CASES PAGESPhilippine Bank of Communications vs NLRC (1986) G.R. L-66598 1Neri vs NLRC (1993) 224 SCRA 717 2Filipinas Synthetic Fiber Corp., vs NLRC (1996) 257 SCRA 336 2Maraquinot vs NLRC (1998) 284 SCRA 539 3Urbanes Jr. vs. Sec. of Labor (2003) GR No. 122791 5San Miguel vs Maerc Integrated Services (2003) G.R. 144627 5Maraviles Shipyard vs. CA (2003) GR No. 144134 6New Golden City Builders vs. CA (2003) GR No. 154715 7National Food Authority vs. Maceda Security Agency (2005) GR No. 163448 7Abella vs PLDT (2005) G.R. 159469 9San Miguel vs Aballa (2005) G.R. 149011 9Manila Electric Co., vs Benamira (2005) G.R. 145271 11Grandspan Development Corp., vs. Bernardo (2005) GR No. 141464 13Acevedo vs. Advanstar Co., (2005) GR No. 157656 13Big AA Manufacturer vs. Antonio (2006) GR No. 160854 14DOLE Philppines vs Esteva (2006) G.R. 161115 15San Miguel vs NLRC (2006) G.R. 147566 16Eparwa vs Liceo (2006) G.R. 150402 17Lapanday Agri Development Corp., vs. CA 324 SCRA 39 17Escario vs NLRC (2000) G.R. 124055 18Aboitiz vs Dimapatoi (2006) G.R. 148619 19GSIS vs NLRC (2006) G.R. 157647 19Republic vs Asiapro Cooperative (2007) G.R. 172101 20Almeda et al., vs Asahi Glass (2008) G.R. 177785 21Sasan, Sr et al, vs NLRC and EPCIB (2008) G.R. 176240 22Purefoods Corp., vs NLRC et al., (2008) G.R. 172241 23Maranaw Hotels and Resort vs CA (2009) G.R. 149660 24Cola-Cola Bottler’s Phils., vs Agito et al., (2009) G.R. 179546 25South Davao Development Co. vs Gamo (2009) G.R. 171814 27Traveno et al., vs Bobongon Banana Growers Multi-purpose Coop et al., (2009) G.R. 164205 27Locsin et al., vs. PLDT (2009) GR No. 185251 28Aliviado vs Procter and Gamble Phils. Inc., et al (2010) G.R. 160506 28San Miguel Corp. vs. Semillano GR No. 164257 29Manila Waters Co. vs. Dalumpines (2010) GR No. 175501 30Teng vs. Pahagac (2010) GR No.169704 30GSIS vs. NLRC et al., (2010) GR No. 180045 31Sy et al., vs. Fairland Knitcraft Co Inc. (2011) GR No. 189658 31DBP vs NLRC (1995) G.R. 108031 32Batong Buhay Gold Mines vs Dela Serna (1999) G.R. 86963 33Barayoga vs Asset Privatization Trust (2005) G.R. 160073 35Philippine Airlines vs Zamora (2007) G.R. 166996 35Philippine Airlines vs Philippine Airlines Employees Association (2007) G.R. 142399 37Garcia vs. Phil Air Lines (2009) GR No. 164856 39Bank of the Philippine Islands vs NLRC (1989) G.R. 69746-47 39Traders Royal Bank Employees Union vs NLRC (1997) G.R. 120592 41Brahm Industries vs NLRC (1997) G.R. 118853 42Heirs of Aniban vs NLRC (1997) G.R. 155034 43Sapio vs Undaloc Construcion et al., (2008) G.R. 155034 43Atty. Ortiz vs San Miguel Corp., (2008) G.R. 151983-84 43Masmud vs NLRC (2009) G.R. 183385 44Kaisahan at kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union vs. MWC (2011) GR 174179 45Bernardo vs. NLRC (1999) G.R. 122917 46Philippine Telegraph & Telephone Co vs NLRC (1997) G.R. 118978 47Del Monte Phils vs Velasco (2007) G.R. 153447 47Ultra Villa Food Haus vs, Geniston (1999) G.R. 120473 48Remington Industrial Sales Corp,. vs Castaneda (2007) G.R. 153477 48Co vs. Vargas (2011) GR No. 195167 49Tolosa vs NLRC (2008) G.R. 149578 50Phil Global Communications Inc vs de Vera (2005) G.R. 157214 50U-Bix Corp. vs Bandiola (2007) G.R. 157168 51Ocean Builders Construction vs. Sps. Cubacub (2011) GR No. 150898 51ISS Indochina Corp., vs Ferrer (2005) G.R. 156381 52People vs Capt. Gasacao (2005) G.R. 168449 53Acuña vs CA (2006) G.R. 159832 53Asian International Manpower Services vs CA (2006) G.R. 169652 54Sim vs. NLRC (2007) G.R. 157376 55Bahia Shipping Services Inc., vs Chua (2008) G.R. 162195 55Masangcay vs Trans-Global Maritime Agency Inc., (2008) G.R. 172800 56Magsaysay Maritime Corp., et al., vs Velasquez, et al., (2008) G.R. 179802 57Serrano vs Gallant Maritime Services et al., (2009) G.R. 167614 59Becmen Service Exporter and Promotion Inc., vs. Sps. Cuaresma (2009) GR Nos. 182978 &184298-99 60People vs Domingo (2009) G.R. 181475 61ATCI Overseas Corp. et al., vs. Echin (2010)GR No. 178551 61Skippers United Pacific vs. Doza et al., (2012) GR No. 175558 62

International Management Services vs. Logarta (2012) GR No. 163657 62

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Topic 13 Other Important Labor Provisions

Contracting Arrangement

Philippine Bank of Communications vs. NLRC[146 SCRA 347 December 19, 1986]

Facts:Petitioner Philippine Bank of Communications and the Corporate Executive Search Inc. (CESI) entered into a letter agreement dated

January 1976 under which CESI undertook to provide "Tempo[rary] Services" to petitioner consisting of the "temporary services" of eleven (11) messengers. The contract period is described as being "from January 1976 ---- ." The petitioner in truth undertook to pay a "daily service rate of P18," on a per person basis.Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he rendered services to the bank, within the premises of the bank and alongside other people also rendering services to the bank. There was some question as to when Ricardo Orpiada commenced rendering services to the bank. As noted above, the letter agreement was dated January 1976. However, the position paper submitted by CESI to the National Labor Relations Commission stated that CESI hired Ricardo Orpiada on 25 June 1975 as a Tempo Service employee, and assigned him to work with the petitioner bank "as evidenced by the appointment memo issued to him on 25 June 1975-." Be that as it may, on or about October 1976, the petitioner requested CESI to withdraw Orpiada's assignment because, in the allegation of the bank, Orpiada's services "were no longer needed."

On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now Ministry of Labor and Employment) against the petitioner for illegal dismissal and failure to pay the 13th month pay provided for in Presidential Decree No. 851. This complaint was docketed as Case No. RO4-10-10184-76-E. After investigation, the Office of the Regional Director, Regional Office No. IV of the Department of Labor, issued an order dismissing Orpiada's complaint for failure of Mr. Orpiada to show the existence of an employer-employee relationship between the bank and himself.

Accordingly, on 2 April 1984, the bank filed the present petition for certiorari with this Court seeking to annul and set aside (a) the decision of respondent Labor Arbiter Dogelio dated 12 September 1977 in Labor Case No. RB-IV-1118-77 and (b) the decision of the NLRC promulgated on 29 December 1983 affirming with some modifications the decision of the Labor Arbiter. This Court granted a temporary restraining order on 11 April 1984.

Issue:Whether or not the relationship is one of employer and job (independent) contractor or one of employer and "labor-only" contractor.

SC Ruling:There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment

in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters into a contract with a contractor for the performance of work for the employer, does not thereby create an employer-employee relationship between himself and the employees of the contractor. Thus, the employees of the contractor remain the contractor's employees and his alone. Nonetheless, when a contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who contracted out the job to the contractor becomes jointly and severally liable with his contractor to the employees of the latter "to the extent of the work performed under the contract" as if such employer were the employer of the contractor's employees. The law itself, in other words, establishes an employer-employee relationship between the employer and the job contractor's employees for a limited purpose, i.e., in order to ensure that the latter get paid the wages due to them.

A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor ---- i.e. "the person or intermediary" ---- is considered "merely as an agent of the employer." The employer is made by the statute responsible to the employees of the "labor only" contractor as if such employees had been directly employed by the employer. Thus, where "labor only" contracting exists in a given case, the statute itself implies or establishes an employer-employee relationship between the employer (the owner of the project) and the employees of the "labor only" contractor, this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code." The law in effect holds both the employer and the "labor-only" contractor responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.

