment of the Respondents.[21]
The petitioner further argues that the decision of the NLRC is essentially flawed
because the private respondents were terminated on the ground of redundancy,
and not retrenchment which is an entirely different concept. There is absolutely
no evidence on record, save the bare allegations of the private respondents that
they were singled out as victims of retrenchment. The other redundant positions
were, likewise, eliminated. It insists that unlike retrenchment, redundancy does
not require business losses to be an authorized cause for dismissal. Moreover,
the law does not give any criteria, guidelines or standard for the selection of
employees who are to be dismissed on the ground of redundancy. It insists that
Article 283 of the Labor Code merely requires that in case of termination due to
the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to, at least, one (1) month pay for every year of service,
whichever is higher.
The petitioner further posits that the law does not require a corporation to adopt
radical cost-cutting measures prior to a termination on the ground of
redundancy. It avers that the mere fact that the termination took place at a time
when the private respondents had just organized the union does not
automatically render their termination invalid. It theorizes that the union could
have been organized as leverage to the implementation of the redundancy
program which the supervisory employees knew was forthcoming. It further
claims that it is clearly not within the discretion of the NLRC to say that the
termination was prematurely resorted to, as such determination was clearly
within the business discretion of the petitioner corporation. It adds that, as
evidenced by the generous separation packages given to the private
respondents, their welfare was amply considered by it.
Thus, the petitioner concludes, there was patent partiality and bias on the part
of the NLRC when it sweepingly declared that the dismissal of the private
respondents was illegal and without valid and authorized cause.[22]
The Ruling of the Court
The petition is denied for lack of merit.
In the main, the issues in this case are factual. Under Rule 45 of the Rules of
Court, only questions of law may be raised in this Court; such factual issues may
be considered and resolved only when the findings of facts and the conclusions
of the Labor Arbiter are inconsistent with those of the NLRC and the CA.
Nevertheless, we have meticulously reviewed the records in this case and find
that the NLRC did not commit any grave abuse of its discretion amounting to
lack or excess of jurisdiction in rendering its decision in favor of the private
respondents. The CA acted in accord with the evidence on record and case law
when it dismissed the petitioners petition for certiorari and affirmed the assailed
decision and resolution of the NLRC.
We reiterate that it is the burden of the petitioner, as employer, to prove the
factual and legal basis for the dismissal of its employees on the ground of
redundancy.
In Asian Alcohol Corporation v. National Labor Relations Commission,[23] the
Court ruled that redundancy exists when the service capability of the work force
is in excess of what is reasonably needed to meet the demands on the
enterprise. The Court proceeded to expound, as follows:
A redundant position is one rendered superfluous by any number of factors,
such as over-hiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company or phasing out
of a service activity priorly undertaken by the business. Under these conditions,
the employer has no legal obligation to keep in its payroll more employees than
are necessary for the operation of its business.[24]
Contrary to the petitioners claim, the employer must comply with the following
requisites to ensure the validity of the implementation of a redundancy
program: (1) a written notice served on both the employees and the
Department of Labor and Employment at least one month prior to the intended
date of retrenchment; (2) payment of separation pay equivalent to at least one
month pay or at least one month pay for every year of service, whichever is
higher; (3) good faith in abolishing the redundant positions; and (4) fair and
reasonable criteria in ascertaining what positions are to be declared redundant
and accordingly abolished.[25]
The Court emphasized in the earlier case of Panlilio v. National Labor Relations
Commission[26] that it is imperative for the employer to have fair and
reasonable criteria in implementing its redundancy program, such as but not
limited to (a) preferred status; (b) efficiency; and (c) seniority.[27]
The general rule is that the characterization by an employer of an employees
services as no longer necessary or sustainable is an exercise of business
judgment on the part of the employer. The wisdom or soundness of such
characterization or decision is not, as a general rule, subject to discretionary
review on the part of the Labor Arbiter, the NLRC and the CA.[28] Such
characterization may, however, be rejected if the same is found to be in
violation of the law or is arbitrary or malicious.[29]
In Dangan v. National Labor Relations Commission,[30] the Court ruled that the
hiring, firing or demotion of employees is a management prerogative, but is
subject to limitations stated in the collective bargaining agreement, if any, or
general principles of fair play and justice. Indeed, the Court will not hesitate to
strike down a redundancy program structured by a corporation to downsize its
personnel, solely for the purpose of weakening the union leadership, thereby
preventing it from securing reasonable terms and conditions of employment in
their CBA with the employer.
In this case, we agree with the ruling of the CA that the petitioner illegally
dismissed the private respondents from their employment by including them in
its special retirement program, thus, debilitating the union, rendering it pliant
by decapacitating its leadership. As such, the so-called downsizing of the Cane
Marketing Department and SMSD based on the SGV Study Report was a farce
capricious and arbitrary.
The Court agrees with the private respondents averments in their position
paper, as follows:
Complainants are not in a position to anticipate how respondent will present its
case for redundancy particular[ly] because no standard, criteria or guidelines for
the selection of dismissed employees was made known to them, and all that
they were told was that you were selected as among those who will be
separated from the service; nonetheless, this early, it is possible to point out
certain facts which throw light on the plausibility or want of it, of the ground
relied upon.
1. No contingency has occurred, of the kind mentioned by the Supreme Court in
the Wiltshire case, (over-hiring of workers, decreased volume of business or
dropping of a particular service line) which would explain the dismissal on the
ground of redundancy; over-hiring of workers cannot conceivably occur in the
level of the supervisors; on the other hand, it would have required an event of
cataclysmic proportion to justify the dismissal for redundancy of a full one-third
of the supervisors in an establishment, and if such an event were to occur it
would have resulted in tremendous losses which is not true here because the
dismissal is not on account of or to prevent losses;
2. In no other category of employees did positions suddenly become redundant
except among the supervisors who have just organized themselves into a labor
union and were working for their first-ever CBA in the establishment;
3. The dismissal came at the precise time when the Lopez Sugar Central
Supervisors Association (LSCA) had presented its CBA proposals and was
expecting the companys reply as mandated by law; in fact, the reply was
overdue, being required to be submitted by management within ten (10) days
from receipt of the union proposal; there is no better proof that the dismissals
have served their hidden purpose than that the CBA negotiation has ended to
all intents and purpose, before management could even present its
counterproposal. Certainly, it would be farfetched to say that the remaining
union officers and members have abandoned its objective of having a CBA for
reasons other than the fear of suffering the fate of those who had been
dismissed.
The absence of criteria, guidelines, or standard for selection of dismissed
employees renders the dismissals whimsical, capricious and vindictive; in the
case of the complainants Franco and Pabalan, who are the Union President and
Treasurer, respectively, the reason for their inclusion is obvious. Additionally, it
must be mentioned that in the case of Pabalan, there were three shift
supervisors, one for each 8-hour shift before the program was implemented,
namely, Pabalan, Bitera and Lopez; Pabalan and Bitera (a union director) were
terminated, leaving Lopez alone, who worked on 12-hour shift duty with Henry
Villa, department head who was forced to perform the work of shift supervisor;
Pabalan was offered to be rehired as an employee of BUGLAS, a labor-only
contractor but he refused; an employee, Eugenio Bolanos was assigned from
another department to do the work of shift supervisor and three of them (Lopez,
Villa and Bolanos) now divide shift duties among themselves. There is no
explanation why among the shift supervisors it was Pabalan and Bitera who
were included in the program.
In the case of complainants [P]errin and Candelario, both Planter Service
Representatives, the manipulation is even more apparent; one year before the
program was instituted, two new PSRs were hired (Labrador and Cambate)
bringing to six the total number of PSRs; after the termination of [P]errin and
Candelario, who have served for nearly 20 years, two new PSRs were hired
(Oropel and Jeres) on contractual basis and whose compensation is based on
pakiao; additionally, Candelario was hired after his dismissal under the same
arrangement as Oropel and Jeres, which lasted only up to January 1996 when
management learned of the filing of the first of these cases; [P]errin, on his
part, was offered the same arrangement but he refused.
4. The rehiring of dismissed employees through a labor-only contractor exposes
the program as a circumvention of the law. This is true in the case of the
following supervisors who were terminated with complainant but were
subsequently employed to do exactly the same work, but as employees of
BUGLAS, a labor-only contractor which supplies laborers to respondent LSC:
A. Juanito Lanos, Supervisor, Electrical Department.
B. Raymundo Llenos, Community Development Officer.
C. Joseph Nicolas, Supervisor, Refrigeration and Air Conditioning.
The above re-hiring in addition to other circumstances earlier mentioned, such
as the hiring of 2 men PSRs after Candelario and [P]errin were terminated; the
short-lived rehiring of the former and the offer to hire the latter which he
refused, all indicate that there was no redundancy.
None of the work has been phased out or rendered obsolete by any event that
took place. As to duplication of functions, it must be mentioned that the
positions of complainants have existed for a long time judging from their years
of service with respondent; the observation of the Supreme Court in the
Wiltshire case to the effect that in a well-organized establishment, duplication of
functions is hardly to be expected is pertinent.[31]
Foremost, the petitioner failed to formulate fair and reasonable criteria in
ascertaining what positions were declared redundant and accordingly obsolete,
such as preferred status, efficiency or seniority. It, likewise, failed to formulate
fair and reasonable parameters to determine who among the supervisors and
middle-level managers should be retired for redundancy. Using the SGV report
as anchor, the petitioner came out with a special retirement program for its 108
supervisors and middle-level managers, making it clear that its decision to
eliminate them was final and irrevocable. Moreover, the private respondents
were not properly apprised of the existence of the special retirement program,
as well as the criteria for the selection of the supervisors to be retired, and
those to be retained or transferred or demoted.
Contrary to its submissions, the petitioner downsized the Cane Marketing
Department by eliminating private respondents Perrin and Candelario; and
Franco and Candelario from the Sugar and Molasses Storage Department,
respectively, without due regard to the SGV report. The following
recommendations relating to the Sugar and Molasses Storage Department were
made:
RECOMMENDATIONS

=================
2.4 Sugar and Molasses Storage
2.4.1 Renovate old bulk warehouse to improve ventilation, lighting and raw
sugar handling
2.4.2 Install a conveyor/scale before bag sewing of refined sugar to check
weight conformity
2.4.3 Renovate bagging room of refined sugar to enforce strict
hygiene/sanitation
2.4.4 Install a marking mechanism that would indicate production date on
bagged refined sugar
2.4.5 Conduct weekly checks and adjustment on the bag sewing and conveyor
equipment [32]
The downsizing of personnel was not among the foregoing recommendations,
and yet this was what the petitioner did, through its special retirement program,
by including private respondents Franco and Pabalan, thereby terminating their
employment. It is too much of a coincidence that the two private respondents
were active members of the union.
On the other hand, the following recommendations were made relating to the
Cane Marketing Department:
CANE MARKETING AND TRANSPORT
1.0 Cane Marketing
1.1.1 Expand SCs farm leasing operations (by 6,292 hectares)
1.1.2 Establish cane supply planning system
1.1.3 Beef up SCs cane marketing efforts by hiring more effective PSRs to
replace ineffective PSRs
1.1.4 Acquire 6 motorcycles instead of second-hand jeeps
1.1.5 Apply marketing techniques used by other companies/industries.[33]
As can be gleaned from the above, the report recommended the beefing up of
the petitioners planter service representative force, while eliminating those who
were ineffective. There is no showing in the record that respondents Perrin and
Candelario were eliminated solely because they were inefficient. Neither is there
any substantial evidence on record that the private respondents performance
had been deteriorating; on the contrary, they had been so far so efficient that
they had been given promotions from time to time during their employment.
Yet, the petitioner eliminated private respondents Perrin and Candelario and
retained three PSRs, namely, Danilo Villanueva, Roberto Combate and Danilo
Labrador, who were employed with the petitioner from one to three years and
transferred Raymundo de la Rosa, who had been working there for only six
years.[34] Again, it is too much of a coincidence that Franco and Pabalan, the
President and Treasurer, respectively, of the union, were included in the special
retirement program.
We agree with the findings of the CA that the private respondents were
unilaterally included in the said program for the following reasons:
As evidenced by various documents attached to the affidavit of Leonito Franco
and Rogelio Pabalan, as well as supporting affidavits of complainants, the
supervisory employees of LSC organized a labor union called Lopez Sugar
Corporation Supervisors Associations which was issued a certificate of
registration by the DOLE Regional Office No. VI, Iloilo City on December 29,
1994. Complainant Franco was elected President and complainant, Pabalan,
Treasurer, during the organizational meeting. Complainants [P]errin and
Candelario are active union members. Management was duly informed about
this fact and in January 1995 a conference was conducted between the union
and management where the status of the union was clarified and some
problems in the workplace were discussed. The management was also informed
subsequently that 105 out of 108 supervisory employees have joined the union
and authorized check-off of the union dues starting March 1995. The check-off
was effected.
On July 24, 1995, the union formally submitted its CBA proposal to respondent
with request for a reply in ten (10) days pursuant to the Labor Code. The
management in a letter expressed willingness to meet the union panel on
August 30, 1995, which the latter understood to mean that the management
would present its counter-proposal during the said conference.
To the surprise of the complainants, they received instead on August 26, 1995 a
letter of termination stating that, in accordance with the special retirement
program of respondent, their services will be terminated effective September
27, 1995. The letter also stated that according to a study conducted by the
respondent of its organizational set-up, it is over-staffed and there are
duplications of functions which left it no choice but to reduce personnel.
As to the CBA counter-proposal, the management wrote the union on August 31,
1995 that the matter was referred to its external counsel for appropriate
disposition in the light of the recent development in this company.
The special retirement program affected 32 employees or roughly one-third of
the supervisory personnel. They included the union President and Treasurer and
majority of the Board of Directors and active union members. No clarification
was made as to how the terminated employees were chosen, and no guidelines, private respondents were forced to sign the said documents and receive their
criteria or standard was shown to lend coherence to the program. separation pay.