The definition of "labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be read in conjunction with the definition of job contracting given in Section 8 of the same Rules. The undertaking given by CESI in favor of the bank was not the performance of a specific job ---- for instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service, companies with their own personnel who pick up documents and packages from the offices of a client or customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the addresses. In the present case, the undertaking of CESI was to provide its client ---- the bank ---- with a certain number of persons able to carry out the work of messengers. Such undertaking of CESI was complied with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work ---- the delivery of documents to designated persons whether within or without the bank premises ---- is of course directly related to the day-to-day operations of the bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as a distinct and separate line of business.

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing bodies, as it were, in different client companies for longer or shorter periods of time. It is this factor that, to our mind, distinguishes this case from American President Lines v. Clave et al., 114 SCRA 826 (1982) if indeed such distinguishing way is needed.We hold that, in the circumstances of this case, CESI was engaged in "labor-only" contracting vis-a-vis the petitioner bank and in respect of Ricardo Orpiada, and that consequently, the petitioner bank is liable to Orpiada as if Orpiada had been directly employed not only by CESI but

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also by the bank. It may well be that the bank may in turn proceed against CESI to obtain reimbursement of, or some contribution to, the amounts which the bank will have to pay to Orpiada; but this it is not necessary to determine here.

The petition for certiorari is denied and the decision promulgated on 29 December 1983 of the National Labor Relations Commission is affirmed.

Virginia G. Neri vs. National Labor Relations Commission, et al.[224 SCRA 717 July 23, 1993]

Facts:Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other specific services to various

firms, to compel Far Bast Bank and Trust Company to recognize them as its regular employees and be paid the same wages which its employees receive.

Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial capitalization of P1 Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that consequently its employees were not employees of Far East Bank and Trust Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National Labor Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is engaged in "labor-only" contracting hence, they conclude, they are employees of respondent FEBTC.

On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration Branch No. 10 of the Department of Labor and Employment to compel the bank to accept them as regular employees and for it to pay the differential between the wages being paid them by BCC and those received by FEBTC employees with similar length of service.

Issue:Whether or not BCC is only a job contracting company, hence petitioners are not regular employees of FEBTC.

SC Ruling:We cannot sustain the petition.Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others,

because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of

P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only"

contracting.It is well-settled that there is "labor-only" contracting where: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and, (b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer.

Article 106 of the Labor Code defines "labor-only" contracting thus Art. 106. Contractor or subcontractor. . . . . There is "labor-only" contracting where the person supplying workers to an� employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited by such persons are performing activities which are directly related to the principal business of such employer . . . . (emphasis supplied).

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the contractor to prove that he has both capital and the requisite investment, then the conjunction "and" should have been used. But, having established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for it to refute petitioners' contention that the activities they perform are directly related to the principal business of respondent bank.

Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank, under the "right of control" test they must still be considered employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated.

More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional janitors would be hired from the company if the promotion was to be effected. Furthermore, BCC was to be paid in lump sum unlike in the situation in Philippine Bank of Communications where the contractor, CESI, was to be paid at a daily rate on a per person basis. And, the contract therein stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its contract with various clients according to its "own manner and method, free from the control and supervision" of its principals in all matters "except as to the results thereof."

The Petition for Certiorari is dismissed.

Filipinas Synthetic Fiber Corporation vs. NLRC, et al.[257 SCRA 336 June 14, 1996]

Facts:On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture of polyester fiber, contracted with De Lima Trading and

General Services (DE LIMA) for the performance of specific janitorial services Pursuant to the agreement Felipe Loterte, among others, was

deployed at FILSYN to take care of the plants and maintain general cleanliness around the premises.

On 24 February 1992 Loterte sued FILSYN and DE LIMA as alternative defendants for illegal dismissal, underpayment of wages,

non-payment of legal holiday pay, service incentive leave pay and 13th month pay alleging that he was first assigned to perform janitorial work at FILSYN in 1981 by the La Saga General Services; that the La Saga was changed to DE LIMA on August 1991; that when a movement to demand increased wages and 13th month pay arose among the workers on December 1991 he was accused by a certain Dodie La Flores of having posted in the bulletin board at FILSYN an article attributing to management a secret understanding to block the demand; and, for denying responsibility, his gate pass was unceremoniously cancelled on 6 February 1992 and he was subsequently dismissed.

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Loterte was classified by the Labor Arbiter as a regular employee on the ground that he performed tasks usually necessary or desirable in the main business of FILSYN for more than ten (10) years or since 1981. FILSYN was declared to be the real employer of Loterte and DE

LIMA as a mere labor contractor. Hence, FILSYN was adjudged liable for Loterte's reinstatement, payment of salary differentials and back

wages and other benefits. Hence, this petition for certiorari by FILSYN.

Issue: Whether or not there exists

an employer-employee relationship between FILSYN and private respondent Felipe Loterte.

SC Ruling: DE LIMA is an independent job contractor, therefore no direct employer-employee relationship exists between petitioner FILSYN and

private respondent Felipe Loterte. The relationship between petitioner Filipinas Synthetic Fiber Corporation (FILSYN) and private respondent De Lima Trading and General Services (DE LIMA) is one of job contractorship.

Under the Labor Code, two (2) elements must exist for a finding of labor-only contracting: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and (b) the workers recruited and placed by such persons are performing activities directly related to the principal business of such employer.

These two (2) elements do not exist in the instant case. As pointed out by petitioner, private respondent DE LIMA is a going concern duly registered with the Securities and Exchange Commission with substantial capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed. Hence, it cannot be considered as engaged in labor-only contracting being a highly capitalized venture. Moreover, while the janitorial services performed by Felipe Loterte pursuant to the agreement between FILSYN and DE LIMA may be considered directly related to the principal business of FILSYN which is the manufacture of polyester fiber, nevertheless, they are not necessary in its operation. On the contrary, they are merely incidental thereto, as opposed to being integral, without which production and company sales will not suffer. Judicial notice has already been taken of the general practice in private as well as in government institutions and industries of hiring janitorial services on an independent contractor basis.

Respondent De Lima Trading and General Services (DE LIMA) are ordered to reinstate private respondent FELIPE LOTERTE to his former position or its equivalent without loss of seniority rights. And private respondent De Lima Trading and General Services (DE LIMA) is ordered jointly and severally with petitioner Filipinas Synthetic Fiber Corporation (FILSYN) to pay private respondent FELIPE LOTERTE hi salary differentials, 13th month pay, service incentive leave pay, and backwages without prejudice to FILSYN seeking reimbursement from DE LIMA for whatever amount the former may pay or have paid the latter.

Alejandro Maraguinot, JR. and Paulino Enero vs. NLRC[284 SCRA 539 January 22, 1998]

Facts:Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part of the filming

crew with a salary of P375.00 per week. In June 1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P593.00 in September 1991.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21 December 1991.Petitioners’ tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva Films’ warehouse, assisting in the “fixing” of the lighting system, and performing other tasks that the cameraman and/or director may assign.

Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to facilitate their request that private respondents adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank employment contract.

Private respondents assert that they contract persons called “producers” -- also referred to as “associate producers” -- to “produce” or make movies for private respondents; and contend that petitioners are project employees of the associate producers who, in turn, act as independent contractors. As such, there is no employer-employee relationship between petitioners and private respondents.

The Labor Arbiter in his decision of December 30, 1993 declared that petitioners were illegally dismissed. Private respondents were ordered to reinstate petitioners. On appeal to the NLRC, the latter reversed the Labor arbiter’s decision. It concluded the circumstances indicated that petitioners were “project employees.”

Hence, the present petition for certiorari. Petitioners claimed that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in: 1) finding that petitioners were project employees 2) ruling that petitioners were not illegally dismissed 3) reversing the decision of the Labor Arbiter.

Issue:Whether or not an employer-employee relationship existed between petitioners and private respondents or any one of private respondents. If there was none, then this petition has no merit; conversely, if the relationship existed, then petitioners could have been unjustly dismissed.

SC Ruling:The associate producers here are not job contractors. Respondents insist that petitioners are project employees of associate producers

who, in turn, act as independent contractors. It is settled that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible job contracting in this wise:Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof;(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.

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Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As such, and to be a job contractor under the preceding description, associate producers must have tools, equipment, machinery, work premises, and other materials necessary to make motion pictures. However, the associate producers here have none of these. Private respondents’ evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA. These include generators, cables and wooden platforms, cameras and “shooting equipment;” in fact, VIVA likewise owns the trucks used to transport the equipment. It is thus clear that the associate producer merely leases the equipment from VIVA.

If private respondents insist that their associate producers are labor contractors, then these producers can only be “labor-only” contractors, defined by the Labor Code as follows:Art. 106. Contractor or subcontractor.-- x x x

There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code:Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers.

Neither are said associate producers “labor only” contractors. As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an “available group of free-lance workers which includes the complainants Maraguinot and Enero.” And in their Memorandum, private respondents declared that the associate producer “hires the services of... 6) camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc....” This clearly showed that the associate producers did not supply the workers required by the movie project.

The relationship between VIVA and its producers seems to be that of agency. VIVA is the direct employer of petitioners. The relationship between VIVA and its producers or associate producers seems to be that of agency, as the latter make movies on behalf of VIVA, whose business is to “make” movies. As such, the employment relationship between petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be established by the “control test.” While four elements are usually considered in determining the existence of an employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct, the most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done but also as to the means and methods to accomplish the same. These four elements are present here.

VIVA’s control is evident in its mandate that the end result must be a “quality film acceptable to the company.” The means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to suit the taste of the company; and the Supervising Producer, the “eyes and ears” of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems encountered in making the film.

It may not be validly argued then that petitioners are actually subject to the movie director’s control, and not VIVA’s direction. The director merely instructs petitioners on how to better comply with VIVA’s requirements to ensure that a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the employer.

Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by VIVA. A sample appointment slip offered by private respondents “to prove that members of the shooting crew except the driver are project employees of the Independent Producers”.

Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members; moreover, it is VIVA’s corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that it paid petitioners’ salaries as evidenced by vouchers, containing VIVA’s letterhead, for that purpose.

Petitioners are regular employees, not merely project employees. They were illegally dismissed. It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work pool; and, while petitioners were initially hired possibly as project employees, they had attained the status of regular employees in view of VIVA’s conduct.

A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:1) There is a continuous rehiring of project employees even after cessation of a project; and2) The tasks performed by the alleged “project employee” are vital, necessary and indispensable to the usual business or trade of the employer.

However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment.

In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three (23) projects. Moreover, as petitioners’ tasks involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to the Viva Films’ warehouse, and assisting in the “fixing” of the lighting system, it may not be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety.

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The Court’s ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector, but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that simply because an employee is a project or work pool employee even outside the construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees who have already gained the status of regular employees by the employer’s conduct.

In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the cause invoked by private respondents for petitioners’ dismissal, viz., completion of project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have accrued. Nevertheless, following the principles of “suspension of work” and “no pay” between the end of one project and the start of a new one, in computing petitioners’ back wages, the amounts corresponding to what could have been earned during the periods from the date petitioners were dismissed until their reinstatement when petitioners’ respective Shooting Units were not undertaking any movie projects, should be deducted.

The instant petition is GRANTED.

Urbanes Jr. vs Sec. of Labor[GR No. 122791, February 19, 2003]

Facts:

Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency, entered into an agreement   to provide security services to respondent Social Security System (SSS). During the effectivity of the agreement, petitioner, by letter of May 16, 1994, requested the SSS for the upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act 6727 otherwise known as the Wage Rationalization Act.On June 24, 1994, petitioner pulled out his agency's services from the premises of the SSS and another security agency, Jaguar, took over.  On June 29, 1994, petitioner filed a complaint with the DOLE-NCR against the SSS seeking the implementation of Wage Order No. NCR-03.The Regional Director of the DOLE-NCR rendered judgment in favor of the petitioner. SSS appealed to the Secretary of Labor. The Secretary of Labor set aside the order of the Regional Director and the Secretary held petitioner's security agency "JOINTLY AND SEVERALLY liable for wage differentials, the amount of which should be paid DIRECTLY to the security guards concerned.

Issue: Whether or not the Secretary of Labor have jurisdiction to review appeals from decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code 

Ruling:In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards,  the relief sought has to do with the enforcement of the contract between him and the SSS which was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts.But even assuming arguendo that petitioner's complaint were filed with the proper forum, for lack of cause of action it must be dismissed.Articles 106, 107 and 109 of the Labor Code provide:

ART. 106.CONTRACTOR OR SUBCONTRACTOR. — Whenever an employer enters into contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

xxx xxx xxx (Emphasis and underscoring)ART. 107.INDIRECT EMPLOYER. — The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

ART. 109.SOLIDARY LIABILITY. — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-security guards "the increases" mandated by Wage Order No. NCR-03.The records do not show that petitioner has paid the mandated increases to the security guards. The security guards in fact have filed a complaint  with the NLRC against petitioner relative to, among other things, underpayment of wages.

San Miguel Corporation vs. Maerc Integrated Services, Inc., et al.[GR No. 144672 July 10, 2003]

Facts:Brought before this court is a petition seeking for a review of the Court of Appeals' judgment. The facts are as follows. 291 workers

filed complaints against San Miguel Corporation and Maerc Integrated Services, Inc. for illegal dismissal, underpayment of wages, non-payment of service incentive leave pays and other labor standards benefits, and for separation pays from 25 June to 24 October 1991. The complainants alleged that they were hired by SMC through its agent or intermediary Maerc. They were paid on a per piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis.

SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC. When the service contract was terminated, complainants claimed that SMC stopped them from performing their jobs; that this was tantamount to their being illegally dismissed by SMC who was their real employer; and, that MAERC was merely made a tool or a shield by SMC to avoid its liability under the Labor Code.

On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC was an independent contractor. He dismissed the complaints for illegal dismissal but held that MAERC and SMC were jointly and severally liable to pay complainants their wage differentials.

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The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a labor-only contractor and that complainants were employees of SMC but still held SMC to be jointly and severally liable with MAERC for complainants' separation benefits. On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC.

Issue:Whether or not the complainants are employees of petitioner SMC or of respondent MAERC.

SC Ruling:Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC's workers. It also appears that

majority of the complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC in 1988.

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.

This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case, petitioner's liability is that of a direct employer and thus solidarily liable with MAERC.

Respondent Maerc Integrated Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private respondents herein) separation benefits and wage differentials as may be finally recomputed by the Labor Arbiter as herein directed, plus attorney's fees to be computed on the basis of ten percent (10%) of the amounts which complainants may recover pursuant to Art. 111 of the Labor Code, as well as an indemnity fee of P2,000.00 to each complainant.

Mariveles Shipyard vs. CA [GR No. 144134, November 11, 2003]

Facts:Petitioner Mariveles Shipyard Corporation engaged the services of Longest Force Investigation and Security Agency, Inc. (hereinafter,

"Longest Force") to render security services at its premises. Pursuant to their agreement, Longest Force deployed its security guards, the private respondents herein, at the petitioner's shipyard in Mariveles, Bataan.According to petitioner, it religiously complied with the terms of the security contract with Longest Force, promptly paying its bills and the contract rates of the latter. However, it found the services being rendered by the assigned guards unsatisfactory and inadequate, causing it to terminate its contract with Longest Force on April 1995.  Longest Force, in turn, terminated the employment of the security guards it had deployed at petitioner's shipyard.

On September 2, 1996, private respondents filed a case for illegal dismissal, underpayment of wages pursuant to the PNPSOSIA-PADPAO rates, non-payment of overtime pay, premium pay for holiday and rest day, service incentive leave pay, 13th month pay and attorney's fees, against both Longest Force and petitioner, before the Labor Arbiter. Docketed as NLRC NCR Case No. 00-09-005440-96-A, the case sought the guards' reinstatement with full backwages and without loss of seniority rights.

Petitioner Corporation sought before the Court of Appeals the nullification of the decision of the NLRC which affirmed the Labor Arbiter's decision finding it jointly and severally liable with the Longest Force Investigation and Security Agency, Inc. for the underpayment of wages and overtime pay due to the latter's security guards, private respondents herein, deployed at the petitioner's shipyard in Mariveles, Bataan. Petitioner denied any liability, arguing that it had religiously and promptly paid the compensation of the security guards as stipulated under the contract with the security agency. The Court of Appeals dismissed outright petitioner's petition for certiorari and its subsequent motion for reconsideration, due to a defective certificate of non-forum shopping and non-submission of the required documents to accompany said petition.