As may be expected, the dismissals generated a general perception that IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
management was sending a strong message that all employees hold their
position at its pleasure, and that it was within its power to dismiss anyone SO ORDERED.
anytime. With the dismissal of the union officers and with the membership now
effectively threatened, the union virtually collapsed as an organization. Out of Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
fear, no one would even assume the position of union President. An indication of
this sad state of affairs into which the union has fallen is that nothing came out
of its CBA proposal. It has been a year and three months as of this writing since
the respondent informed the union that its proposal had been referred to the
companys external counsel, but no counter-proposal has been submitted and no
single conference has been held since then.[35]

While it may be true that the private respondents signed separate Deeds of
Release Waiver and Quitclaim and received separation pay, nonetheless, we
find and so hold that the NLRC did not err in nullifying the decision of the Labor
Arbiter, thus:
Republic of the Philippines
The Release Waiver and Quitclaim were not verified by the complainants. Under SUPREME COURT
prevailing jurisprudence, the fact that an employee has signed a satisfaction Manila
receipt of his claims does not necessarily result in the waiver thereof. The law
does not consider as valid any agreement whereby a worker agrees to receive SECOND DIVISION
less compensation than what he is entitled to recover. A deed of release or
quitclaim cannot bar an employee from demanding benefits to which he is G.R. No. 146530 January 17, 2005
legally entitled. We have herefore (sic) explained that the reason why quitclaims
are commonly frowned upon as contrary to public policy and why they are held PEDRO CHAVEZ, petitioner,
to be ineffective to bar claims for the full measures of the workers legal rights is vs.
the fact the employer and the employee obviously do not stand on the same NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC.
footing. The employer drove the employees to the wall. The latter must have to and ALVIN LEE, Plant Manager, respondents.
get hold of the money. Because out of job, they had to face the harsh
necessities of life. x x x (Marcos vs. NLRC, G.R. No. 111744, September 8, 1995) DECISION
[36]
CALLEJO, SR., J.:
Private respondents Franco and Pabalan protested the termination of their
employment. Private respondents Candelario and Perrin were shocked when, Before the Court is the petition for review on certiorari of the Resolution1 dated
although they were on leave, they were invited to the Northeast Beach Resort December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated
by Juan Masa, Jr., the head of the Cane Marketing Department, on August 25, April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the
1996, only to be told that, after spending a considerable number of years under Decision dated July 10, 1998 of the National Labor Relations Commission
the petitioners employ, they were suddenly out of jobs. The private respondents (NLRC), dismissing the complaint for illegal dismissal filed by herein petitioner
had no other recourse but to execute the said Release Waiver and Quitclaim Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision
because the petitioner made it clear in its Memorandum dated August 8, 1995 dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the
that it had the final say on who would be included in its special retirement petitioner had been illegally dismissed by respondents Supreme Packaging, Inc.
program. Their dismissal from the petitioner corporation was a fait accompli, and Mr. Alvin Lee.
solely because they organized a union that would bargain for reasonable terms
and conditions of employment sought to be included in a CBA. In fine, the The case stemmed from the following facts:
private respondents were left to fend for themselves, with no source of income
from then on; prospects for new jobs were dim. Their backs against the wall, the The respondent company, Supreme Packaging, Inc., is in the business of
manufacturing cartons and other packaging materials for export and
distribution. It engaged the services of the petitioner, Pedro Chavez, as truck
driver on October 25, 1984. As such, the petitioner was tasked to deliver the
respondent companys products from its factory in Mariveles, Bataan, to its
various customers, mostly in Metro Manila. The respondent company furnished
the petitioner with a truck. Most of the petitioners delivery trips were made at
nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in
the afternoon two or three days after. The deliveries were made in accordance
with the routing slips issued by respondent company indicating the order, time
and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per
trip. This was later adjusted to P480.00 per trip and, at the time of his alleged
dismissal, the petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee,
respondent companys plant manager, his (the petitioners) desire to avail
himself of the benefits that the regular employees were receiving such as
overtime pay, nightshift differential pay, and 13th month pay, among others.
Although he promised to extend these benefits to the petitioner, respondent Lee
failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga.
Before the case could be heard, respondent company terminated the services of
the petitioner. Consequently, on May 25, 1995, the petitioner filed an amended
complaint against the respondents for illegal dismissal, unfair labor practice and
non-payment of overtime pay, nightshift differential pay, 13th month pay,
among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee
relationship between the respondent company and the petitioner. They averred
that the petitioner was an independent contractor as evidenced by the contract
of service which he and the respondent company entered into. The said contract
provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents,
agrees to hire and the Contractor [referring to Pedro Chavez], by nature of their
specialized line or service jobs, accepts the services to be rendered to the
Principal, under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the
contractor to the principal, shall only cover travel route from Mariveles to Metro
Manila. Otherwise, any change to this travel route shall be subject to further
agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery
transport services fully rendered by the Contractor shall be on a per trip basis
depending on the size or classification of the truck being used in the transport
service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the
payment on a per trip basis from Mariveles to Metro Manila shall be THREE
HUNDRED PESOS (P300.00) and EFFECTIVE December 15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler, the payment
on a per trip basis, following the same route mentioned, shall be THREE
HUNDRED FIFTY (P350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic]
at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the
Principal for the cost of any damage to, loss of any goods, cargoes, finished
products or the like, while the same are in transit, or due to reckless [sic] of its
men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over
its men working for him subject to this agreement, and that the Contractor shall
hold the Principal free and harmless from any liability or claim that may arise by
virtue of the Contractors non-compliance to the existing provisions of the
Minimum Wage Law, the Employees Compensation Act, the Social Security
System Act, or any other such law or decree that may hereafter be enacted, it
being clearly understood that any truck drivers, helpers or men working with
and for the Contractor, are not employees who will be indemnified by the
Principal for any such claim, including damages incurred in connection
therewith;
6. This contract shall take effect immediately upon the signing by the parties,
subject to renewal on a year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently
renewed twice, on July 10, 1989 and September 28, 1992. Except for the rates
to be paid to the petitioner, the terms of the contracts were substantially the
same. The relationship of the respondent company and the petitioner was
allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the
means and methods by which his work was accomplished. He paid the wages of
his helpers and exercised control over them. As such, the petitioner was not
entitled to regularization because he was not an employee of the respondent
company. The respondents, likewise, maintained that they did not dismiss the
petitioner. Rather, the severance of his contractual relation with the respondent
company was due to his violation of the terms and conditions of their contract.
The petitioner allegedly failed to observe the minimum degree of diligence in
the proper maintenance of the truck he was using, thereby exposing respondent
company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered
the Decision dated February 3, 1997, finding the respondents guilty of illegal
dismissal. The Labor Arbiter declared that the petitioner was a regular employee
of the respondent company as he was performing a service that was necessary
and desirable to the latters business. Moreover, it was noted that the petitioner
had discharged his duties as truck driver for the respondent company for a
continuous and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void
as it constituted a circumvention of the constitutional provision affording full
protection to labor and security of tenure. The Labor Arbiter found that the
petitioners dismissal was anchored on his insistent demand to be regularized.
Hence, for lack of a valid and just cause therefor and for their failure to observe
the due process requirements, the respondents were found guilty of illegal
dismissal. The dispositive portion of the Labor Arbiters decision states:
The respondents sought reconsideration of the January 27, 1998 Decision of the
NLRC. Acting thereon, the NLRC rendered another Decision6 dated July 10,
1998, reversing its earlier decision and, this time, holding that no employer-
employee relationship existed between the respondent company and the
petitioner. In reconsidering its earlier decision, the NLRC stated that the
respondents did not exercise control over the means and methods by which the
petitioner accomplished his delivery services. It upheld the validity of the
contract of service as it pointed out that said contract was silent as to the time
by which the petitioner was to make the deliveries and that the petitioner could
hire his own helpers whose wages would be paid from his own account. These
factors indicated that the petitioner was an independent contractor, not an
employee of the respondent company.

WHEREFORE, in the light of the foregoing, judgment is hereby rendered
declaring respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant
Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal
dismissal, ordering said respondent to pay complainant his separation pay
equivalent to one (1) month pay per year of service based on the average
monthly pay of P10,800.00 in lieu of reinstatement as his reinstatement back to
work will not do any good between the parties as the employment relationship
has already become strained and full backwages from the time his
compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-
off date) until compliance, otherwise, his backwages shall continue to run. Also
to pay complainant his 13th month pay, night shift differential pay and service
incentive leave pay hereunder computed as follows:
a) Backwages .. P248,400.00 July 10, 1998 Decision of the NLRC and reinstating the decision of the Labor
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant
as attorneys fees.
The NLRC ruled that the contract of service was not intended to circumvent
Article 280 of the Labor Code on the regularization of employees. Said contract,
including the fixed period of employment contained therein, having been
knowingly and voluntarily entered into by the parties thereto was declared valid
citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed the petitioners
complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was
denied by the NLRC in its Resolution dated September 7, 1998. He then filed
with this Court a petition for certiorari, which was referred to the CA following
the ruling in St. Martin Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the
Arbiter. In the said decision, the CA ruled that the petitioner was a regular
employee of the respondent company because as its truck driver, he performed
a service that was indispensable to the latters business. Further, he had been
the respondent companys truck driver for ten continuous years. The CA also
reasoned that the petitioner could not be considered an independent contractor
since he had no substantial capital in the form of tools and machinery. In fact,
the truck that he drove belonged to the respondent company. The CA also
observed that the routing slips that the respondent company issued to the
petitioner showed that it exercised control over the latter. The routing slips
indicated the chronological order and priority of delivery, the urgency of certain
deliveries and the time when the goods were to be delivered to the customers.

SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the
appeal was dismissed by the NLRC in its Decision4 dated January 27, 1998, as it
affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the
petitioner as a "scheme" that was resorted to by the respondents who, taking
advantage of the petitioners unfamiliarity with the English language and/or
legal niceties, wanted to evade the effects and implications of his becoming a
regularized employee.5
The CA, likewise, disbelieved the respondents claim that the petitioner
abandoned his job noting that he just filed a complaint for regularization. This
actuation of the petitioner negated the respondents allegation that he
abandoned his job. The CA held that the respondents failed to discharge their
burden to show that the petitioners dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal dismissal and the
decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between
the respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent
workers from attaining the status of regular employment, it is but necessary for
the courts to scrutinize with extreme caution their legality and justness. Where
from the circumstances it is apparent that a contract has been entered into to
preclude acquisition of tenurial security by the employee, they should be struck
down and disregarded as contrary to public policy and morals. In this case, the
"contract of service" is just another attempt to exploit the unwitting employee
and deprive him of the protection of the Labor Code by making it appear that
the stipulations of the parties were governed by the Civil Code as in ordinary
transactions.9
However, on motion for reconsideration by the respondents, the CA made a
complete turn around as it rendered the assailed Resolution dated December
15, 2000 upholding the contract of service between the petitioner and the
respondent company. In reconsidering its decision, the CA explained that the
extent of control exercised by the respondents over the petitioner was only with
respect to the result but not to the means and methods used by him. The CA
cited the following circumstances: (1) the respondents had no say on how the
goods were to be delivered to the customers; (2) the petitioner had the right to
employ workers who would be under his direct control; and (3) the petitioner
had no working time.
The fact that the petitioner had been with the respondent company for more
than ten years was, according to the CA, of no moment because his status was
determined not by the length of service but by the contract of service. This
contract, not being contrary to morals, good customs, public order or public
policy, should be given the force and effect of law as between the respondent
company and the petitioner. Consequently, the CA reinstated the July 10, 1998
Decision of the NLRC dismissing the petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15,
2000 Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO
THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES
WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT NOTWITHSTANDING
ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL
AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS
THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE
RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS
CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an
employer-employee relationship between the respondent company and the
petitioner. We rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1)
the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the employers power to control the employees
conduct.11 The most important element is the employers control of the
employees conduct, not only as to the result of the work to be done, but also as
to the means and methods to accomplish it.12 All the four elements are present
in this case.
First. Undeniably, it was the respondents who engaged the services of the
petitioner without the intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered."13 That the petitioner was paid on a per trip basis
is not significant. This is merely a method of computing compensation and not a
basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on
whether the elements of an employer-employee relationship are present or
not.14 In this case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that he rendered
to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is
required to pay his employees by means of payroll.15 The payroll should show,
among other things, the employees rate of pay, deductions made, and the
amount actually paid to the employee. Interestingly, the respondents did not
present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its
presentation would be adverse to their case.16
Third. The respondents power to dismiss the petitioner was inherent in the fact
that they engaged the services of the petitioner as truck driver. They exercised
this power by terminating the petitioners services albeit in the guise of
"severance of contractual relation" due allegedly to the latters breach of his
contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. Compared to an employee,
an independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own account
and under its own responsibility according to its own manner and method, free
from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.17 Hence, while an
independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employers power to
control the means and methods by which the employees work is to be
performed and accomplished.18
Although the respondents denied that they exercised control over the manner
and methods by which the petitioner accomplished his work, a careful review of
the records shows that the latter performed his work as truck driver under the
respondents supervision and control. Their right of control was manifested by
the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be
used exclusively to deliver respondent companys goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to
park the truck in either of two specific places only, to wit: at its office in Metro
Manila at 2320 Osmea Street, Makati City or at BEPZ, Mariveles, Bataan;20
and
4. Respondents determined how, where and when the petitioner would perform
his task by issuing to him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological order
and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant
that the petitioner had to deliver the same according to the order of priority
indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered
urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to
be delivered to the customers as, for example, the words "tomorrow morning"
was written on slip no. 2776.
These circumstances, to the Courts mind, prove that the respondents exercised
control over the means and methods by which the petitioner accomplished his
work as truck driver of the respondent company. On the other hand, the Court is
hard put to believe the respondents allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling services when
he did not even own the truck used for such services. Evidently, he did not
possess substantial capitalization or investment in the form of tools, machinery
and work premises. Moreover, the petitioner performed the delivery services
exclusively for the respondent company for a continuous and uninterrupted
period of ten years.
The contract of service to the contrary notwithstanding, the factual
circumstances earlier discussed indubitably establish the existence of an
employer-employee relationship between the respondent company and the
petitioner. It bears stressing that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract and
providing therein that the employee is an independent contractor when, as in
this case, the facts clearly show otherwise. Indeed, the employment status of a
person is defined and prescribed by law and not by what the parties say it
should be.22
Having established that there existed an employer-employee relationship
between the respondent company and the petitioner, the Court shall now
determine whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a
valid and just cause.23 In this case, the respondents failed to prove any such
cause for the petitioners dismissal. They insinuated that the petitioner
abandoned his job. To constitute abandonment, these two factors must concur:
(1) the failure to report for work or absence without valid or justifiable reason;
and (2) a clear intention to sever employer-employee relationship.24 Obviously,
the petitioner did not intend to sever his relationship with the respondent
company for at the time that he allegedly abandoned his job, the petitioner just
filed a complaint for regularization, which was forthwith amended to one for
illegal dismissal. A charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more so when it includes a
prayer for reinstatement.25
Neither can the respondents claim that the petitioner was guilty of gross
negligence in the proper maintenance of the truck constitute a valid and just
cause for his dismissal. Gross negligence implies a want or absence of or failure
to exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid
them.26 The negligence, to warrant removal from service, should not merely be
gross but also habitual.27 The single and isolated act of the petitioners
negligence in the proper maintenance of the truck alleged by the respondents
does not amount to "gross and habitual neglect" warranting his dismissal.
The Court agrees with the following findings and conclusion of the Labor Arbiter:
As against the gratuitous allegation of the respondent that complainant was
not dismissed from the service but due to complainants breach of their
contractual relation, i.e., his violation of the terms and conditions of the
contract, we are very much inclined to believe complainants story that his
dismissal from the service was anchored on his insistent demand that he be
considered a regular employee. Because complainant in his right senses will not
just abandon for that reason alone his work especially so that it is only his job
where he depends chiefly his existence and support for his family if he was not
aggrieved by the respondent when he was told that his services as driver will be
terminated on February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the
petitioner renders his dismissal illegal. Under Article 279 of the Labor Code, an
employee who is unjustly dismissed is entitled to reinstatement, without loss of
seniority rights and other privileges, and to the payment of full backwages,
inclusive of allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.29 However, as found by the Labor Arbiter, the
circumstances obtaining in this case do not warrant the petitioners
reinstatement. A more equitable disposition, as held by the Labor Arbiter, would
be an award of separation pay equivalent to one month for every year of
service from the time of his illegal dismissal up to the finality of this judgment in
addition to his full backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December