The appellate court found that the verification and certification on non-forum shopping was signed not by the duly authorized officer of petitioner, but by its counsel.Issues:(1) Was it error for the Court of Appeals to sustain its order of dismissal of petitioner's special civil action for certiorari, notwithstanding subsequent compliance with the requirements under the Rules of Court by the petitioner? (2) Did the appellate court err in not holding that petitioner was denied due process of law by the NLRC? (3) Did the appellate court grievously err in finding petitioner jointly and severally liable with Longest Force for the payment of wage differentials and overtime pay owing to the private respondents?Ruling:1. It is settled that the requirement in the Rules that the certification of non-forum shopping should be executed and signed by the plaintiff or the principal means that counsel cannot sign said certification unless clothed with special authority to do so.  The reason for this is that the plaintiff or principal knows better than anyone else whether a petition has previously been filed involving the same case or substantially the same issues. Hence, a certification signed by counsel alone is defective and constitutes a valid cause for dismissal of the petition.   In the case of natural persons, the Rule requires the parties themselves to sign the certificate of non-forum shopping. However, in the case of the corporations, the physical act of signing may be performed, on behalf of the corporate entity, only by specifically authorized individuals for the simple reason that corporations, as artificial persons, cannot personally do the task themselves.  In this case, not only was the originally appended certification signed by counsel, but in its motion for reconsideration, still petitioner utterly failed to show that Ms. Rosanna Ignacio, its Personnel Manager who signed the verification and certification of non-forum shopping attached thereto, was duly authorized for this purpose. It cannot be gainsaid that obedience to the requirements of procedural rule is needed if we are to expect fair results therefrom. Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction. Thus, on this point, no error could be validly attributed to respondent Court of Appeals. It did not err in dismissing the petition for non-compliance with the requirements governing the certification of non-forum shopping.2. Well settled is the rule that the essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of.   Not all cases require a trial-type hearing. The requirement of due process in labor cases before a Labor Arbiter is satisfied when the parties are given the opportunity to submit their position papers to which they are supposed to attach all the supporting documents or documentary evidence that would prove their respective claims, in the event the Labor Arbiter determines that no formal hearing would be conducted or that such hearing was not necessary.   In any event, as found by the NLRC, petitioner was given ample opportunity to present its side in several hearings conducted before the Labor Arbiter and in the position papers and other supporting documents that it had submitted. We find that such opportunity more than satisfies the requirement of due process in labor cases.

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3. Petitioner's liability is joint and several with that of Longest Force, pursuant to Articles 106, 107 and 109 of the Labor Code which provide as follows:

ART. 106.CONTRACTOR OR SUBCONTRACTOR. — Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

xxx xxx xxxART. 107.INDIRECT EMPLOYER. — The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.ART. 109.SOLIDARY LIABILITY . — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

Petitioner cannot evade its liability by claiming that it had religiously paid the compensation of guards as stipulated under the contract with the security agency. Labor standards are enacted by the legislature to alleviate the plight of workers whose wages barely meet the spiraling costs of their basic needs. Labor laws are considered written in every contract. Stipulations in violation thereof are considered null.

New Golden City Builders vs. CA [GR No.154715, December 11, 2003]

Facts:Petitioner entered into a construction contract with Prince David Development Corporation. Petitioner engaged the services of Nilo

Layno Builders to do the specialized concrete works, forms works and steel rebars works. Pursuant to the contract, Nilo Layno Builders hired private respondents to perform work at the project. After the completion of the phase for which Nilo Layno Builders was contracted, private respondents filed a complaint against petitioner and its president for unfair labor practice, non-payment of 13th month pay, service incentive leave, illegal dismissal and severance pay, in lieu of reinstatement. The Labor Arbiter ruled in favor of respondents, but dismissed the charges for illegal dismissal including their prayers for backwages and unfair labor practice and other monetary claims except their 13th month pay and service incentive leave pay. It was also found that Nilo Layno Builders was a labor-only-contractor, thus private respondents were deemed employees of the petitioner. Both parties appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision with modification that private respondents were illegally dismissed. Since petitioner's motion for reconsideration was denied, it instituted a special civil action for certiorari with the Court of Appeals, but the latter denied the same.Issue:Whether Nilo Layno Builders was an "independent contractor" or a "labor-only" contractorRuling:

Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who undertakes "job contracting," i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials which are necessary in the conduct of the business. Jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

Nilo Layno Builders is a duly licensed labor contractor carrying on an independent business for a specialized work that involves the use of some particular, unusual and peculiar skills and expertise, like concrete works, form works and steel rebars works. As a licensed labor contractor, it complied with the conditions set forth in Section 5, Rule VII-A, Book III, Rules to Implement the Labor Code, among others, proof of financial capability and list of equipment, tools, machineries and implements to be used in the business. Further, it entered into a written contract with the petitioner, a requirement under Section 3, Rule VII-A, Book III, Rules to Implement the Labor Code to assure the employees of the minimum labor standards and benefits provided by existing laws.

The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only to the results of the work.

This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to do specialized work in the Prince David Project of the petitioner. The means and methods adopted by the private respondents were directed by Nilo Layno Builders except that, from time to time, the engineers of the petitioner visited the site to check whether the work was in accord with the plans and specifications of the principal. As admitted by Nilo G. Layno, he undertook the contract work on his own account and responsibility, free from interference from any other persons, except as to the results; that he was the one paying the salaries of private respondents; and that as employer of the private respondents, he had the power to terminate or dismiss them for just and valid cause.   Indubitably, the Court finds that Nilo Layno Builders maintained effective supervision and control over the private complainants.

National Food Authority (NFA) vs . Masada Security Agency, Inc. [G.R. No. 163448 March 08, 2005]

Facts:On September 17, 1996, MASADA Security Agency, Inc., entered into a one year contract to provide security services to the various

offices, warehouses and installations of NFA within the scope of the NFA Region I, comprised of the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte.  Upon the expiration of said contract, the parties extended the effectivity thereof on a monthly basis under same terms and condition.

Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the daily wage

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rate.  Accordingly, respondent requested NFA for a corresponding upward adjustment in the monthly contract rate consisting of the increases in

the daily minimum wage of the security guards as well as the corresponding raise in their overtime pay, holiday pay, 13 th month pay, holiday and rest day pay.  It also claimed increases in Social Security System (SSS) and Pag-ibig premiums as well as in the administrative costs and margin.   NFA, however, granted the request only with respect to the increase in the daily wage by multiplying the amount of the mandated increase by 30 days and denied the same with respect to the adjustments in the other benefits and remunerations computed on the basis of the daily wage.

Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I, La Union, as Chairman of the Regional Tripartite Wages and Productivity Board and the DOLE Secretary through the Executive Director of the National Wages and Productivity Commission.  Despite the advisory of said offices sustaining the claim of respondent that the increase mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the daily pay, NFA maintained its stance that it is not liable to pay the corresponding adjustments in the wage related benefits of respondent’s security guards.

Issue: Whether or not the liability of principals in service contracts under Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in the minimum wage.

SC Ruling:RA 6727, created the National Wages and Productivity Commission (NWPC), vested, inter alia, with the power to prescribe rules and

guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels; and the Regional Tripartite Wages and Productivity Boards (RTWPB) which, among others, determine and fix the minimum wage rates applicable in their respective region, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC. Pursuant to its wage fixing authority, the RTWPB issue wage orders which set the daily minimum wage rates.

Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer.   Section 6 of RA 6727, however, expressly lodged said obligation to the principals or indirect employers in construction projects and establishments providing security, janitorial and similar services.  Substantially the same provision is incorporated in the wage orders issued by the RTWPB. Section 6 of RA 6727, provides:

SEC. 6.  In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service contractors and the contract shall be deemed amended accordingly.  In the event, however, that the principal or client fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his principal or client. (Emphasis supplied)NFA claims that its additional liability under the aforecited provision is limited only to the payment of the increment in the statutory

minimum wage rate, i.e., the rate for a regular eight (8) hour work day. In construing the word “wage” in Section 6 of RA 6727, reference must be had to Section 4 (a) of the same Act.  It states:

SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers and employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25) per day … (Emphasis supplied)

 The term “wage” as used in Section 6 of RA 6727 pertains to no other than the “statutory minimum wage” which is defined under the

Rules Implementing RA 6727 as the lowest wage rate fixed by law that an employer can pay his worker. The basis thereof under Section 7 of the same Rules is the normal working hours, which shall not exceed eight hours a day.   Hence, the prescribed increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or amount added to the remuneration of an employee for an 8-hour work.

Expresio unius est exclusio alterius.  Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to others. Since the increase in wage referred to in Section 6 pertains to the “statutory minimum wage” as defined herein, principals in service contracts cannot be made to pay the corresponding wage increase in the overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits granted to workers.  While basis of said remuneration and benefits is the statutory minimum wage, the law cannot be unduly expanded as to include those not stated in the subject provision.

The settled rule in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation.  This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently.  The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute.  Verba legis non est recedendum, or from the words of a statute there should be no departure.