15, 2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in
CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February
3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the
respondents guilty of illegally terminating the employment of petitioner Pedro
Chavez, is REINSTATED.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 114250 April 5, 1995
DOMINICO C. CONGSON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NOE BARGO, ROGER HIMENO,
RAYMUNDO BADAGOS, PATRICIO SALVADOR, SR., NEHIL BARGO, JOEL MENDOZA,
and EMMANUEL CALIXIHAN, respondents.
PADILLA, J.:
Petitioner Dominico C. Congson seeks the nullification of the decision rendered
by the National Labor Relations Commission in Case No. NLRC CA M-000681-92
1 dated 28 May 1993 and its resolution dated 28 January 1994, denying
petitioner's motion for reconsideration..
In the challenged decision*, the NLRC affirmed in toto Labor Arbiter Arturo
Aponesto's decision dated 27 September 1991, holding thus:
WHEREFORE, the appealed decision is hereby AFFIRMED IN TOTO and the
instant appeal is DISMISSED for lack of merit.
SO ORDERED. 2
Petitioner is the registered owner of Southern Fishing Industry. Private
respondents were hired on various dates 3 by petition'er as regular piece-rate
workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty
(30) to eighty (80) kilos per movement, that is from the fishing boats down to
petitioner's storage plant at a load/unload cycle of work until the tuna catch
reached its final shipment/destination. They did the work of unloading tuna from
fishing boats to truck haulers; unloading them again at petitioner's cold storage
plant for filing, storing, cleaning, and maintenance; and finally loading the
processed tuna for shipment. They worked seven (7) days a week.
During the first week of June 1990, petitioner notified his workers of his proposal
to reduce the rate-per-tuna movement due to the scarcity of tuna. Private
respondents resisted petitioner's proposed rate reduction. When they reported
for work the next day, they were informed that they had been replaced by a
new set of workers, When they requested for a dialogue with the management,
they were instructed to wait for further notice. They waited for the notice of
dialogue for a full week but in vain.
On 15 June 1990, private respondents filed a case against petitioner before the
NLRC Sub-Regional Arbitration Branch No. XI in General Santos City, docketed as
Case No. RAB-11-06-50165-90 for underpayment of wages (non-compliance
with Rep. Act Nos. 6640 and 6727) and non-payment of overtime pay, 13th
month pay, holiday pay, rest day pay, and five (5)-day service incentive leave
pay; and for constructive dismissal. With respect to their monetary claims,
private respondents charged petitioner with violation of the minimum wage law,
alleging that with petitioner's rates and the scarcity of tuna catches, private
respondents' average monthly earnings each did not exceed ONE THOUSAND
PESOS (P1,000.00).
Accusing petitioner of constructive dismissal, private respondents claimed that
petitioner refused to give them work assignments and replaced them with new
workers when they showed resistance to the petitioner's proposed reduction of
the rate-per-tuna movement.
On 2 July 1990, private respondents filed another case against petitioner,
docketed as Case No. RAB; 11-07-50179-90 containing an additional claim for
separation pay should their complaint for constructive dismissal be upheld.
The two (2) cases were consolidated. Conciliation conferences were scheduled.
On 24 July 1990, however, Labor Arbiter Aponesto directed the parties to submit
their respective position papers within twenty (20) days from receipt of the
directive, since no amicable settlement was reached in conciliation between the
parties.
On 22 August 1990, private respondents filed their position paper reiterating
the charges in their complaint for constructive dismissal, attaching thereto a Bill
of Particulars containing the computations of their monetary claims. Petitioner,
instead of filing his position paper, sought, through counsel, an extension of
time within which to file his position paper.
On 20 September 1991, petitioner filed his position paper wherein he claimed
that the only issue for resolution was private respondents' monetary claims, and
that there was no constructive dismissal. Petitioner further argued that private
respondents were not dismissed but rather, they abandoned their work after
learning of petitioner's proposal to reduce tuna movement rates because of the
scarcity of tuna, and that, it took private respondents one (1) month to return to
work, but they could no longer be accommodated as petitioner had already
hired their replacements after private respondents failed to heed petitioner's
repeated demands for them to return to work. Upon said premises, petitioner
contended that private respondents were not entitled to separation pay.
On 27 September. 1991, Labor Arbiter Aponesto rendered a decision, with the
following disposition:
WHEREFORE, finding that complainants Noe Bargo, Roger Himeno, Raymundo R. Badayos
Badagos, Patricio Salvador; Sr., Negil Barge, Joel Mendoza and Emmanuel
Calixihan were (constructively) dismissed from employment without just or (P2,670 x 10)
unauthorized cause hence illegal, respondents Southern Fishing Industry and Mr.
Dominico Congson are hereby directed to pay, jointly and severally, their 26,700
respective separation pay and monetary claims for salary differentials, 13th
month pay and service incentive leave pay, as computed above, in the total 4
sum of FIVE HUNDRED TWO THOUSAND EIGHT HUNDRED SIXTY FIVE
(P502,865.00) PESOS. P. Salvador, Jr.

The claims for overtime pay, holiday pay and rest day pay are, however, (P2,670 x 6)
dismissed for lack of factual basis and for reasons aforecited.
16,020
SO ORDERED. 4
5
In holding petitioner guilty of constructive dismissal, Labor Arbiter Aponesto
made the following findings: Negil Bargo

After a careful evaluation of the foregoing facts, proofs, evidence, arguments (P2,670 x 10)
and counter-arguments adduced by the parties we find that complainants were
summarily dismissed from employment t on the first week of June, 1990, when 26,700
respondent Dominico Congson arbitrarily replaced them with another group of
laborers to do the work of complainants. This was brought about by their 6
reluctance or resistance to accept a new lower rate proposed by respondent the
day before. The advise to wait for further notice' was indeed a confirmation that J. Mendoza
complainants were dismissed as underscored by the fact that such notice never
came even until this date. Having been constructively and illegally dismissed (P2,670 x 6)
complainants are therefore entitled to their prayer for separation pay. Their
length of service 10 years and 6 years, respectively(supra), which respondent 16,020
dismally failed to controvert or refute, shall be the basis of our computation,
thus: 7

1 E. Calixihan

N. Bargo (P2,670 x 6)

(P2,670 x 10) 16,020

P26,700

2 Total

R. Himeno P154,860 5

(P2,670 x 10) Except for private respondents' claim for overtime pay, holiday pay, and rest
day pay which were dismissed, Labor Arbiter Aponesto granted the monetary
26,700 claims of private respondents, in this wise:

3 We likewise grant the monetary claims of complainants for wage differentials,

13th month pay and service incentive leave pay payment of or exemption from
which respondents failed to show. Hence, given the 3-year period covered by 42,120
their monetary claims, i.e. from June, 1987 to June, 1990 the monetary awards
due complainants are as follows: 6,510.00

Name 1,085

Wage 49,715.00

13th N. Bargo

SIL 42,120

Total 6,510.00

Diff'l. 1,085

Mon. Pay 49,715.00

Noe Bargo J. Mendoza

42,120 42,120

6,510.00 6,510.00

1,085 1,085

P49,715.00 49,715.00

R. Himeno Calixihan.

42,120 42,120

6,510.00 6,510.00

1,085 1,085

49,715.00 49,715.00

R. Badagos

42,120 Total

6,510.00 P348,005.00

1,085 xxx xxx xxx

49,715.00 Pertaining to salary differentials respondent failed to adduce any evidence or

document at all to show that under their peculiar arrangements complainants
P. Salvador were receiving compensation at par or above the then existing minimum wage;
this, despite more than sufficient time afforded. Consequently, we have no
other alternative but to give credence to complainants' assertion that their
average income (each) did not exceed P1,000.00 a month (Annex "B")
complainants' position paper), thus the differentials. 6
On the other hand, Labor Arbiter Aponesto made short shrift of petitioner's
defense by ruling that:
We cannot give credence to the allegations or defenses put up by respondents:
As stated, one of the principal claims of complainants is the payment of their
separation pay which was specifically prayed by complainants when they filed
the second case on July 2, 1990; this claim is likewise included in their Bill of
particulars (Annex "C" complainants' position paper). We cannot sustain
respondents' theory of abandonment. Record shows that shortly after
complainants were constructively dismissed on the first week of June, 1990 they
immediately filed the instant case for constructive dismissal on June 15,1990.
There is also no showing of a deliberate refusal on their part to resume work.
Moreover, respondents dismally failed to substantiate their general allegation
that "repeated demands" were made upon complainants to return to work. 7
On appeal by petitioner, respondent NLRC found petitioner guilty of illegal
dismissal. Holding that petitioner failed to substantiate his contention that
private respondents abandoned their work, respondent NLRC ruled that
petitioner replaced private respondents with a new set of workers without just
cause and the required notice and hearing. Respondent NLRC therefore affirmed
Labor Arbiter Aponesto's findings and monetary awards. Petitioner's motion for
reconsideration and supplemental motion for reconsideration were denied for
lack of merit in the challenged resolution dated 28 January 1994.
Hence, the present recourse by petitioner.
Petitioner imputes grave abuse of discretion to respondent NLRC in completely
disregarding his motion for reconsideration and supplemental motion for
reconsideration. He contends that said motions for reconsideration raised
substantial issues which respondent NLRC failed to consider and resolve.
Petitioner's motion for reconsideration and supplemental motion for
reconsideration raised only two (2) issues: a) the accuracy of Labor Arbiter
Aponesto's computations in arriving at the monetary awards representing salary
differentials; and b) the propriety or correctness of Labor Arbiter Aponesto's
grant of separation pay to private respondents.
Petitioner takes issue with the manner Labor Arbiter Aponesto computed private
respondents wage differentials. In his supplemental motion for reconsideration,
petitioner argued, thus:
In the Decision rendered, the Arbiter awarded wage differential on the premise
that complainants monthly average income is only P1, 000.00 as alleged in their
position paper. This is erroneous. Here is why:
Herein complainants were employed by respondents on a load-unload cycle of
hauling "bariles" from the fishing boats to the truck hauler of the respondents;
then from the truck hauler down to the cold storage; the herein complainants
were paid P 1.00 per movement t; that is, from the fishing boat to the cold
storage, the herein complainants actually received the amount of P2.00, one (1)
peso per movement; that there are two (2) movements from the fishing boat to
the cold storage, hence complainants are actually receiving P2.00 per piece of
tuna. The Arbiter must have been on the impression that there is only one (1)
movement from the fishing boat to the cold storage. This is erroneous.
That finally, when the tuna is ready for export, the same is to be transferred
from the cold storage to the ocean going vessel berthed at respondents wharf
at Talisay, General Santos City, this time herein complainants are paid P3.00 per
piece of tuna from the cold storage to the ocean going vessel as shown in the
herewith attached Annexes.
In fine, all in all, there are three (3)movements from the time the tuna is
unloaded from the fishing boat to the fish car then to the cold storage; and,
finally from the cold storage to the vessel.
In addition to the amount of P1.00 per 'bariles' per movement herein
complainants get the intestines and liver of the tuna as part of their salary. That
for every tuna delivered, herein complainants extract at least three (3) kilos of
intestines and liver. That the minimum prevailing price of tuna intestine and
liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The value of the tuna
intestine and liver should be computed in arriving at the daily wage of herein
complainants because the very essence of the agreement between
complainants and respondent is: complainants shall be paid only P1.00 per tuna
per movement BUT the intestines and liver of the tuna delivered shall go to the
herein complainants. It should be noted that tuna intestines and liver are easily
disposed of in any public market. Complainants themselves would not have
agreed and would not have served respondent that long period of time if they
are only paid P1.00 per tuna movement. What they are after, in truth and in fact
is the tuna intestines and liver which they can easily convert into cash. 8
Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual
wage rate applied to private respondents as expressly agreed upon by both
parties. Petitioner further admits that private respondents, per their request,
were entitled to retrieve the tuna intestines and liver as part of their
compensation. Finally, petitioner does not refute Labor Arbiter Aponesto when
the latter fixed private respondents' individual monthly wage at P2,670
computed at the mandatory daily wage of P89.00.
However, it is the contention of petitioner that notwithstanding the fact that
private respondents' actual cash wage fell below the minimum wage fixed by
law, respondent NLRC should have considered as forming a substantial part of
private respondents' total wages the cash value of the tuna liver and intestines
private respondents were entitled to retrieve. Petitioner therefore argues that
the combined value of private respondents' cash wage and the monetary value
of the tuna liver and intestines clearly exceeded the minimum wage fixed by
law.
Petitioner's foregoing arguments do not impress us.
The Labor Code expressly provides:
Article 102. Forms of Payment. No. employer shall pay the wages of an
employee by means of, promissory notes, vouchers, coupons, tokens tickets,
chits, or any object other than legal tender, even when expressly requested by
the employee.
Payment of wages by check or money order shall be allowed when such manner
of payment is customary on the date of effectivity of this Code, or is necessary
as specified in appropriate regulations to be issued by the Secretary of Labor or
as stipulated in a collective bargaining agreement. (Emphasis supplied)
Undoubtedly, petitioner's practice of paying the private respondents the
minimum wage by means of legal tender combined with tuna liver and
intestines runs counter to the above cited provision of the Labor Code. The fact
that said method of paying the minimum wage was not only agreed upon by
both parties in the employment agreement but even expressly requested by
private respondents, does not shield petitioner. Article 102 of the Labor Code is
clear. Wages shall be paid only by means of legal tender. The only instance
when an employer is permitted to pay wages informs other than legal tender,
that is, by checks or money order, is when the circumstances prescribed in the
second paragraph of Article 102 are present.
We therefore find no grave abuse of discretion on the part of respondent NLRC
in upholding Labor Arbiter Aponesto's award of salary differentials.
With respect to the issue concerning the propriety or correctness of the grant of
separation pay to private respondents, petitioner contends that; assuming
arguendo that Labor Arbiter Aponesto's findings were proper as to private
respondents' illegal dismissal, his decision did not state the reason why instead
of reinstatement, separation pay has to be awarded to private respondents.
Petitioner submits that under existing laws and jurisprudence, whenever there is
a finding of illegal dismissal, the available and logical remedy is reinstatement.
As a permissible exception to the general rule, separation pay may be awarded
to the employee in lieu of reinstatement, by reason of strained relationship
between the employer and employee. Since there was no finding or even
allegation of strained relationship between .petitioner and private respondents,
respondent NLRC should have deleted, according to petitioner, the award of
separation pay in Labor Arbiter Aponesto's decision.
We find petitioner's ratiocination on the impropriety of the award of separation
pay to private respondents to be specious. Petitioner seeks to defeat the award
of separation pay, in lieu of reinstatement, on the pretext that inasmuch as the
existence of strained relationship as a permissible exception to an axiomatic
order of reinstatement in cases of illegal dismissal was not adequately
established, Labor Arbiter Aponesto should not have entertained at all private
respondents' claim for separation pay.
A careful scrutiny of the records of the case at bench, however, readily discloses
the existence of strained relationship between the petitioner and private
respondents.
Firstly, petitioner consistently refused to re-admit private respondents in his
establishment. Petitioner even replaced private respondents with a new set of
workers to perform the tasks of private respondents; Moreover, although
petitioner ostensibly argued in his supplemental motion for reconsideration that
reinstatement should have been the proper remedy in the case at bench on his
premise that the existence of strained relationship was not adequately
established, yet petitioner never sincerely intended to effect the actual
reinstatement of private respondents. For if petitioner were to pursue further
the entire logic of his argument, the prayer in his supplemental motion for
reconsideration should have contained not just the mere deletion of the award
of separation pay, but precisely, the reinstatement of private respondents. Quite
obviously then, notwithstanding petitioner's argument for reinstatement he was
only interested in the deletion of the award of separation pay to private
respondents.
In the case of Felix Esmalin vs. National Labor Relations Commission (3rd
Division) and CARE Philippines, 9 we held that strained relationship is fairly
established if the records of the case showed consistent refusal of the employer
to accept the dismissed employee, to wit:
From the records of the case it can be discerned that reinstatement is no longer
viable in view of the strained relations between petitioner-employee (Felix
Esmalin) and private respondent employer (CARE Philippines). This is very
evident from the vehement and consistent stand of CARE Philippines in refusing
to accept back petitioner Esmalin. Instead, petitioner should be awarded
separation pay as an alternative for reinstatement.
And secondly, private respondents themselves, from the very start, had already
indicated their aversion to their continued employment in petitioner's
establishment. The very filing of their second case before Labor.
Arbiter Aponesto (RAB-1 1-07-90179-90) specifically for separation pay is
conclusive of private respondents' intention to sever their working ties with
petitioner.
In the case of Arturo Lagniton, Sr. vs. National Labor Relations Commission, et
a1., 10 we ruled that the refusal of the dismissed employee to be re-admitted is
constitutive of strained relations, thus:
It appears that relations between the petitioner and the complainants have
been so strained that the complainants are no longer willing to be reinstated. As
such reinstatement would only exacerbate the animosities that have developed
between the parties, the public respondents were correct in ordering instead the
grant of separation pay to the dismissed employees in the interest of industrial
peace.
We therefore find no grave abuse of discretion on the part of respondent NLRC
in upholding Labor Arbiter Aponesto,'s grant of private respondents' prayer for
separation pay in lieu of reinstatement.
WHEREFORE, premises considered, the petition is hereby DISMISSED. The
challenged decision of respondent NLRC dated 28 May 1993 is hereby
AFFIRMED.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 77959 January 9, 1989
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner,
vs.
THE SECRETARY OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR OF
THE NATIONAL CAPITAL REGION, DEPARTMENT OF LABOR AND EMPLOYMENT
and UNITED RCPI COMMUNICATIONS LABOR ASSOCIATION (URCPICLA)-FUR,
respondents.
Ermitao, Asuncion, Manzano & Associates for petitioner.
The Solicitor General for public respondent.
Abad, Leano & Associates for respondent URCPICLA.
REGALADO, J.:
This petition for certiorari seeks the annulment of the orders issued by public
respondents in NWC Ref. No. W01-13, viz: (1) the order of May 7, 1986 of
respondent Regional Director requiring petitioner Radio Communications of the
Philippines, Inc. (hereinafter, RCPI) and its employees represented by Buklod ng
Manggagawa sa RCPI-NFL (BMRCPI-NFL, for brevity) to pay private respondent
United RCPI Communications Labor Association (URCPICLA-FUR for short) its
15% union service fee of P427,845.60, jointly and severally, and accordingly
directing the issuance of a writ of execution and garnishment of RCPI's bank
account for the satisfaction of said fee; (2) the order of August 16, 1986 of
respondent Secretary of Labor and Employment modifying the foregoing order
by reducing the union service fee to 10% of the awarded amounts and holding
petitioner solely liable for the payment of such fee; and (3) the order, dated
March 20, 1987, of respondent Secretary denying petitioner's motion for
reconsideration.
The records 1 show that on May 4, 1981, petitioner, a domestic corporation
engaged in the telecommunications business, filed with the National Wages
Council an application for exemption from the coverage of Wage Order No. 1. 2
The application was opposed by respondent URCPICLA-FUR, a labor organization
affiliated with the Federation of Unions of Rizal (FUR). On May 22, 1981, the
National Wages Council, through its Chairman, rendered a letter-decision 3
disapproving said application and ordering the petitioner to pay its covered
employees the mandatory living allowance of P2.00 daily effective March 22,
1981. Said letter-decision was affirmed by the Office of the President in O.P.
Case No. 1882 and, subsequently, this Court in its resolution of July 15, 1985 in
G.R. No. 70148 dismissed RCPI's petition for certiorari for lack of merit. Entry of
final judgment was issued by the Court on July 15, 1985. 4
Furthermore, it is not denied that as early as March 13, 1985, before the
aforesaid case was elevated to this Court, respondent union filed a motion for
the issuance of a writ of execution, asserting therein its claim to 15% of the
total backpay due to all its members as "union service fee" for having
successfully prosecuted the latter's claim for payment of wages and for
reimbursement of expenses incurred by FUR and prayed for the segregation and
remittance of said amount to FUR thru its National President. 5
In a subsequent "Motion for Immediate Issuance of Writ of Execution", dated
September 9, 1985, respondent union reiterated its claim for said union service
fee but this time in an amount equivalent to 20% of the total backpay due its
members, to be remitted to the institution previously adverted to. 6
On September 24, 1985, petitioner filed its opposition to said motion, asserting,
among others, that "there is no legal basis for respondent Union to have the
sum equivalent to 20% union service fee deducted from the amount due to
every recipient member". 7 An alias writ of execution was issued on September
26, 1985. 8
On October 24, 1985, without the knowledge and consent of respondent union,
petitioner entered into a compromise agreements 9 with BMRCPI-NFL as the
new bargaining agent of oppositors RCPI employees, the pertinent provisions
whereof are hereunder reproduced:
WHEREAS, there are now pending with the National Labor Relations Commission
Case No. NLRC-NCR- 11-5265-83 (NFL, et al. vs. RCPI) relative to RCPI's alleged
liabilities under P.D. 1713 and Wage Orders 1, 2 and 3 and NLRC Certified Case
No. 0356, with the National Wages Council and the Office of the Regional
Director, Ministry of Labor and Employment, National Capital Region NWC Case
Ref. No. WO-1-13 (O.P. Case No. 1882, S.C. G.R. No. 70148) relative to RCPI's
alleged liabilities under Wage Order No. 1; and with the Office of the Regional
Director, MOLE-NCR, a similar case (NCR-FSD-10-118- 83);
'WHEREAS, RCPI is one of the parties in the above cases and is herein
represented by its duly authorized representative/s while the
complainant/employees of RCPI are the other real parties in interest in the said
cases and are represented herein by BMRCPI-NFL, the duly certified bargaining
agent of the said complainant/employees;
WHEREAS, it is to the actual interest and benefit of the parties mentioned in the
preceding WHEREAS (the herein parties) that this Compromise Agreement be
entered into by and between them for the purpose of novating the above
mentioned cases, particularly any and all decisions therein, with the view of re-
defining the parties' rights and obligations under the various Presidential
Decrees and/or Wage Orders subjects of the above mentioned cases.
NOW, THEREFORE, for and in consideration of the foregoing premises and the
terms and conditions herein stated, the parties have agreed and bound
themselves as follows: THAT
1. RCPI by way of a compromise settlement acknowledges its alleged liability
under PD 1713 (mandatory third year) and Wage Order 1 (first and third year)
subject of the cases mentioned in the first WHEREAS hereof;
2. As consideration for the dismissal with prejudice of the above-captioned
cases and the novation thereof and of all decisions in said cases, the parties
hereby further agree that:
a) On November 30, 1985, RCPI shall pay to each of its
employees/complainants 30% of whatever is due him/her under PD 1713
(mandatory third year) and Wage Order 1 (first and third year) subject of the
cases mentioned in the first WHEREAS hereof;
b) The balance of 70% due to each employee/complainant under PD 1713
(mandatory third year) and Wage Order 1 (first and third year) subject of the
cases mentioned in the first WHEREAS hereof shall be the subject of re-opening
and/or negotiation by the parties on July 31, 1986 for the purpose of reaching a
compromise settlement thereon on terms mutually acceptable. Against this 30%
shall be deducted in full all personal cash advances of every covered employee;
c) Of and from the aforesaid total amount due every employee, 10% thereof
shall be considered as attorney's fee due Atty. Rodolfo Capocyan, the same to
be deducted from the remaining 70% and distributed to Atty. R. Capocyan at the
time of the distribution of the remaining 70%. In this connection, Atty. Rodolfo
Capocyan manifest (sic) that he is authorized by the covered employee (sic) to
collect 10% of whatever is/are due them as attorney's fees and undertakes and
binds himself to submit to RCPI the required individual check-off authorization
with respect to the 30%. He and the herein union assume sole responsibility for
and shall hold RCPI free and harmless from any claim, suit or complaint arising
from the deduction of this 10% attorney's fee,'
xxx
What transpired thereafter is more completely and undisputedly narrated by the
Solicitor General in behalf of public respondent, thus:
Thereupon, the parties to the compromise agreement filed a joint Motion to
Dismiss with Prejudice praying for the dismissal of the same with prejudice on
the ground that the decision of the National Wages Council dated May 22, 1981
had already been novated by the Compromise Agreement re-defining the rights
and obligations of the parties. Respondent Union on November 7, 1985
countered by opposing the motion and alleging that one of the signatories
thereof-Buklod ng Manggagawa sa RCPI is not a party in interest in the case but
that it was respondent Union which represented oppositors RCPI employees all
the way from the level of the National Wages Council up the Supreme Court.
Respondent Union therefore claimed that the Compromise Agreement is
irregular and invalid, apart from the fact that there was nothing to compromise
in the face of a final and executory decision.
On November 22, 1985, respondent Union filed an Urgent Motion for Lien (15%
Union Service Fee) calling attention to a Resolution passed and approved by the
URCPICLA-FUR Legislative Board on June 4, 1984 declaring respondent union
entitled to a sum equivalent to 15% of the total backpay received by each RCPI
employee from RCPI as union service fee and reimbursement of expenses
incurred in successfully handling the instant case. Respondent Union prayed
that RCPI be required to deposit with the Cashier of the National Capital Region,
Ministry of Labor and Employment an amount equivalent to 15% of the total
amount due to the covered employees as union service fee. Copy of this motion
was received by the Office of the President, RCPI on November 28, 1985.
xxx
'Acting on the Urgent Motion for Lien, Director Severo M. Pucan issued an Order
dated November 25, 1985 awarding to URCPICLA-FUR and FUR 15% of the total
backpay of RCPI employees as their union service fees, and directing RCPI to
deposit said amount with the cashier of the Regional Office for proper
disposition to said awardees.
Despite notice of the Order of November 25, 1985, and its accompanying letter
requesting the management of RCPI to withhold the 15% union service fee from
each employee affected, petitioner paid in full the covered employees on
November 29, 1985, without deducting the union service fee of 15%. In its
motion for reconsideration and to set aside the Order of November 25, 1985,
petitioner argued that said Order has been rendered moot and academic by the
fact that it had already paid in full the award under the decision of the National
Wages Council. It proposed instead that URCPICLA and/or FUR re-direct their
efforts at collection to the rank and file employees of RCPI. It also attacked the
questioned order as null and void ab anitio for lack of jurisdiction and due
process.
On December 16, 1985, respondent Union filed a petition praying for
garnishment of petitioner's funds in its depository banks to effect remittance of
its 15% union service fee in view of the payment in full by the latter of the
wages due its covered employees. Petitioner moved to dismiss the petition for
garnishment as illegal, irregular and highly anomalous. This was opposed by
respondent Union. 10
At this juncture, the record shows that on December 19, 1985, said Regional
Director issued an order declaring the decision fully satisfied and lifting all the
garnishments effected pursuant thereto "(C)onsidering that the Alias Writ of
Execution dated 26 September 1985 in this case had already been fully
satisfied. 11
However, it appears that thereafter, in an order dated May 7, 1986, NCR officer-
in-charge Romeo A. Young found petitioner RCPI and its employees jointly and
severally liable for the payment of the 15% union service fee amounting to
P427,845.60 to private respondent URCPICLA-FUR and consequently ordered the
garnishment of petitioner's bank account to enforce said claim. It was his
position that although the decision of the National Wages Council did not
categorically require payment of the 15% service fee directly to URCPICLA-FUR
it had acted as the counsel of record of petitioner's employees, hence said
payment could be authorized by applying suppletorily the provisions of Section
37, Rule 138 of the Rules of Court on attorney's lien. Said order further noted
that the transaction entered into by petitioner in favor of BMRCPI-NFL in the
guise of a compromise agreement, was made without the consent of URCPICLA-
FUR in clear defraudation of the latter's right to the 15% union service fee justly
due it. 12
Acting on petitioners "Omnibus Motion" seeking, among others, a
reconsideration of said order of May 7, 1986, which motion was treated as an
appeal, respondent Secretary of Labor and Employment issued an order on
August 18, 1986 modifying the order appealed from by holding petitioner solely
liable to respondent union for 10% of the awarded amounts as attorney's fees,
on the rationale that:
... oppositor's claim for attorney's fee was the ultimate consequence of the non-
compliance of RCPI with Wage Order No. 1. The RCPI employees were forced to
avail of the services of oppositor as counsel, RCPI having continuously withheld
payment of said benefit. They were forced to litigate up to the Supreme Court
for the protection of their interest. In the case of Cristobal vs. ECC, I,49280
promulgated February 26, 1981, 103 SCRA 339, the Supreme Court ruled that
'the defaulting employer or government agency remains liable for attorney's
fees because it compelled the complainant to employ the services of counsel by
unjustly refusing to recognize the validity of the claim.' Attorney's fee due the
oppositor is, thus, chargeable against RCPI. 13
Hence, the instant petition, basically on the sole issue of whether the public
respondents acted with grave abuse of discretion amounting to lack of
jurisdiction in holding the petitioner solely liable for "union service fee' to
respondent URCPICLA-FUR.
We hold in the negative.
The contention of petitioner that the challenged order of May 7, 1986 was
issued with grave abuse of discretion, for supposedly imposing an additional
obligation in the form of attorney's fees not contemplated in the decision of the
National Wages Council, is bereft of merit.
While it is true that the original decision of said Council; did not expressly
provide for payment of attorney's fees, that particular aspect or deficiency is
deemed to have been supplied, if not modified pro tanto, by the compromise
agreement subsequently executed between the parties. A cursory perusal of
said agreement shows an unqualified admission by petitioner that "from the
aforesaid total amount due every employee, 10% thereof shall be considered as
attorney's fee, 14 although, as hereinafter discussed, it sought to withhold it
from respondent union. Considering, however, that respondent union was
categorically found by the Labor Secretary to have been responsible for the
successful prosecution of the case to its ultimate conclusion in behalf of its
member, employees of herein petitioner, its right to fees for services rendered,
or what it termed as "union service fee," is indubitable.
The further pretension of petitioner that respondent union is not entitled to
attorney's fee or union service fee because it is not a member of the Bar is both
untenable and in disregard of the liberalized scheme and theory of
representation for labor adopted in the Labor Code.
As explained by the order of the Deputy Minister of August 18, 1986
hereinbefore adverted to
... The appearance of labor federations and local unions as counsel in labor
proceedings has been given legal sanction and we need only cite Art. 222 of the
Labor Code which allows non-lawyers to represent their organization or
members thereof.
It is undisputed that oppositor (private respondent herein) was the counsel on
record of the RCPI employees in their claim for EC0LA under Wage Order No. 1
since the inception of the proceedings at the National Wages Council up to the
Supreme Court. It had therefore a valid claim for attorney's fee which it called
union service fee'. .. 15 (Emphasis supplied).
As affirmed and further clarified by respondent Secretary of Labor and
Employment in his order of March 20, 1987
'While the claim for union service fee was initially directed against the union
members, there is no dispute that the claim was basically for attorney's fee. As
a matter of fact, RCPI admitted that the union service fee is 'for Compensation
for services rendered by the union. ... 16
We also cannot but look askance and take a quizzical view of the aforequoted
compromise agreement on which petitioner anchors its main arguments.
Aside from the fact that, as already stated, the same was concluded behind the
back of private respondent, so to speak, and with another labor union and a
lawyer neither of whom prior thereto had a hand in the recovery of benefits for
the RCPI employees concerned, there are certain indicia which cast serious
doubts on the motives and actuations therein of petitioner.
As already stated, as early as March 13, 1985, private respondent had moved
for the deduction of said fee from the total backpay awarded in the decision of
the Council. It reiterated such claim in its motion for a writ of execution filed on
September 10, 1985 after this Court had dismissed the petition for certiorari
filed by petitioner in G.R. No. 70148. Petitioner was fully aware of these
proceedings since it even filed its opposition thereto on September 23, 1985,
but in the aforestated order of November 25, 1985, private respondent was
awarded 15% of the total backpay of the RCPI employees as its union service
fee, with petitioner being directed to deposit said amount with the NCR office.
Yet, on November 29, 1985, petitioner, despite timely notice of said order and in
total disregard thereof, directly paid its employees the full amount of their
backpay, without deducting the union service fee. 17
Again, as is evident in the aforequoted provisions of the compromise
agreement, petitioner was bound to pay only 30% of the amount due each
employee on November 30, 1985, while the balance of 70% would still be the
subject of renegotiation by the parties on July 31, 1986. Yet, despite such
conditions beneficial to it, petitioner paid in full the backpay of its employees on
November 29, 1985, ignoring the service fee due the private respondent.
Worse, petitioner supposedly paid to one Atty. Rodolfo M. Capocyan the 10% fee
that properly pertained to herein private respondent, an unjustified and baffling
diversion of funds. It tried to explain away such obvious tergiversation by
claiming that said 10% fee corresponded to the other claims embraced in the
compromise agreement but not the liability under Wage Order No. 1, an
apocryphal contradiction of its contrary admission in Paragraph 7 of its Reply 18
and the provisions of Paragraph 2(c) of the compromise agreement.
On top of that, the records do not show any rejoinder or explanation by
petitioner of this grave revelation and accusation of the Solicitor General:
But the spurious and fraudulent character of such disposition made by
petitioner is clearly inferable from the circumstances that: ... (2) there is no
such Atty. Rodolfo Capocyan in the Attorney's Rollo of this Court (See
Communication from the Office of the Bar Confidant of the Supreme Court dated
March 17, 1986 found on page 459 of the record). Atty. Capocyan, being a mere
fictitious character, his 'attorney's fees' which included the claim of private
respondent, necessarily devolved upon petitioner.
'It would now appear that petitioner had a secret interest over the 10% fees due
and owing to private respondent and thru the manipulations of petitioner's
agents were given the appearance of attorney's fees' to a certain Atty. Rodolfo
Capocyan. It cannot be denied that by such fraudulent method, private
respondent was deprived of its just and lawful fees. 19
Even the employment of the term "novation" in the compromise agreement
appears to have been dictated by the dubious motive to secure dismissal with
prejudice of the decision of the National Wages Council. For, despite the
express, albeit improper use of such term, there could have been no valid
novation of the prior judgment for the simple reason that the pre-existing
obligation thereunder and the new one sought to be created are not absolutely
incompatible. On the contrary, the compromise agreement expressly recognizes
the respective obligations of the parties in said judgment and precisely provides
a method by which the same shall be extinguished, which method is, as
expressly stated in said contract, by installment payments. The contract,
instead of containing provisions incompatible with the obligations in the
judgment, expressly ratifies such obligations and contains provisions for
satisfying them. The said agreement simply gave the petitioner a method and
more time for the satisfaction of said judgment. It did not extinguish the
obligations contained in the judgment, until the terms of said agreement had
been fully complied with. Had the petitioner continued to comply with the
conditions of said agreement, it could have successfully invoked its provisions
against the issuance of a writ of execution upon said judgment. The contract
and the punctual compliance with its terms only delayed the right of the
respondent union to the execution of the judgment. The judgment was not
satisfied and the obligations existing thereunder still subsisted until the terms of
the agreement had been fully complied with. 20
Finally, petitioner cannot invoke the lack of an individual written authorization
from the employees as a shield for its fraudulent refusal to pay the service fee
of private respondent. Prior to the payment made to its employees, petitioner
was ordered by the Regional Director to deduct the 15% attorney's fee from the
total amount due its employees and to deposit the same with the Regional
Labor Office. Petitioner failed to do so allegedly because of the absence of
individual written authorizations. Be that as it may, the lack thereof was
remedied and supplied by the execution of the compromise agreement whereby
the employees, expressly approved the 10% deduction and held petitioner RCPI
free from any claim, suit or complaint arising from the deduction thereof. When
petitioner was thereafter again ordered to pay the 10% fees to respondent
union, it no longer had any legal basis or subterfuge for refusing to pay the
latter.
We agree that Article 222 of the Labor Code requiring an individual written
authorization as a prerequisite to wage deductions seeks to protect the
employee against unwarranted practices that would diminish his compensation
without his knowledge and consent. 21 However, for all intents and purposes,
the deductions required of the petitioner and the employees do not run counter
to the express mandate of the law since the same are not unwarranted or
without their knowledge and consent. Also, the deductions for the union service
fee in question are authorized by law and do not require individual check-off
authorizations. 22