At any rate, the interest of the employees will not be adversely affected if the obligation of principals under the subject provision will be limited to the increase in the statutory minimum wage.  This is so because all remuneration and benefits other than the increased statutory minimum wage would be shouldered and paid by the employer or service contractor to the workers concerned.   Thus, in the end, all allowances and benefits as computed under the increased rate mandated by RA 6727 and the wage orders will be received by the workers.

Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals and the service contractors.   Under the second sentence of Section 6 of RA 6727, in the event that the principal or client fails to pay the prescribed wage rates, the service contractor shall be held solidarily liable with the former.  Likewise, Articles 106, 107 and 109 of the Labor Code provides:

ART. 106. Contractor or Subcontractor. – Whenever an employer enters into contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

…ART. 107. Indirect Employer. – The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.ART. 109. Solidary Liability. – The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations increasing the liability of the principal.  So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum wage is complied with, the Wage Rationalization Act is not violated.

In the instant case, Article IV.4 of the service contract provides:IV.4.  In the event of a legislated increase in the minimum wage of security guards and/or in the PADPAO rate, the AGENCY may

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negotiate for an adjustment in the contract price.  Any adjustment shall be applicable only to the increment, based on published and circulated rates and not on mere certification.

In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:3.  For purposes of wage adjustments, consider only the rate based on the wage Order issued by the Regional Tripartite Wage

Productivity Board (RTWPB).  Unless otherwise provided in the Wage Order issued by the RTWPB, the wage adjustment shall be limited to the increment in the legislated minimum wage;

The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant to RA 6727.   There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is limited to the payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.[33] Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment.  Having discharged its obligation to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent.   The latter’s complaint for collection of remuneration and benefits other than the increased minimum wage rate, should therefore be dismissed for lack of cause of action.

Zaldy G. Abella, et al vs. Philippine Long Distance Telephone Company, et al.[G.R. No. 159469  June 8, 2005]

Facts:Respondent PSI entered into an agreement with the PLDT to provide the latter with such number of qualified uniformed and properly

armed security guards for the purpose of guarding and protecting PLDT’s installations and properties from theft, pilferage, intentional damage, trespass or other unlawful acts. Under the agreement, it was expressly provided that there shall be no employer-employee relationship between the PLDT and the security guards, which may be supplied to it by PSI, and that the latter shall have the entire charge, control and supervision over the work and services of the supplied security guards. It was likewise stipulated therein that PSI shall also have the exclusive authority to select, engage, and discharge its security guards, with full control over their wages, salaries or compensation.

Consequently, respondent PSI deployed security guards to the PLDT.  PLDT’s Security Division interviewed these security guards and asked them to fill out personal data sheets. Those who did not meet the height requirements were sent back by PLDT to PSI.

On 05 June 1995, sixty-five security guards supplied by respondent PSI filed a Complaint for regularization against the PLDT with the Labor Arbiter.  The Complaint alleged inter alia that petitioner security guards have been employed by the company through the years commencing from 1982 and that all of them served PLDT directly for more than 1 year, that PSI acted as the middleman in the payment of the minimum pay to the security guards, but no premium for work rendered beyond eight hours was paid to them nor were they paid their 13 th month pay, and that they should be considered as regular employees by the latter with compensation and benefits equivalent to ordinary rank-and-file employees of the same job grade. Issue:

Whether or not employer-employee relationship exists between the security guards and PLDT.

SC Ruling:Testimonies during the trial reveal that interviews and evaluation were conducted by PLDT to ensure that the standards it set are met

by the security guards.  In fact, PLDT rarely failed to accept security guards referred to by PSI but on account of height deficiency.   The referral is nothing but for possible assignment in a designated client which has the inherent prerogative to accept and reject the assignee for justifiable grounds or even arbitrarily.  We are thus convinced that the employer-employee relationship is deemed perfected even before the posting of the complainants with the PLDT, as assignment only comes after employment.

Here, the security guards which PSI had assigned to PLDT are already the former’s employees prior to assignment and if the assigned guards to PLDT are rejected by PLDT for reasons germane to the security agreement, then the rejected or terminated guard may still be assigned to other clients of PSI.  Therefore, the evidence as it stands is at odds with petitioners’ assertion that PSI is an “in-house” agency of PLDT so as to call for a piercing of veil of corporate identity.

The delinquency reports merely served as justifiable, not arbitrary, basis for PLDT to demand replacement of guards found to have committed infractions while on their tours of duty at PLDT’s premises.

As a case in point, manufacturing companies usually hold suppliers’ conferences to integrate their suppliers’ corporate goals and visions with their own so that the manufacturing companies are ensured of the quality and timing of their supplies of materials or services, as the case may be.  It is therefore not surprising that PLDT would demand that security guards assigned to its premises undergo seminars and trainings on certain areas of concern which are unique to PLDT, and also to assign their own security personnel and supervisors to monitor the performance of the security guards as part of the company’s internal check, monitoring and control system in order to rate whether the security agency it hired is performing at par with PLDT’s set standards.

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor.   The partiality for labor has not in any way diminished our belief that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.

Petition is denied and the resolution of the Court of Appeals is affirmed.

San Miguel Corporation vs. Prospero A. Aballa, et al.[G.R. No. 149011 June 28, 2005]

Facts:Petitioner San Miguel Corporation, Visayas Area Manager for Aquaculture Operations and Sunflower Multi-Purpose Cooperative

entered into a one-year Contract of Services commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party.

Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMC’s Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City.  The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995.

In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees.

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Private respondents subsequently filed on September 25, 1995 an Amended Complaint to include illegal dismissal as additional cause of action following SMC’s closure of its Bacolod Shrimp Processing Plant on September 15, 1995 which resulted in the termination of their services.

SMC filed a Motion for Leave to File Attached Third Party Complaint dated November 27, 1995 to implead Sunflower as Third Party Defendant which was, by Order of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon. In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and Employment a Notice of Closure of its aquaculture operations effective on even date, citing serious business losses.

Issues: 1. Whether or not Sunflower is a labor-only contractor.2. Whether or not Sunflower is liable, with San Miguel Corporation, for the claims of private respondents.

SC Ruling:Article 106 of the Labor Code provides:ART. 106. Contractor or subcontracting. – Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Code.  In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer.   In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate and labor-only contracting:

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers.  Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited.  For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present:

i)    The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal, or

ii)   The contractor does not exercise the right to control over the performance of the work of the contractual employee.

The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws.  The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees’ wages whenever the contractor fails to pay the same.  Other than that, the principal employer is not responsible for any claim made by the employees. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents.  The language of a contract is not, however, determinative of the parties’ relationship; rather it is the totality of the facts and surrounding circumstances of the case. A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute.

From the job description provided by SMC itself, the work assigned to private respondents was directly related to the aquaculture operations of SMC, which formed an integral part of the shrimp processing operations of SMC.   As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer has been jurisprudentially recognized.

Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.

All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and private respondents. Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter and as such are entitled to all the benefits and rights appurtenant to regular employment. They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMC’s other regular employees.

Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to Article 280 of the Labor Code.  Although janitorial and messengerial services are considered directly related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business; hence, the distinction.

The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.

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As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day immediately following their first year of service.

Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 19 of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents.

The petition is denied and the assailed decision dated February 7, 2001 and resolution dated July 11, 2001 of the Court of Appeals is affirmed with modification.

Manila Electric Company vs. Rogelio Benamira, et al.[G.R. No. 145271 July 14, 2005]

Facts:The individual respondents are licensed security guards formerly employed by People’s Security, Inc. and deployed as such at

MERALCO’s head office in Ortigas Avenue, Pasig, Metro Manila.  On Nov. 30, 1990, the security service agreement between PSI and MERALCO was terminated. Immediately thereafter, 56 of PSI’s security guards, including herein eight individual respondents, filed a complaint for unpaid monetary benefits against PSI and MERALCO.

Meanwhile, the security service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect on Dec. 1, 1990. Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCO’s head office.

 On June 29, 1992, the labor arbiter rendered a decision in favor of the former PSI security guards, including the individual respondents. Less than a month later, the individual respondents filed another complaint for unpaid monetary benefits, this time against ASDAI and MERALCO.

On July 25, 1992, the security service agreement between respondent Advance Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous security service agreement with ASDAI.  Except as to the number of security guards, the amount to be paid the agency, and the effectivity of the agreement, the terms and conditions were substantially identical with the security service agreement with ASDAI.