On the foregoing considerations, We find no cogent reason to disturb the order

of the Secretary of Labor and Employment finding petitioner liable for the union Republic of the Philippines
service fee of private respondent. SUPREME COURT
Manila
WHEREFORE, the order of the Secretary of Labor of August 16, 1986 is hereby
AFFIRMED and the petition at bar is DISMISSED, with double costs against EN BANC
petitioner. The temporary restraining order issued pursuant to the Resolution of
the Court of June 22, 1987 is LIFTED and declared of no further force and effect. G.R. No. L-5062 April 29, 1953

SO ORDERED. MANILA TRADING & SUPPLY CO., petitioner,

vs.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur. MANILA TRADING LABOR ASSOCIATION, respondent.

Ross, Selph, Carrascoso & Janda for petitioner.

Cipriano Cid for respondent.

REYES, J.:

On October 10, 1950, the Manila Trading Labor Association, composed of

workers of Manila Trading and Supply Co., made a demand upon said company
for increase of personnel, Christmas bonus, and other gratuities and privileges.
As the demand was refused and the Department of Labor whose intervention
had been sought by the association failed to effect an amicable settlement,
the Head of the Department certified the dispute to the Court of Industrial
Relations on October 25 and there it was docketed as case No. 521-V. The
company, on its part, on that same day applied to the Court of Industrial
Relations for authority to lay off 50 laborers due to "poor business," the
application being docketed as Case No. 415-V (4).

To resolve the disputes involved in the two cases the Court of Industrial
Relations conducted various hearings between October 26, 1950, and January
18, 1951. Of their own volition the president and vice-president of the
association attended themselves from work for that reason they afterwards
claimed that they were entitled to their wages. The Court of Industrial Relations
found merit in the claim, and at their instance, ordered the company to pay
them their wages corresponding to the days they were absent from work while
in attendance at the hearings.

Contending that the industrial court had no authority to issue an order, the
company asks this Court to have it annuled. Opposing the petition, the
association, on its part, contends that the order comes within the broad powers
of the industrial court in the settlement of disputes between capital and labor.
The question presented is whether the Court of Industrial Relations may require
an employer to pay the wages of officers of its employees' labor union while
attending the hearing of cases between the employer and the union. The
question, it appears, is no different from that decided early in the case of J.P.
Heilbronn Co. vs. National Labor Union,* G.R. No. L-5121. In that case the
plaintiff company questioned the validity of an order the Court of Industrial
Relations requiring it to pay the president and the secretary of the labor union
their salaries corresponding to the days they attending the conferences and
hearings before that court. Setting aside the said order, we there said:
When in case of strikes, and according to the CIR even if the strike is legal,
strikers may not collect their wages during the days they did not go to work, for
the same reasons if not more, laborers who voluntarily absent themselves from
work to attend the hearing of a case in which they seek to prove and establish
their demands against the company, the legality and propriety of which
demands is not yet known, should lose their pay during the period of such
absence from work. The age-old rule governing the relation between labor and
capital or management and employee is that of a "fair day's wage for a fair
day's labor." If there is no work performed by the employee there can be no
wage or pay, unless of course, the laborer was able, willing and ready to work
but was illegally locked out, dismissed or suspended. it is hardly fair or just for
an employee or laborer to fight or litigate against his employer on the
employer's time.
In a case where a laborer absents himself from work because of a strike or to
attend a conference or hearing in a case or incident between him and his
employer, he might seek reimbursement of his wages from his union which had
declared the strike or filed the case in the industrial court. Or, in the present
case, he might have his absence from his work charged against his vacation
leave. Three of the Justices who sign the present decision believe that the
deductions made from the wage of Armando Ocampo and Protacio Ty might
possibly be charge as damages in the case in the event that the said case in CIR
prosecuted in behalf of their union is finally decided in their favor and against
the company.
The respondent association, however, claims that it was not the one that
brought the cases to the Court of Industrial Relations, and the point is made
that " if the laborer who is dragged to court is deprived of his wages while
attending court hearings, he would in effect be denied the opportunity to
defend himself and protect his interests and those of his fellow workers." But
while it is true that it was the Secretary of Labor who certified the dispute
involved in case No. 521-V to the Court of Industrial Relations, the fact remains
that the dispute was initiated by a demand from the labor association. The
truth, therefore, is that while one of the cases was filed by the employer, the
other was initiated by the employees. It may be conceded that the employer is
in most cases in a better position to bear the burdens of litigation than the
employees. But as was said in the case of J. P. Heilbronn Co. vs. National Labor
Union, supra, "It is hardly fair for an employee or laborer to fight or litigate
against his employer on the employer's time." The most that can be conceded
in favor of the claimants herein is to have the absences occasioned by their
attendance at the hearings charged against their vacation leave if they have
any, or as suggested by three of the Justices who signed the decision in the
case just cited, to have the wages they failed to earn charged as damages in
the event the cases whose hearings they attended are decided in favor of the
association. But the majority of the Justices make no commitment on this latter
point.
In view of the foregoing, the petition for certiorari is granted and the order
complained of set aside. Without pronouncement as to costs.
Paras, C.J., Feria, Pablo, Bengzon, Tuason, Montemayor, Jugo, and Bautista
Angelo, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 111474 August 22, 1994
FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and GILBERTO
SABSALON, respondents.
Edgardo G. Fernandez for petitioners.
R E SO L U T I O N
REGALADO, J.:
Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action for
certiorari to annul the decision 1 of respondent National Labor Relations
Commission (NLRC) ordering petitioners to pay private respondents Domingo
Maldigan and Gilberto Sabsalon their accumulated deposits and car wash
payments, plus interest thereon at the legal rate from the date of promulgation
of judgment to the date of actual payment, and 10% of the total amount as and
for attorney's fees.
We have given due course to this petition for, while to the cynical the de
minimis amounts involved should not impose upon the valuable time of this
Court, we find therein a need to clarify some issues the resolution of which are
important to small wage earners such as taxicab drivers. As we have heretofore
repeatedly demonstrated, this Court does not exist only for the rich or the
powerful, with their reputed monumental cases of national impact. It is also the
Court of the poor or the underprivileged, with the actual quotidian problems
that beset their individual lives.
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the
petitioners as taxi drivers 2 and, as such, they worked for 4 days weekly on a
24-hour shifting schedule. Aside from the daily "boundary" of P700.00 for air-
conditioned taxi or P450.00 for non-air-conditioned taxi, they were also required
to pay P20.00 for car washing, and to further make a P15.00 deposit to answer
for any deficiency in their "boundary," for every actual working day.
In less than 4 months after Maldigan was hired as an extra driver by the
petitioners, he already failed to report for work for unknown reasons. Later,
petitioners learned that he was working for "Mine of Gold" Taxi Company. With
respect to Sabsalon, while driving a taxicab of petitioners on September 6,
1983, he was held up by his armed passenger who took all his money and
thereafter stabbed him. He was hospitalized and after his discharge, he went to
his home province to recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under
the same terms and conditions as when he was first employed, but his working
schedule was made on an "alternative basis," that is, he drove only every other
day. However, on several occasions, he failed to report for work during his
schedule.
On September 22, 1991, Sabsalon failed to remit his "boundary" of P700.00 for
the previous day. Also, he abandoned his taxicab in Makati without fuel refill
worth P300.00. Despite repeated requests of petitioners for him to report for
work, he adamantly refused. Afterwards it was revealed that he was driving a
taxi for "Bulaklak Company."
Sometime in 1989, Maldigan requested petitioners for the reimbursement of his
daily cash deposits for 2 years, but herein petitioners told him that not a single
centavo was left of his deposits as these were not even enough to cover the
amount spent for the repairs of the taxi he was driving. This was allegedly the
practice adopted by petitioners to recoup the expenses incurred in the repair of
their taxicab units. When Maldigan insisted on the refund of his deposit,
petitioners terminated his services. Sabsalon, on his part, claimed that his
termination from employment was effected when he refused to pay for the
washing of his taxi seat covers.
On November 27, 1991, private respondents filed a complaint with the Manila
Arbitration Office of the National Labor Relations Commission charging
petitioners with illegal dismissal and illegal deductions. That complaint was
dismissed, the labor arbiter holding that it took private respondents two years
to file the same and such unreasonable delay was not consistent with the
natural reaction of a person who claimed to be unjustly treated, hence the filing
of the case could be interpreted as a mere afterthought.
Respondent NLRC concurred in said findings, with the observation that private
respondents failed to controvert the evidence showing that Maldigan was
employed by "Mine of Gold" Taxi Company from February 10, 1987 to December
10, 1990; that Sabsalon abandoned his taxicab on September 1, 1990; and that
they voluntarily left their jobs for similar employment with other taxi operators.
It, accordingly, affirmed the ruling of the labor arbiter that private respondents'
services were not illegally terminated. It, however, modified the decision of the
labor arbiter by ordering petitioners to pay private respondents the awards
stated at the beginning of this resolution.
Petitioners' motion for reconsideration having been denied by the NLRC, this
petition is now before us imputing grave abuse of discretion on the part of said
public respondent.
This Court has repeatedly declared that the factual findings of quasi-judicial
agencies like the NLRC, which have acquired expertise because their jurisdiction
is confined to specific matters, are generally accorded not only respect but, at
times, finality if such findings are supported by substantial evidence. 3 Where,
however, such conclusions are not supported by the evidence, they must be
struck down for being whimsical and capricious and, therefore, arrived at with
grave abuse of discretion. 4
Respondent NLRC held that the P15.00 daily deposits made by respondents to
defray any shortage in their "boundary" is covered by the general prohibition in
Article 114 of the Labor Code against requiring employees to make deposits,
and that there is no showing that the Secretary of Labor has recognized the
same as a "practice" in the taxi industry. Consequently, the deposits made were
illegal and the respondents must be refunded therefor.
Article 114 of the Labor Code provides as follows:
Art. 114. Deposits for loss or damage. No employer shall require his worker to
make deposits from which deductions shall be made for the reimbursement of
loss of or damage to tools, materials, or equipment supplied by the employer,
except when the employer is engaged in such trades, occupations or business
where the practice of making deposits is a recognized one, or is necessary or
desirable as determined by the Secretary of Labor in appropriate rules and
regulations.
It can be deduced therefrom that the said article provides the rule on deposits
for loss or damage to tools, materials or equipments supplied by the employer.
Clearly, the same does not apply to or permit deposits to defray any deficiency
which the taxi driver may incur in the remittance of his "boundary." Also, when
private respondents stopped working for petitioners, the alleged purpose for
which petitioners required such unauthorized deposits no longer existed. In
other case, any balance due to private respondents after proper accounting Section 3 of Presidential Decree No. 1691, states that non-lawyers may appear
must be returned to them with legal interest. before the NLRC or any labor arbiter only (1) if they represent themselves, or (2)
if they represent their organization or the members thereof. While it may be
However, the unrebutted evidence with regard to the claim of Sabsalon is as true that Guillermo H. Pulia was the authorized representative of private
follows: respondents, he was a non-lawyer who did not fall in either of the foregoing
categories. Hence, by clear mandate of the law, he is not entitled to attorney's
YEAR DEPOSITS SHORTAGES VALES fees.

1987 P 1,403.00P 567.00 P 1,000.00 Furthermore, the statutory rule that an attorney shall be entitled to have and
recover from his client a reasonable compensation for his services 7 necessarily
1988 720.00 760.00 200.00 imports the existence of an attorney-client relationship as a condition for the
recovery of attorney's fees, and such relationship cannot exist unless the
1989 686.00 130.00 1,500.00 client's representative is a lawyer. 8

1990 605.00 570.00 WHEREFORE, the questioned judgment of respondent National Labor Relations
Commission is hereby MODIFIED by deleting the awards for reimbursement of
1991 165.00 2,300.00 car wash expenses and attorney's fees and directing said public respondent to
order and effect the computation and payment by petitioners of the refund for
private respondent Domingo Maldigan's deposits, plus legal interest thereon
from the date of finality of this resolution up to the date of actual payment
P 3,579.00P 4,327.00P 2,700.00 thereof.

The foregoing accounting shows that from 1987-1991, Sabsalon was able to SO ORDERED.
withdraw his deposits through vales or he incurred shortages, such that he is
even indebted to petitioners in the amount of P3,448.00. With respect to Narvasa, C.J., Padilla, Puno and Mendoza, JJ., concur.
Maldigan's deposits, nothing was mentioned questioning the same even in the
present petition. We accordingly agree with the recommendation of the Solicitor
General that since the evidence shows that he had not withdrawn the same, he
should be reimbursed the amount of his accumulated cash deposits. 5

On the matter of the car wash payments, the labor arbiter had this to say in his
decision: "Anent the issue of illegal deductions, there is no dispute that as a
matter of practice in the taxi industry, after a tour of duty, it is incumbent upon
the driver to restore the unit he has driven to the same clean condition when he
took it out, and as claimed by the respondents (petitioners in the present case), G.R. No. 143304. July 8, 2004]
complainant(s) (private respondents herein) were made to shoulder the
expenses for washing, the amount doled out was paid directly to the person SPECIAL STEEL PRODUCTS, INC., petitioner, vs. LUTGARDO VILLAREAL AND
who washed the unit, thus we find nothing illegal in this practice, much more FREDERICK SO, respondents.
(sic) to consider the amount paid by the driver as illegal deduction in the
context of the law." 6 (Words in parentheses added.) DECISION

Consequently, private respondents are not entitled to the refund of the P20.00
car wash payments they made. It will be noted that there was nothing to
prevent private respondents from cleaning the taxi units themselves, if they
wanted to save their P20.00. Also, as the Solicitor General correctly noted, car
washing after a tour of duty is a practice in the taxi industry, and is, in fact,
dictated by fair play.
On the last issue of attorney's fees or service fees for private respondents'
authorized representative, Article 222 of the Labor Code, as amended by
SANDOVAL-GUTIERREZ, J.:
May an employer withhold its employees wages and benefits as lien to protect
its interest as a surety in the latters car loan and for expenses incurred in a
training abroad? This is the basic issue for our resolution in the instant case.
At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the Decision[1] dated October 29, 1999
and Resolution[2] dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No.
50957, entitled Special Steel Products, Inc. vs. National Labor Relations
Commission, Lutgardo Villareal and Frederick So.
The factual antecedents as borne by the records are:
Special Steel Products, Inc., petitioner, is a domestic corporation engaged in the
principal business of importation, sale, and marketing of BOHLER steel products.
Lutgardo C. Villareal and Frederick G. So, respondents, worked for petitioner as
assistant sales manager and salesman, respectively.
Sometime in May 1993, respondent Villareal obtained a car loan from the Bank
of Commerce, with petitioner as surety, as shown by a continuing suretyship
agreement and promissory note wherein they jointly and severally agreed to
pay the bank P786,611.60 in 72 monthly installments. On January 15, 1997,
respondent Villareal resigned and thereafter joined Hi-Grade Industrial and
Technical Products, Inc. as executive vice-president.
Sometime in August 1994, petitioner sponsored respondent Frederick So to
attend a training course in Kapfenberg, Austria conducted by BOHLER,
petitioners principal company. This training was a reward for respondent Sos
outstanding sales performance. When respondent returned nine months
thereafter, petitioner directed him to sign a memorandum providing that
BOHLER requires trainees from Kapfenberg to continue working with petitioner
for a period of three (3) years after the training. Otherwise, each trainee shall
refund to BOHLER $6,000.00 (US dollars) by way of set-off or compensation. On
January 16, 1997 or 2 years and 4 months after attending the training,
respondent resigned from petitioner.
Immediately, petitioner ordered respondents to render an accounting of its
various Christmas giveaways[3] they received. These were intended for
distribution to petitioners customers.
In protest, respondents demanded from petitioner payment of their separation
benefits, commissions, vacation and sick leave benefits, and proportionate 13th
month pay. But petitioner refused and instead, withheld their 13th month pay
and other benefits.
On April 16, 1997, respondents filed with the Labor Arbiter a complaint for
payment of their monetary benefits against petitioner and its president,
Augusto Pardo, docketed as NLRC NCR Case No. 04-02820-97.
In due course, the Labor Arbiter rendered a Decision dated February 18, 1998,
the dispositive portion of which reads:
WHEREFORE, decision is hereby rendered ordering the respondents, Special
Steel Products, Inc. and Mr. Augusto Pardo to pay, jointly and severally,
complainants Frederick G. So and Lutgardo C. Villareal the amounts of Seventy
One Thousand Two Hundred Seventy Nine Pesos and Fifty Eight Centavos
(P71,279.58) and One Hundred Sixty Four Thousand Eight Hundred Seventy
Three Pesos (P164,873.00), respectively, representing their commissions,
retirement benefit (for Villareal), proportionate 13th month, earned vacation
and sick leave benefits, and attorneys fees.
xxx
SO ORDERED.
On appeal, the National Labor Relations Commission (NLRC), in a Decision dated
June 29, 1998, affirmed with modification the Arbiters Decision in the sense that
Pardo, petitioners president, was exempted from any liability.
On September 11, 1998, petitioner filed a motion for reconsideration but was
denied.
Hence, petitioner filed with the Court of Appeals a petition for certiorari.
On October 29, 1999, the Court of Appeals rendered a Decision dismissing the
petition and affirming the assailed NLRC Decision, thus:
At the outset, the Court notes that despite its Seventh Assignment of Error,
petitioner does not question the NLRCs decision affirming the labor arbiters
award to private respondents of commissions, proportionate 13th month pay,
earned vacation and sick leave benefits and retirement benefit (for Villareal). It
merely asserts that it was withholding private respondents claims by reason of
their pending obligations.
Petitioner justifies its withholding of Villareals monetary benefits as a lien for the
protection of its right as surety in the car loan. It asserts that it would release
Villareals monetary benefits if he would cause its substitution as surety by Hi-
Grade. It further asserts that since Villareals debt to the Bank is now due and
demandable, it may, pursuant to Art. 2071 of the New Civil Code, demand a
security that shall protect him from any proceeding by the creditor and from the
danger of insolvency of the debtor.
Petitioners posture is not sanctioned by law. It may only protect its right as
surety by instituting an action x x x to demand a security (Kuenzle and Streiff
vs. Tan Sunco, 16 Phil 670). It may not take the law into its own hands. Indeed,
it is unlawful for any person, directly or indirectly, to withhold any amount from
the wages of a worker or induce him to give up any part of his wages by force,
stealth, intimidation, threat or by any other means whatsoever without the
workers consent (Art. 116, Labor Code).
Moreover, petitioner has made no payment on the car loan. Consequently,
Villareal is not indebted to petitioner. On the other hand, petitioner owes
Villareal for the decreed monetary benefits. The withholding of Villareals
monetary benefits had effectively prevented him from settling his arrearages
with the Bank.
With regard to Sos money claims. We find no cogent reason to disturb the
findings of the NLRC. x x x.

Sos all-expense paid trip to Austria was a bonus for his outstanding sales
performance. Before his sojourn to Austria, petitioner issued him a
memorandum (or memo) stating that Bohler is now imposing that trainees
coming to Kapfenberg to stay with the local representative for at least three (3)
years after training, otherwise, a lump sum compensation of not less than US
$6,000.00 will have to be refunded to them by the trainee. So did not affix his
signature on the memo. However, nine (9) months after coming back from his
training, he was made to sign the memo. In his letter to Augusto Pardo dated
July 18, 1997, So stated that his signature was needed only as a formality and
that he was left with no choice but to accommodate Augusto Pardos request.
The labor arbiter gave credence to such explanation.
Assuming arguendo that the memo is binding on So, his more than two years
post-training stay with petitioner is a substantial compliance with the condition.
Besides, So tendered his resignation effective February 16, 1997. Instead of
asking So to defer his resignation until the expiration of the three-year period,
petitioner advanced its effectivity by one month - as of January 16, 1997. This
means that petitioner no longer needed Sos services, particularly the skill and
expertise acquired by him from the training. More importantly, the party entitled
to claim the US $6,000.00 liquidated damages is BOHLER and not petitioner.
Consequently, petitioner has no right to insist on payment of the liquidated
damages, much less to withhold Sos monetary benefits in order to exact
payment thereof.
With regard to the Christmas giveaways. We agree with the findings of the labor
arbiter (affirmed by the NLRC) that there is no existing memorandum requiring
the accounting of such giveaways and that no actual accounting has ever been
required before, as in the case of then Sales Manager Benito Sayo whose
resignation took effect on December 31, 1996 but was not required to account
for the Christmas giveaways. To make So account now for said items would
amount to discrimination. In any event, the matter of accounting of the
giveaways may be ventilated in the proper forum.
Finally, petitioner may not offset its claims against private respondents
monetary benefits. With respect to its being the surety of Villareal, two
requisites of compensation are lacking, to wit: that each one of the obligors be
bound principally, and that he be at the same time a principal creditor of the
other and that (the two debts) be liquidated and demandable (Art. 1279 (1) and
(4), New Civil Code). And in respect to its claim for liquidated damages against
So, there can be no compensation because his creditor is not petitioner but
BOHLER (Art. 1278, New Civil Code).
Consequently, the NLRC committed no grave abuse of discretion.
WHEREFORE, the petition is DISMISSED while the assailed decision of the NLRC
is AFFIRMED.
SO ORDERED.
On December 15, 1999, petitioner filed a motion for reconsideration but was
denied by the Appellate Court in a Resolution dated May 8, 2000.
Hence, this petition for review on certiorari. Petitioner contends that as a
guarantor, it could legally withhold respondent Villareals monetary benefits as a
preliminary remedy pursuant to Article 2071 of the Civil Code, as amended.[4]
As to respondent So, petitioner, citing Article 113 of the Labor Code, as
amended,[5] in relation to Article 1706 of the Civil Code, as amended,[6]
maintains that it could withhold his monetary benefits being authorized by the
memorandum he signed.
Article 116 of the Labor Code, as amended, provides:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for
any person, directly or indirectly, to withhold any amount from the wages (and
benefits) of a worker or induce him to give up any part of his wages by force,
stealth, intimidation, threat or by any other means whatsoever without the
workers consent.
The above provision is clear and needs no further elucidation. Indeed, petitioner
has no legal authority to withhold respondents 13th month pay and other
benefits. What an employee has worked for, his employer must pay.[7] Thus, an
employer cannot simply refuse to pay the wages or benefits of its employee
because he has either defaulted in paying a loan guaranteed by his employer;
or violated their memorandum of agreement; or failed to render an accounting
of his employers property.[8]
Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends that the
right to demand security and obtain release from the guaranty it executed in
favor of respondent Villareal may be exercised even without initiating a
separate and distinct action.
There is no guaranty involved herein and, therefore, the provision of Article
2071 does not apply.
A guaranty is distinguished from a surety in that a guarantor is the insurer of
the solvency of the debtor and thus binds himself to pay if the principal is
unable to pay, while a surety is the insurer of the debt, and he obligates himself
to pay if the principal does not pay.[9]
Based on the above distinction, it appears that the contract executed by
petitioner and respondent Villareal (in favor of the Bank of Commerce) is a
contract of surety. In fact, it is denominated as a continuing suretyship
agreement. Hence, petitioner could not just unilaterally withhold respondents
wages or benefits as a preliminary remedy under Article 2071. It must file an
action against respondent Villareal. Thus, the Appellate Court aptly ruled that
petitioner may only protect its right as surety by instituting an action to demand
a security.
As to respondent So, petitioner maintains that there can be a set-off or legal
compensation between them. Consequently, it can withhold his 13th month pay
and other benefits.