The individual respondents amended their complaint to implead AFSISI as party respondent.   They then again amended their complaint to allege that AFSISI terminated their services on August 6, 1992 without notice and just cause and therefore guilty of illegal dismissal.  The individual respondents alleged that: MERALCO and ASDAI never paid their overtime pay, service incentive leave pay, premium pay for Sundays and Holidays, P50.00 monthly uniform allowance and underpaid their 13 th month pay; on July 24, 1992, when the security service agreement of ASDAI was terminated and AFSISI took over the security functions of the former on July 25, 1992, respondent security guard Benamira was no longer given any work assignment when AFSISI learned that the former has a pending case against PSI, in effect, dismissing him from the service without just cause; and, the rest of the individual respondents were absorbed by AFSISI but were not given any assignments, thereby dismissing them from the service without just cause. ASDAI denied in general terms any liability for the claims of the individual respondents, claiming that there is nothing due them in connection with their services.

On the other hand, MERALCO denied liability on the ground of lack of employer-employee relationship with individual respondents.  It averred that the individual respondents are the employees of the security agencies it contracted for security services; and that it has no existing liability for the individual respondents’ claims since said security agencies have been fully paid for their services per their respective security service agreement.

For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not absorb or hire the individual respondents, the latter were merely hold-over guards from ASDAI; it is not obliged to employ or absorb the security guards of the agency it replaced since there is no provision in its security service agreement with MERALCO or in law requiring it to absorb and hire the guards of ASDAI as it has its own guards duly trained to service its various clients. 

SC Ruling:At the outset, we note that the individual respondents never alleged in their complaint in the Labor Arbiter, in their appeal in the

NLRC and even in their petition for certiorari in the CA that MERALCO was their employer.  They have always advanced the theory that AFSISI is their employer.  A perusal of the records shows it was only in their Memorandum in the CA that this thesis was presented and discussed for the first time.  We cannot ignore the fact that this position of individual respondents runs contrary to their earlier submission in their pleadings filed in the Labor Arbiter, NLRC and even in the petition for certiorari in the CA that AFSISI is their employer and liable for their termination.  As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with his pleadings.

Moreover, it is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. The individual respondents are bound by their submissions that AFSISI is their employer and they should not be permitted to change their theory.  Such a change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules but as a matter of fairness.   A change of theory on appeal is objectionable because it is contrary to the rules of fair play, justice and due process. Thus, the CA should not have considered the new theory offered by the individual respondents in their memorandum.

In this case, the terms and conditions embodied in the security service agreement between MERALCO and ASDAI expressly recognized ASDAI as the employer of individual respondents. 

Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged the security guards; (b) assigned them to MERALCO according to the number agreed upon; (c) provided the uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised them or principally controlled their conduct.  The agreement even explicitly provided that “[n]othing herein contained shall be understood to make the security guards under this Agreement, employees of the COMPANY, it being clearly understood that such security guards shall be considered as they are, employees of the AGENCY alone.”  Clearly, the individual respondents are the employees of ASDAI.

As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose behavior, conduct or appearance is not satisfactory, such merely confirms that the power to discipline lies with the agency.  It is a standard stipulation in security service agreements that the client may request the replacement of the guards to it.   Service-oriented enterprises, such as the business of providing security services, generally adhere to the business adage that “the customer or client is always right” and, thus, must satisfy the interests, conform to the needs, and cater to the reasonable impositions of its clients.

Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an indication of control.  It is simply a security clause designed to prevent the agency from unilaterally removing its security guards from their assigned posts at MERALCO’s premises to the latter’s detriment. 

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The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is likewise not indicative of control as it is not a unilateral right.  The agreement provides that the agency is principally mandated to conduct inspections, without prejudice to MERALCO’s right to conduct its own inspections. 

Needless to stress, for the power of control to be present, the person for whom the services are rendered must reserve the right to direct not only the end to be achieved but also the means for reaching such end. Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. Rules which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the power of control.

The security service agreements in the present case provided that all specific instructions by MERALCO relating to the discharge by the security guards of their duties shall be directed to the agency and not directly to the individual respondents.   The individual respondents failed to show that the rules of MERALCO controlled their performance.

Moreover, ASDAI and AFSISI are not “labor-only” contractors.  There is “labor only” contract when the person acting as contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him.  On the other hand, “job (independent) contracting” is present if the following conditions are met: (a) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business. Given the above distinction and the provisions of the security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were engaged in job contracting.

The individual respondents can not be considered as regular employees of the MERALCO for, although security services are necessary and desirable to the business of MERALCO, it is not directly related to its principal business and may even be considered unnecessary in the conduct of MERALCO’s principal business, which is the distribution of electricity.

Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is a clear indication that the individual respondents acknowledge that ASDAI is their employer. 

We cannot give credence to individual respondents’ insistence that they were absorbed by AFSISI when MERALCO’s security service agreement with ASDAI was terminated.  The individual respondents failed to present any evidence to confirm that AFSISI absorbed them into its workforce.  Thus, respondent Benamira was not retained in his post at MERALCO since July 25, 1992 due to the termination of the security service agreement of MERALCO with ASDAI.  As for the rest of the individual respondents, they retained their post only as “hold-over” guards until the security guards of AFSISI took over their post on August 6, 1992.

In the present case, respondent Benamira has been “off-detail” for seventeen days while the rest of the individual respondents have only been “off- detail” for five days when they amended their complaint on August 11, 1992 to include the charge of illegal dismissal.  The inclusion of the charge of illegal dismissal then was premature.  Nonetheless, bearing in mind that ASDAI simply stopped giving the individual respondents any assignment and their inactivity clearly persisted beyond the six-month period allowed by Article 286 of the Labor Code, the individual respondents were, in effect, constructively dismissed by ASDAI from employment, hence, they should be reinstated.

The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual respondents does not exonerate MERALCO from liability as to the monetary claims of the individual respondents.  When MERALCO contracted for security services with ASDAI as the security agency that hired individual respondents to work as guards for it, MERALCO became an indirect employer of individual respondents pursuant to Article 107 of the Labor Code, which reads: 

ART.  107. Indirect employer - The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes jointly and severally liable for the individual respondents’ wages, under Articles 106 and 109 of the Labor Code, which provide:

ART.  106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the performance of the former[‘s] work, the employees of the contractor and of the latter[‘s] subcontractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. xxxART.  109. Solidary liability - The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code.   For purpose of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect employer of the individual respondents for the purpose of paying their wages in the event of failure of ASDAI to pay them.   This  statutory  scheme  gives  the  workers the  ample protection consonant with labor and social justice provisions of the 1987 Constitution.

However, as held in Mariveles Shipyard Corp. vs. Court of Appeals, the solidary liability of MERALCO with that of ASDAI does not preclude the application of Article 1217 of the Civil Code on the right of reimbursement from his co-debtor by the one who paid, which provides:

ART. 1217.  Payment made by one of the solidary debtors extinguishes the obligation.  If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made.  If the payment is made before the debt is due, no interest for the intervening period may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.

ASDAI may not seek exculpation by claiming that MERALCO’s payments to it were inadequate for the individual respondents’ lawful compensation.  As an employer, ASDAI is charged with knowledge of labor laws and the adequacy of the compensation that it demands for contractual services is its principal concern and not any other’s.

Grandspan Development Corp., vs. Bernardo[GR No. 141464, September 21, 2005]

Facts:

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Respondents, in their complaint, alleged that sometime in 1990, they were employed as truck scale monitors by petitioner with a daily salary of P104.00 each. Eventually, they were assigned at its Truck Scale Section of the Warehouse/Materials Department. They were issued identification cards signed by Bonifacio Selmo, petitioner's personnel manager. On October 28, 1992, petitioner sent them a notice terminating their services effective October 29, 1992 for using profane or offensive language, in violation of Article VI (2) (a) of the company's Rules and Regulations.Petitioner denied the allegations of respondents in their complaint, claiming that they are employees of J. Narag Construction. Sometime in the third quarter of 1992, Canad Japan Co., Ltd. engaged petitioner's services for fabrication works of several round and rectangular steel tanks needed for the HCMG or Sogo project due for completion in September, 1992. As a consequence, petitioner subcontracted the services of J. Narag Construction which, in turn, assigned its 3 helpers (herein respondents) to work for petitioner's project. Sometime in October, 1992, Manuel G. Lee, manager of petitioner's Warehouse Department received a report from supervisor Robert Ong that respondents vandalized the company's log book and chairs. This prompted petitioner to send J. Narag Construction a memorandum terminating the services of respondents for violation of the company's Rules and Regulations.The Labor Arbiter rendered a Decision dismissing respondents' complaint stating that they were project employees whose services were terminated upon completion of the project for which they were hired.

Issue: Whether or not there is an employer-employee relationship between petitioner and respondent or wether the respondents are employees of J. Narag Construction, an independent contractor.Ruling:Article 106 of the Labor Code, as amended, provides in part:

"ART. 106.Contractor or subcontracting. — . . . .xxx xxx xxx

There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. . . . ."

J. Narag Construction is indeed a labor-only contractor. These are the reasons: (1) it is not registered as a building contractor with the SEC; (2) it has no contract with petitioner; and (3) there is no proof of its financial capability and has no list of equipment, tools, machineries and implements used in the business.Clearly, J. Narag Construction could not be respondents' employer.

Acevedo vs. Advanstar Co., [GR No. 157656, November 11, 2005]

Facts:The Advanstar Company Inc. (ACI) was engaged in the distribution and sale of various brands of liquor and alcoholic spirits,

including the Tanduay Brand. Felipe Loi was employed as its manager. To effectively launch its vigorous marketing operations, ACI hired several salesmen, one of whom was Tony Jalapadan. On September 1, 1994, ACI executed an Agreement for the Sale of Merchandise  1 with Jalapadan for a period of one year, renewable for another year under the same terms and conditions.

Under the agreement, the parties agreed, inter alia, that Jalapadan would promote and sell products of ACI, solicit from customers and outlets within his designated territory, collect payments from such customers and account the same to ACI. Jalapadan was provided with a 6-wheeler truck to facilitate the sale and delivery of products to customers and outlets from his base of operations in Ozamis City to Zamboanga del Sur and Zamboanga del Norte. Jalapadan was also authorized to employ and discharge a driver and other assistants as he deemed necessary. It was stipulated, however, that the hired hands would be considered his employees, and that he alone would be liable for their compensation and actual expenses, including meals while on duty. As of July 1997, Jalapadan had employed and fired 14 drivers.

On August 5, 1997, Jalapadan hired Arnulfo Acevedo 2 as the driver of the truck assigned to him by ACI. Acevedo was tasked to sell and deliver stocks to outlets and customers, collect payments, and to maintain the truck in good and clean condition. He reported for work from 6:00 a.m. to 8:00 or 9:00 p.m.3 Aside from Acevedo, Jalapadan also hired a loader (kargador).

Acevedo received a daily wage of P152.00 and was paid on a weekly basis. He also enjoyed sick leave privilege, which benefit was convertible into cash. Sometime in June 1998, he received from Jalapadan a salary differential for the period of December 1997 to June 1998, following a P15.00 increase in his daily wage. He received his wages from Jalapadan through vouchers approved by the latter. 4Sometime in July 1998, Acevedo failed to comply with Jalapadan's instructions. At that time, they were on their way to Plaridel, Misamis Oriental on board the truck. Jalapadan ordered Acevedo to alight from the truck, and threatened to leave him behind to fend for himself.

However, Jalapadan later asked him to return to work 5 and the latter agreed. DCESaIOn October 7, 1998, Acevedo failed to report for work. The next day, Jalapadan inquired why he failed to check and wash the truck.

Jalapadan berated Acevedo and ordered him to get his personal belongings and leave. Acevedo did as he was told. Later, Jalapadan urged Acevedo to go back to work, stating that they were "one big family," but Acevedo refused.  6 He then signed a Letter 7 dated October 10, 1998, informing Jalapadan that he was resigning effective that date.

However, on October 26, 1998, Acevedo filed a complaint against Jalapadan, ACI and its general manager, Felipe Loi, for illegal dismissal and for the recovery of backwages and other monetary benefits.

The Labor Arbiter rendered judgment in favor of the complainant. The NLRC reversed the Labor Arbiter's ruling. It held that the complainant was an employee of respondent Jalapadan, not of respondent ACI, and that he voluntarily resigned. Acevedo then filed a petition for certiorari with the Court of Appeals. CA rendered judgment dismissing the petition for lack of meritIssues:(a) Whether the respondent ACI was the employer of respondent Jalapadan; (b) Whether the petitioner is the employee of respondent ACI; and (c) Whether the petitioner resigned from his employmentRuling:The pertinent provision of the Labor Code on labor-only contracting is paragraph 4 of Article 106, which provides:

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

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Rule VIII-A, Book III, Section 4(f) of the Omnibus Rules Implementing the Labor Code further defines "labor-only" contracting as an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present:

(a)The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility;

(b)The employees recruited, supplied or placed by such contractor or subcontractor, are performing activities which are directly related to the main business of the principal. A person is considered engaging in legitimate job contracting or subcontracting if the following conditions concur:

(a)The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;(b)The contractor or subcontractor has substantial capital or investment; and

(c)The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits. In the present case, the respondents failed to prove that respondent Jalapadan was an independent contractor. Indeed, the substantial evidence on record shows that he was merely a labor-only contractor. EcHIACFirst. The respondents failed to adduce a scintilla of evidence that respondent Jalapadan had any substantial capital or investment, such as tools and equipment, to perform the work contracted for. There is even no evidence that respondent Jalapadan had any assets, or that he maintained an office, staff or a terminal for the truck entrusted to him by respondent ACI.Second. Respondent Jalapadan bound and obliged himself to work exclusively for respondent ACI during the terms of the agreement.Third. Under the agreement, respondent ACI had the right to control not only the end to be attained but also the manner and means to be used in accomplishing that end or purpose. Aside from Jalapadan's duties/obligations as salesman, respondent ACI could require him to perform other duties and obligations. Respondent Jalapadan was, likewise, mandated to obey all rules, regulations, orders, and instructions, whether oral or written, of respondent ACI. He was obliged to work only in the territory assigned to him, which may be altered at any time upon the discretion of ACI. He was also prohibited from overpricing or underpricing the products of respondent ACI, and was required to sell the same according to the prices dictated solely by it. While Jalapadan was entitled to a monthly compensation of P3,590.00 payable on a bi-monthly basis and an unspecified commission based on booking sales fully remitted to respondent ACI, the latter had the absolute right to change, at any time, the amount and/or all the payments of such compensation and commission.Fourth. Respondent Jalapadan was obliged to pay the petitioner's monthly wage of P3,648.00, as well as that of his helper, another P4,000.00 a month, totaling P7,648.00, exclusive of other expenses such as meals, gasoline, and the upkeep of the vehicle. On the other hand, respondent Jalapadan received from respondent ACI only P3,590.00 a month as compensation. He had no other means of income because he was obliged, under the agreement, to devote all his time for respondent ACI.The Court agrees with the rulings of the NLRC and the CA that the petitioner was not dismissed from employment. The Court finds, however, that contrary to the rulings of the NLRC and the CA, the petitioner did not resign from his employment. Reliance on the handwritten letter of resignation dated October 10, 1998 signed and thumbmarked by the petitioner is misplaced. The handwritten letter of resignation signed by the petitioner is inconsistent with the respondents' claim that respondent Jalapadan was the petitioner's employer.The Court declares respondent Tony Jalapadan as a labor-only contractor, and respondent Advanstar Company Inc. as the principal employer of Petitioner Arnulfo C. Acevedo.

Big AA Manufacturer vs. Antonio [GR No. 160854, March 3, 2006]

Facts:Petitioner Big AA Manufacturer is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo. Respondents filed a

complaint for illegal lay-off and illegal deductions. That as regular employees, they worked from 8:00 a.m. to5:00 p.m. at petitioner’s premises using petitioner’s tools and equipment and they received P250 per day. Eutiquio was employed as carpenter-foreman from 1991-99; Jay as carpenter from 1993-99; Felicisimo as carpenter from 1994-99; and Leonardo, Sr. also as carpenter from 1997-99; That they were dismissed without just cause and due process; hence, their prayer for reinstatement and full back wages.