For legal compensation to take place, the requirements set forth in Articles 1278
and 1279 of the Civil Code, quoted below, must be present.

"ARTICLE 1278. Compensation shall take place when two persons, in their own
right, are creditors and debtors of each other.

"ARTICLE 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter
has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy,

commenced by third persons and communicated in due time to the debtor."

In the present case, set-off or legal compensation cannot take place between
petitioner and respondent So because they are not mutually creditor and debtor
of each other.

A careful reading of the Memorandum[10] dated August 22, 1994 reveals that
the lump sum compensation of not less than US $6,000.00 will have to be
refunded by each trainee to BOHLER, not to petitioner.

In fine, we rule that petitioner has no legal right to withhold respondents 13th
month pay and other benefits to recompense for whatever amount it paid as
security for respondent Villareals car loan; and for the expenses incurred by
respondent So in his training abroad.

WHEREFORE, the petition is DENIED. The Decision dated October 29, 1999 and
Resolution dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No. 50957
are hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87449 January 23, 1990
SOUTH MOTORISTS ENTERPRISES, petitioner,
vs.
ROQUE TOSOC, ET AL., and HON. SECRETARY OF LABOR AND EMPLOYMENT,
respondents.
Manuel M. Parades for petitioner.
Henry V. Briguera for private respondents.
MELENCIO-HERRERA, J.:
At issue in this special civil action for Certiorari is the jurisdiction of the Regional
Directors of the Department of Labor and Employment to act on money claims.
Petitioner South Motorists Enterprises (SOUTH MOTORISTS) maintains that said
officials are bereft of authority to act on such claims as this falls under the
original and exclusive jurisdiction of Labor Arbiters. Respondents maintain
otherwise.
The facts are as follows:
Sometime in January of 1983, complaints for non-payment of emergency cost of
living allowances were filed by 46 workers, Tosoc, et als., against SOUTH
MOTORISTS before the Naga City District Office of Regional Office No. 5 of the
then Ministry of Labor. On 10 January 1983 a Special Order was issued by the
District Labor Officer directing its Labor Regulation Officers to conduct an
inspection and verification of SOUTH MOTORISTS' employment records.
On the date of the inspection and verification, SOUTH MOTORISTS was unable to
present its employment records on the allegation that they had been sent to the
main office in Manila. The case was then set for conference on 25 January 1983
but had to be reset to 8 February 1983 upon the request of SOUTH MOTORISTS
to enable it to present all the employment records on such date. However, on 7
February 1983 SOUTH MOTORISTS asked for another deferment to 16 February
1983 due to its lawyer's tight schedule. On 16 February 1983, SOUTH
MOTORISTS again requested for a resetting to 3 March 1983 because of the
alleged voluminous records it had to locate and its desire to submit a
memorandum regarding complainants' claims. On 2 March 1983, SOUTH
MOTORISTS once again requested an extension of 30 days on the ground that
the documents were still being prepared and collated and that a formal
manifestation or motion would follow. Nothing did.
On 7 March 1983, the assigned Labor Regulation Officers submitted an
Inspection Report on the basis of which an Order dated 14 April 1983 was issued
by Labor Officer Domingo Reyes directing SOUTH MOTORISTS to pay Tosoc, et
als., the total amount of One Hundred Eighty Four Thousand Six Hundred Eighty
Nine and 12/100 Pesos (P184,689.12) representing the latter's corresponding
emergency cost of living allowances.
SOUTH MOTORISTS moved for reconsideration of the Order, which was denied.
On 11 July 1988, the Secretary of Labor and Employment affirmed the appealed
Order. On 28 July 1988, SOUTH MOTORISTS moved for reconsideration but this
proved unsuccessful. A Second Motion for Reconsideration was filed, which was
likewise denied in an Order dated 7 March 1989.
Hence, this certiorari Petition questioning the monetary award by the Regional
Director and, in general, his jurisdiction to validly award money claims.
The Court resolved to give due course to the Petition and to decide the case.
SOUTH MOTORISTS contends that only the Labor Arbiter, who is a trier of facts,
may determine after hearing such questions as whether or not an employer-
employee relationship exists; whether or not the workers were project workers;
whether or not the employees worked continuously or whether or not they
should receive emergency cost of living allowances and if entitled, how much
each should receive. Thus, SOUTH MOTORISTS submits that this case should be
referred to the Labor Arbiter for proper proceedings.
Two provisions of law are crucial to the issueArticle 129 and Article 217 of the
Labor Code, as recently amended by Republic Act No. 6715, approved on 2
March 1989. Said amendments, being curative in nature, have retroactive effect
and, thus, should apply in this case (BRIAD AGRO vs. DE LA CERNA, G.R. No.
82805, and CAMUS ENGINEERING vs. DE LA CERNA, G.R. No. 83225, 9
November 1989). At this juncture, it should be pointed out in the light of these
Briad-Agro cases, including the modificatory Resolution thereon of 9 November
1989, petitioner's invocations of the rulings in Zambales Base Metals, L-73184-
88, 26 November 1986, and kindred cases, is now out-dated.
The aforesaid Articles, as amended, respectively 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 cases 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 and househelper under this Code,
arising from employer-employee relations: Provided, That such complaint does 1. Anatalio Cado P 3,203.20
not include a claim for reinstatement: Provided, further, That the aggregate 2. Macario Gavino 6,332.48
claim of each employee or househelper does not exceed five thousand pesos 3. Vito T. Euste 6,073.76
(P5,000.00). . . . 4. Domingo Ricafort 3,843.84
5. Roger Paulo 4,176.48
and 6. Elias Clarianes 4,201.12
7. Ernesto Brequillo 4,176.48
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as 8. Santiago Asares 4,114.88
otherwise provided under this Code, the Labor Arbiters shall have original and 9. Marcelito Verdadero 4,127.20
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after 10. Elias Pascua 4,348.96
the submission of the case by the parties for decision without extension, even in 11. Francisco Herrera 3,991.68
the absence of stenographic notes, the following cases involving all workers, 12. Efren San Joaquin 3,979.36
whether agricultural or non-agricultural: 13. Dominador Payo 4,201.12
14. Jesus Militante 4,201.12
xxx xxx xxx 15. Ubaldo Osoc, Jr. 2,156.00
16. Salvador Clarianes 3,843.84
(6) Except claims for employees compensation, social security, medicare 17. Vicente Lovendino 1,416.80
and maternity benefits, all other claims arising from employer-employee 18. Jose Brequillo 6,049.12
relations, including those of persons in domestic or household service, involving 19. Domingo Cis 7,884.80
an amount exceeding five thousand pesos (P5,000), whether or not 20. Alberto Agreda 5,396.16
accompanied with a claim for reinstatement. 21. Amancio Galona 6,418.72
22. Eduardo Brequillo 2,858.24
xxx xxx xxx 23. Luis Clarianes 4,127.20
24. Roque Tosoc 6,418.72
Clearly, Regional Directors are empowered to hear and decide, in a summary 25. Hilarion P. Guinoo 6,086.08
proceeding, claims for recovery of wages and other monetary claims and 26. Carlos Plegino 1,478.40
benefits, including legal interest, subject to the concurrence of the following 27. Felipe Cea 6,024.48
requisites: 28. Salvador Calamba 4,040.96
29. Ramon Marco 4,669.28
1) the claim is presented by an employee or person employed in domestic 30. Eddie del Castillo 4,201.12
or household service, or househelper under the Code; 31. Lope Guinoo 3,868.48
32. Marcelino Habla 1,096.48
2) the claim arises from employer-employee relations; 33. Roberto Guinoo 5,938.24
34. Efren Andalis 4,114.88
3) the claimant no longer being employed, does not seek reinstatement; 35. Solomon Tosoc 2,722.72
and 36. Cornelio Ballares 3,006.08
37. Ernesto Osoc 6,024.48
4) the aggregate money claim of each employee or househelper does not 38. Bernardo Gabrillo 1,490.72
exceed P5,000.00 (Art. 129, Labor Code, as amended by R.A. 6715). 39. Romeo Abarro 2,722.72
40. Rogelio Usinar 2,722.72
But where these requisites do not concur, the Labor Arbiters shall have 41. Fortunate Sola 1,453.76
exclusive original jurisdiction over claims arising from employer-employee 42. Romeo Calpi 2,821.28
relationship except claims for employees' compensation, social security, 43. Rogelio Villamor 2,772.00
medicare and maternity benefits (parag. 6, Art. 217, Labor Code as amended by 44. Jose Banday 4,817.12
R.A. 6715). 45. Alberto Cornelio 2,882.88
46. Pablo Olarte 2,192.96
The records of this case show that the award of One Hundred Eighty Four
Thousand Six Hundred Eighty Nine and 12/100 Pesos (P l84,689.12) given by
the District Labor Officer on 14 April 1983 is itemized as follows: TOTAL P 184,689.12
In accordance with Articles 129 and 217 of the Labor Code, as amended, supra,
those awards in excess of P5,000.00, particularly those given to Macario Gavino,
Vito T. Euste, Jose Brequillo, Domingo Cis, Alberto Agreda, Amancio Galona,
Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto Osoc,
each of which exceeds P5,000.00, should be ventilated in a proceeding before
the Labor Arbiters. The other awards, or those not in excess of P5,000.00 and
having no issue of reinstatement set forth, should be affirmed.

As to the matter that the respondent Secretary of Labor and Employment erred
in affirming the award based on a mere Inspection Report, we see no reason for
SOUTH MOTORISTS to complain as it was afforded ample opportunity to present
its side. It failed to present employment records giving as an excuse that they
were sent to the main office in Manila, in violation of Section 11 of Rule X, Book
II of the Omnibus Rules Implementing the Labor Code providing that:

All employment records of the employees of the employer shall be kept and
maintained in or about the premises of the workplace. The premises of a
workplace shall be understood to mean the main or branch office or
establishment, if any, depending., upon where the employees are regularly
assigned. The keeping of the employee's records in another place is prohibited.

SOUTH MOTORISTS also caused the resettings of all subsequent hearingsfrom

25 January 1983 to 8 February 1983, then to 16 February 1983, then to 3 March
and finally, again requested for another 30-day-extension on the ground that
the documents, were still being prepared and collated. Having been given the
opportunity to put forth its case, SOUTH MOTORISTS has only itself to blame for
having failed to avail of the same (Adamson and Adamson, Inc. vs. Judge
Amores, G.R. No. 58292, 23 July 1987,152 SCRA 237). What is more, its
repeated failure to attend the hearings, and to submit any motion as manifested
may be construed as a waiver of its right to adduce evidence to controvert the
worker's claims.

WHEREFORE, the award of One Hundred Eighty Four Thousand Six Hundred
Eighty Nine and 12/100 (P l84,689.12) is hereby MODIFIED. The individual
claims of Macario Gavino, Vito T. Euste Jose, Brequillo, Domingo Cis, Alberto
Agreda, Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto
Guinoo, and Ernesto Osoc, each of which exceeds P5,000.00, are hereby
remanded to the Labor Arbiter for proper disposition. All other individual awards
not in excess of P5,000.00 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

Paras, Padilla, Sarmiento and Regalado, JJ., concur.


Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 123880 February 23, 1999
MARANAW HOTELS AND RESORT CORPORATION, (Owner of Century Park
Sheraton Manila), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EDDIE DAMALERIO,
respondents.
PURISIMA, J.:
This special civil action for certiorari under Rule 65 of the Revised Rules of Court
seeks to annul and set aside the Decision, dated September 18, 1995, of the
National Labor Relations Commission (NLRC) 1, and the Order 2, dated January
30, 1996, denying petitioner's motion for reconsideration in NLRC-NCR-CA No.
005642-93, on the ground of lack or excess of jurisdiction or grave abuse of
discretion.
On April 2, 1992, Eddie Damalerio (Damalerio), a room attendant of the Century
Park Sheraton Hotel, operated by Maranaw Hotel and Resort Corporation, was
seen by hotel guest Jamie Glaser (Glaser) with left hand inside the latter's
suitcase. Confronted with what he was doing, Damalerio explained that he was
trying to tidy up the room. Not satisfied with the explanation of Damalerio,
Glaser lodged a written complaint before William D. Despuig, shift-in-charge of
security of the hotel. Glaser also reported that Damalerio had previously asked
from him souvenirs, cassettes, and other giveaways. The complaint was later
brought by Despuig to the attention of Major Eddie Buluran, chief of Security of
the hotel.
On April 3, 1992, Damalerio was given a Disciplinary Action Notice (DAN). The
next day, an administrative hearing was conducted on the matter. Among those
present at the hearing were: 1) Lourdes Ricardo (room attendant), 2) Angelito
Torres (floor supervisor), 3) Major Eddie Buluran (chief of security), 4) Susan
Dino (Personnel representative), 5) Alfredo San Gabriel (senior floor supervisor)
and 6) Ben Hur Amador (union representative).
Taking the witness stand on his own behalf, Damalerio denied the accusation
against him, theorizing that when he found the room of Glaser in disarray, and
was about to make the bed, he noticed some belongings, such as socks and T-
shirts of the said hotel guest scattered around, so much so that he thought of
placing the some in his luggage. While doing so, Glaser arrived. When asked by
the latter if something was wrong, he (Damalerio) said "I'm just cleaning your
room," and Glaser remarked, "Good work," and then, the two of them chatted
about Glaser's concert at the Araneta Coliseum.
On April 13, 1992, Damalerio received a memorandum 3 issued by Alfredo San
Gabriel, Sr., Floor Supervisor, bearing the approval of Nicolas R. Kirit, Executive
Housekeeper, stating that he (Damalerio) was found to have committed
qualified theft in violation of House Rule No. 1, Section 3 of Hotel Rules and
Regulations. The same memorandum served as a notice of termination of his
employment.
On May 19, 1992, Damalerio filed with the Labor Arbiter a Complaint for illegal
dismissal against the petitioner.
On August 20, 1993, after the parties had sent in their position papers, Labor
Arbiter Ceferina J. Diosana decided the case; disposing, thus:
WHEREFORE, judgment is hereby rendered finding the dismissal of complainant
to be illegal and ordering the respondents to reinstate him to his former or
equivalent position without loss of seniority rights and with backwages from
April 15, 1992 when he was preventively suspended up to actual reinstatement
and other benefits, including but not limited to his share in the charges and or
tips which he failed to receive, and all other CBA benefits that have accrued
since his dismissal.
SO ORDERED.
From the aforesaid Labor Arbiter's disposition, the petitioner appealed to the
NLRC, which modified the appealed decision by giving petitioner the option of
paying Damalerio a separation pay equivalent to one (1) month pay for every
year of service, instead of reinstating him.
On November 22, 1995, petitioner interposed a motion for reconsideration but
to no avail. NLRC denied the same on January 30, 1996.
Undaunted, petitioner has come to this Court via the present petition; posing
the questions:
1. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN HOLDING THAT
PETITIONER FAILED TO ADDUCE CONCLUSIVE EVIDENCE IN SUPPORT OF ITS
VERSION OF THE INCIDENT, CONSIDERING THE FACT THAT THE EVIDENCE ON
RECORD INELUCTABLY SHOWS THAT PRIVATE RESPONDENT WAS CAUGHT IN rate of one (1) month pay for every year of service. Should petitioner opt in
FLAGRANTE DELICTO; and favor of separation pay, the private respondent shall no longer be entitled to
share in the service charges collected during his preventive suspension.
2. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT REVERSING THAT WHEREFORE, the petition is hereby DISMISSED and the Court affirms the
PORTION OF THE DECISION OF THE LABOR ARBITER ORDERING HEREIN questioned Decision of the National Labor Relations Commission, to be
PETITIONER TO PAY PRIVATE RESPONDENT HIS SHARE IN THE SERVICE CHARGE implemented according to law and this disposition. No pronouncement as to
WHICH WAS COLLECTED DURING THE TIME HE WAS NOT WORKING IN THE costs.
HOTEL.
SO ORDERED.
The petition is barren of merit.
Romero, Panganiban and Gonzaga-Reyes, JJ., concur.
Petitioner's theory that Damalerio was caught committing qualified theft in
flagrante delicto is anemic of evidentiary support. Records disclose petitioner's
failure to substantiate such imputation against him. During the investigation
presided over by the Labor Arbiter, Damalerio narrated a plausible and
satisfactory explanation for his behavior complained of. According to him, he
was then cleaning the hotel room of Glaser, and while in the process of placing
inside the luggage the personal belongings of Glaser scattered near the bed,
the latter entered the room. Glaser did not bother to testify as all his things
were intact.

Although it was not completely proper for Damalerio to be touching the things
of a hotel guest while cleaning the hotel rooms, personal belongings of hotel
guests being off-limits to roomboys, under the attendant facts and
circumstances, we believe that the dismissal of Damalerio was unwarranted. To
be sure, the investigation held by the hotel security people did not unearth
enough evidence of culpability. It bears repeating that subject hotel guest lost
nothing. Albeit petitioner may have reasons to doubt the honesty and
trustworthiness of Damalerio, as a result of what happened, absent sufficient
proof of guilt, he (Damalerio), who is a rank-and-file employee, cannot be legally
dismissed. 4 Unsubstantiated suspicions and baseless conclusions by employers
are not legal justification for dismissing employees. The burden of proving the
existence of a valid and authorized cause of termination is on the employer. 5
Any doubt should be resolved in favor of the employee, in keeping with the
principle of social justice enshrined in the Constitution. 6

All things studiedly considered and viewed in proper perspective, the dismissal
of Damalerio, under the premises, cannot be countenanced.

As regards the share of Damalerio in the service charges collected during the
period of his preventive suspension, the same form part of his earnings, and his
dismissal having been adjudged to be illegal, he is entitled not only to full
backwages but also to other benefits, including a just share in the service
charges, to be computed from the start of his preventive suspension until his
reinstatement.

However, mindful of the animosity and strained relations between the parties,
emanating from this litigation, we uphold the ruling a quo that in lieu of
reinstatement, separation pay may be given to the private respondent, at the

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 140364 August 15, 2000
ACE NAVIGATION CO., INC. and/or CONNING SHIPPING LTD., petitioners,
vs.
COURT OF APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR RELATIONS
COMMISSION (FIRST DIVISION) and ORLANDO ALONSAGAY, respondents.
DECISION
PUNO, J.:
This is a petition for review of the resolutions1 of the Court of Appeals2 that
dismissed the petition for certiorari filed by petitioners and which denied their
motion for reconsideration, respectively.
First, the facts.
In June 1994, Ace Navigation Co., Inc. (Ace Nav) recruited private respondent
Orlando Alonsagay to work as a bartender on board the vessel M/V "Orient
Express" owned by its principal, Conning Shipping Ltd. (Conning). Under their
POEA approved contract of employment, Orlando shall receive a monthly basic
salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including
overtime pay for 12 hours of work daily plus tips of two U.S. dollars (U.S. $2.00)
per passenger per day. He, was also entitled to 2.5 days of vacation leave with
pay each month. The contract was to last for one (1) year.
Petitioners alleged that on June 13, 1994, Orlando was deployed and boarded
M/V "Orient Express" at the seaport of Hong Kong. After the expiration of the
contract on June 13, 1995, Orlando returned to the Philippines and demanded
from Ace Nav his vacation leave pay. Ace Nav did not pay him immediately. It
told him that he should have been paid prior to his disembarkation and
repatriation to the Philippines. Moreover, Conning did not remit any amount for
his vacation leave pay. Ace Nav, however, promised to verify the matter and
asked Orlando to return after a few days. Orlando never returned.
On November 25, 1995, Orlando filed a complaint3 before the labor arbiter for
vacation leave pay of four hundred fifty U.S. dollars (U.S. $450.00) and unpaid
tips amounting to thirty six, thousand U.S. dollars (U.S. $36,000.00).4 On
November 15, 1996, Labor Arbiter Felipe P. Pati ordered Ace Nav and Conning to
pay jointly and severally Orlando his vacation leave pay of US$450.00. The
claim for tips of Orlando was dismissed for lack of merit.5
Orlando appealed6 to the National Labor Relations Commission (NLRC) on
February 3, 1997. In a decision7 promulgated on November 26, 1997, the NLRC
ordered Ace Nav and Conning to pay the unpaid tips of Orlando which amounted
to US$36,000.00 in addition to his vacation leave pay. Ace Nav and Conning
filed a motion for reconsideration on February 2, 1998 which was denied on May
20, 1999.8
On July 2, 1999, Ace Nav and Conning filed a petition for certiorari before the
Court of Appeals to annul the decision of the NLRC. On July 28, 1999, the Court
of Appeals promulgated a three-page resolution9 dismissing the petition. Their
motion for reconsideration filed on September 8, 1999 was denied on October 8,
1999. Hence this appeal.
In assailing the dismissal of their petition on technical grounds, petitioners
argued that the Court of Appeals erred in rigidly and technically applying
Section 13, Rule 1310 and Section 1, Rule 6511 of the 1997 Rules of Civil
Procedure.12 They also contend that the respondent court erred in ruling that
they are the ones liable to pay tips to Orlando. They point out that if tips will be
considered as part of the salary of Orlando, it will make him the highest paid
employee on M/V "Orient Express." The ship captain, the highest ranking officer,
receives U.S.$3,000.00 per month without tips. Orlando, who is a bartender, will
receive U.S.$3,450.00 per month. Allegedly, this will compel foreign ship owners
to desist from hiring Filipino bartenders. It will create an unfavorable precedent
detrimental to the future recruitment, hiring and deployment of Filipino
overseas workers specially in service oriented businesses. It will also be a case
of double compensation that will unjustly enrich Orlando at the expense of
petitioners. They also stress that Orlando never complained that they should
pay him the said tips.
Respondent filed a two-page comment to the petition adopting the resolution of
the Court of Appeals dated July 28, 1999.
We find merit in the petition.
Rules of procedure are used to help secure and not override substantial
justice.13 Even the Rules of Court mandates a liberal construction in order to
promote their objective of securing a just, speedy and inexpensive disposition of
every action and proceeding.14 Since rules of procedure are mere tools
designed to facilitate the attainment of justice, their strict and rigid application
which would result in technicalities that tend to frustrate rather than promote
substantial justice must always be avoided.15 Thus, the dismissal of an appeal
on purely technical ground is frowned upon especially if it will result to
unfairness.
We apply these sound rules in the case at bar. Petitioners' petition for certiorari
before the Court of Appeals contained the certified true copy of the NLRC's
decision dated November 26, 1997,16 its order dated May 2, 199917 and the
sworn certification of non-forum shopping.18 Petitioners also explained that
their counsel executed an affidavit of proof of service and explanation in the
afternoon of July 1, 1999. However, he forgot to attach it when he filed their
petition the following day because of the volume and pressure of work and lack
of office personnel. However, the Registry Receipt,19 which is the proof of
mailing to Orlando's counsel, issued by the Central Post Office was attached on
the original petition they filed with the respondent court. It was also stamped20
by the NLRC which is proof of receipt of the petition by the latter. The affidavit of
service, which was originally omitted, was attached on their motion for
reconsideration.21 Significantly, it was dated July 1, 1999. In view of the
surrounding circumstances, the subsequent filing of the affidavit of service may
be considered as substantial compliance with the rules.
We now come to the merits of the case. The issue is whether petitioners are
liable to pay the tips to Orlando.
The word ["tip"] has several meanings, with origins more or less obscure,
connected with "tap" and with "top." In the sense of a sum of money given for
good service, other languages are more specific, e.g., Fr. pourboire, for drink. It
is suggested that [the word] is formed from the practice, in early 18th c. London
coffeehouses, of having a box in which persons in a hurry would drop a small
coin, to gain immediate attention. The box was labelled To Insure Promptness;
then just with the initials T.I.P.22
It is more frequently used to indicate additional compensation, and in this sense
"tip" is defined as meaning a gratuity; a gift; a present; a fee; money given, as
to a servant to secure better or more prompt service. A tip may range from pure
gift out of benevolence or friendship, to a compensation for a service measured
by its supposed value but not fixed by an agreement, although usually the word
is applied to what is paid to a servant in addition to the regular compensation
for his service in order to secure better service or in recognition of it. It has been
said that a tip denotes a voluntary act, but it also has been said that from the
very beginning of the practice of tipping it was evident that, whether considered
from the standpoint of the giver or the recipient, a tip lacked the essential
element of a gift, namely, the free bestowing of a gratuity without a
consideration, and that, despite its apparent voluntariness, there is an element
of compulsion in tipping.23
Tipping is done to get the attention and secure the immediate services of a
waiter, porter or others for their services. Since a tip is considered a pure gift
out of benevolence or friendship, it can not be demanded from the customer.
Whether or not tips will be given is dependent on the will and generosity of the
giver. Although a customer may give a tip as a consideration for services
rendered, its value still depends on the giver. They are given in addition to the
compensation by the employer. A gratuity given by an employer in order to
inspire the employee to exert more effort in his work is more appropriately
called a bonus.
The NLRC and the Court of Appeals held that petitioners were liable to pay tips
to Orlando because of the contract of employment. Thus:
"The contract of employment entered into by and between the complainant and
Ace Navigation Co., Inc. (p. 82, Record) clearly provides xxx:
'That the employee shall be employed on board under the following terms and
conditions:
1.1 Duration of Contract: (12 months) 10 months remaining duration of contract
1.2 Position: Bartender
1.3 Basic Monthly Salary: U.S.$450.00 Flat rate including overtime pay for
1.4 Hours of Work: 12 hrs. work daily.
1.5 Overtime: Plus tips of U.S.$2.00 per passenger per day.
1.6 Vacation Leave with Pay: 2.5 days/mo.' (record, p. 82)
"The record of this case shows that the respondent, in the Contract of
Employment xxx undertook to pay to complainant 'tips of U.S.$2.00 per
passenger per day.' Yet, there is no showing that the said undertaking was
complied with by the respondents.
"It was thus a serious error on the part of the Labor Arbiter to rule that the tips
were already paid, much less to rule that said tips were directly paid to the crew
of M/V "ORIENT PRINCESS." With Article 4 of the Labor Code reminding us that
doubts should be resolved in favor of labor, we all the more find it compelling to
rule that the complainant is still entitled to the contractually covenanted sum of
US$36,000.00. xxx."
We disagree. The contract of employment between petitioners and Orlando is
categorical that the monthly salary of Orlando is US$450.00 flat rate. This
already included his overtime pay which is integrated in his 12 hours of work.
The words "plus tips of US$2.00 per passenger per day" were written at the line
for overtime. Since payment for overtime was included in the monthly salary of
Orlando, the supposed tips mentioned in the contract should be deemed
included thereat.
The actuations of Orlando during his employment also show that he was aware
his monthly salary is only US$450.00, no more no less. He did not raise any
complaint about the non-payment of his tips during the entire duration of his
employment. After the expiration of his contract, he demanded payment only of
his vacation leave pay. He did not immediately seek the payment of tips. He
only asked for the payment of tips when he filed this case before the labor
arbiter. This shows that the alleged non-payment of tips was a mere
afterthought to bloat up his claim. The records of the case do not show that
Orlando was deprived of any monthly salary. It will now be unjust to impose a
burden on the employer who performed the contract in good faith.
Furthermore, it is presumed that the parties were aware of the plain, ordinary
and common meaning of the word "tip." As a bartender, Orlando can not feign
ignorance on the practice of tipping and that tips are normally paid by
customers and not by the employer.
It is also absurd that petitioners intended to give Orlando a salary higher than
that of the ship captain.1wphi1 As petitioners point out, the captain of M/V
"Orient Princess" receives US$3,000.00 per month while Orlando will receive
US$3,450.00 per month if the tip of US$2.00 per passenger per day will be
given in addition to his US$450.00 monthly salary. It will be against common
sense for an employer to give a lower ranked employee a higher compensation
than an employee who holds the highest position in an enterprise.
However, Orlando should be paid his vacation leave pay. Petitioners denied this
liability by raising the defense that the usual practice is that vacation leave pay
is given before repatriation. But as the labor arbiter correctly observed,
petitioners did not present any evidence to prove that they already paid the
amount. The burden of proving payment was not discharged by the petitioners.
IN VIEW WHEREOF, the resolutions of the Court of Appeals in CA G.R. SP No.
53508 are reversed and set aside. The decision of the labor arbiter ordering
petitioners to pay jointly and severally the unpaid vacation leave pay of private
respondent, Orlando Alonsagay, in the amount of US$450.00 and dismissing his
other claim for lack of merit is reinstated. SO ORDERED.