Petitioner Big AA Manufacturer contested that it is a sole proprietorship registered in the name of Enrico Alejo and engaged in manufacturing office furniture, but it denied that respondents were its regular employees. It claimed that Eutiquio Antonio was one of its independent contractors who used the services of the other respondents. It said that its independent contractors were paid by results and were responsible for the salaries of their own workers. Allegedly, there was no employer-employee relationship between petitioner and respondents. But it allowed respondents to use its facilities to meet job orders. It also denied that respondents were laid-off by Big AA Manufacturer, since they were project employees only. It added that since Eutiquio Antonio had refused a job order of office tables, their contractual relationship ended.- Labor Arbiter ruled against petitioners. Both appealed to NLRC. Respondents appealed for not ordering their reinstatement to their former positions. The NLRC modified the Labor Arbiter’s decision. It ordered petitioner to reinstate respondents to their former positions or to pay them separation pay in case reinstatement was no longer feasible, with full back wages in either case. The NLRC ruled that respondents were regular employees, not independent contractors. It further held that petitioner failed to justify its reason for terminating respondents and its failure to comply with the due process requirements. CA affirmed NLRC ruling.Issue:1. WON respondents were regular employees2. WON respondents were illegally dismissedRuling

1. YES- Respondents were employed for more than 1 year and their work as carpenters was necessary or desirable in petitioner’s usual trade or business of manufacturing office furniture. Under Art. 280 of the Labor Code, the applicable test to determine whether an employment should be considered regular or non-regular is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer.- True, certain forms of employment require the performance of usual or desirable functions and exceed 1 year but do not necessarily result to regular employment under Art. 280 of the Labor Code. Some specific exceptions include project or seasonal employment. Yet, in this case, respondents cannot be considered project employees. Petitioner had neither shown that respondents were hired for a specific project the duration of which was determined at the time of their hiring nor identified the specific project or phase thereof for which respondents were hired.Obiter on Requirements for an Independent contractor : a) he carries a distinct and independent business, b) possesses substantial capital or investment in tools, equipment, machinery or work premises, c) he does not work within another employer/company’s premises using the latter’s tools and materials, and d) he is not under the control and supervision of an employer or company2. YES- The consistent rule is that the employer must affirmatively show rationally adequate evidence

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that the dismissal was for a justifiable cause, failing in which would make the termination illegal, as in this case.- Contrary to petitioner’s claim of abandonment as a valid just cause for termination, herein respondents did not abandon their work. Petitioner failed to prove that (1) not only of respondents’ failure to report for work or absence without valid reason, but(2) also of respondents’ clear intention to sever employer-employee relations as manifested by some overt acts.- By filing the complaint for illegal dismissal within two days of their dismissal and by seeking reinstatement in their position paper, respondents manifested their intention against severing their employment relationship with petitioner and abandoning their jobs. It is settled that an employee who forthwith protests his layoff cannot be said to have abandoned his work.

DOLE Philippines, Inc. vs. Medel Esteva, et al.[GR No. 161115 November 30, 2006]

Facts:Petitioner is a corporation engaged principally in the production and processing of pineapple for the export market. Respondents are

members of the Cannery Multi-Purpose Cooperative (CAMPCO).  CAMPCO was organized in accordance with Republic Act No. 6938, otherwise known as the Cooperative Code of the Philippines. Pursuant to the Service Contract, CAMPCO members rendered services to petitioner.  The number of CAMPCO members that report for work and the type of service they performed depended on the needs of petitioner at any given time.  Although the Service Contract specifically stated that it shall only be for a period of six months, i.e., from 1 July to 31 December 1993, the parties had apparently extended or renewed the same for the succeeding years without executing another written contract.   It was under these circumstances that respondents came to work for petitioner. DOLE organized a Task Force that conducted an investigation into the alleged labor-only contracting activities of the cooperatives. The Task Force identified six cooperatives that were engaged in labor-only contracting, one of which was CAMPCO. In this case, respondents alleged that they started working for petitioner at various times in the years 1993 and 1994, by virtue of the Service Contract executed between CAMPCO and petitioner.  All of the respondents had already rendered more than one year of service to petitioner.  While some of the respondents were still working for petitioner, others were put on “stay home status” on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with work thereafter.  Together, respondents filed a Complaint with the NLRC for illegal dismissal, regularization, wage differentials, damages and attorney’s fees. Petitioner denied that respondents were its employees. It explained that it found the need to engage external services to augment its regular workforce, which was affected by peaks in operation, work backlogs, absenteeism, and excessive leaves.  It used to engage the services of individual workers for definite periods specified in their employment contracts and never exceeding one year.  However, such an arrangement became the subject of a labor case, in which petitioner was accused of preventing the regularization of such workers. Issues:

1. Whether or not the court of appeals was correct when it made its own factual findings and disregarded the factual findings of the labor arbiter and the NLRC.

2. Whether or not CAMPCO was a mere labor-only contractor.SC Ruling:

The Court in the exercise of its equity jurisdiction may look into the records of the case and re-examine the questioned findings. As a corollary, this Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary to arrive at a just decision of the case. The same principles are now necessarily adhered to and are applied by the Court of Appeals in its expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see no error on its part when it made anew a factual determination of the matters and on that basis reversed the ruling of the NLRC.

On the second issue, CAMPCO was a mere labor-only contractor. First, although petitioner touts the multi-million pesos assets of CAMPCO, it does well to remember that such were amassed in the years following its establishment.   In 1993, when CAMPCO was established and the Service Contract between petitioner and CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up capital, which could hardly be considered substantial. It only managed to increase its capitalization and assets in the succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE officials as labor-only contracting. Second, CAMPCO did not carry out an independent business from petitioner.  It was precisely established to render services to petitioner to augment its workforce during peak seasons. Petitioner was its only client.  Even as CAMPCO had its own office and office equipment, these were mainly used for administrative purposes; the tools, machineries, and equipment actually used by CAMPCO members when rendering services to the petitioner belonged to the latter. Third, petitioner exercised control over the CAMPCO members, including respondents.  Petitioner attempts to refute control by alleging the presence of a CAMPCO supervisor in the work premises.  Yet, the mere presence within the premises of a supervisor from the cooperative did not necessarily mean that CAMPCO had control over its members.  Section 8(1), Rule VIII, Book III of the implementing rules of the Labor Code, as amended, required for permissible job contracting that the contractor undertakes the contract work on his account, under his own responsibility, according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof.  As alleged by the respondents, and unrebutted by petitioner, CAMPCO members, before working for the petitioner, had to undergo instructions and pass the training provided by petitioner’s personnel.  It was petitioner who determined and prepared the work assignments of the CAMPCO members.  CAMPCO members worked within petitioner’s plantation and processing plants alongside regular employees performing identical jobs, a circumstance recognized as an indicium of a labor-only contractorship. Fourth, CAMPCO was not engaged to perform a specific and special job or service.  In the Service Contract of 1993, CAMPCO agreed to assist petitioner in its daily operations, and perform odd jobs as may be assigned.  CAMPCO complied with this venture by assigning members to petitioner.   Apart from that, no other particular job, work or service was required from CAMPCO, and it is apparent, with such an arrangement, that CAMPCO merely acted as a recruitment agency for petitioner.  Since the undertaking of CAMPCO did not involve the performance of a specific job, but rather the supply of manpower only, CAMPCO clearly conducted itself as a labor-only contractor. Lastly, CAMPCO members, including respondents, performed activities directly related to the principal business of petitioner.   They worked as can processing attendant, feeder of canned pineapple and pineapple processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc., functions which were, not only directly related, but were very vital to petitioner’s business of production and processing of pineapple products for export. The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only contracting, then consequently, an employer-employee relationship is deemed to exist between petitioner and respondents, since CAMPCO shall be considered as a mere agent or intermediary of petitioner.

Since respondents are now recognized as employees of petitioner, this Court is tasked to determine the nature of their employment.   In consideration of all the attendant circumstances in this case, this Court concludes that respondents are regular employees of petitioner. As such, they are entitled to security of tenure.  They could only be removed based on just and authorized causes as provided for in the Labor Code, as amended, and after they are accorded procedural due process. Therefore, petitioner’s acts of placing some of the respondents on “stay home status” and not giving them work assignments for more than six months were already tantamount to constructive and illegal dismissal.

San Miguel Corporation vs. NLRC and Rafael Maliksi[GR No. 147566 December 6, 2006]

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Facts:On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel Corporation-Magnolia Division, (SMC) and

Philippine Software Services and Education Center (PHILSSEC) to compel the said respondents to recognize him as a regular employee. He amended the complaint on 12 November 1990 to include the charge of illegal dismissal because his services were terminated on 31 October 1990.

The complainant’s employment record indicates that he rendered service with Lipercon Services from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division, then from July 1983 to April 1985 with Skillpower, Inc., as accounting clerk assigned to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk. The complainant considered himself as an employee of SMC-Magnolia. Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-only contractors and any one of which had never been his employer. His dismissal, according to him, was in retaliation for his filing of the complaint for regularization in service. His dismissal was illegal there being no just cause for the action. He was not accorded due process neither was his dismissal reported to the Department of Labor and Employment.

PHILSSEC disclaimed liability. As an entity catering (sic) computer systems and program for business enterprises, it has contracted with SMC-Magnolia to computerize the latter s manual accounting reporting systems of its provincial sales. PHILSSEC then conducted a three� phase analysis of SMC Magnolia set up: first the computer needs of the firm was (sic) determined; then, the development of computer systems� or program suitable; and, finally, set up the systems and train the employees to operate the same. In all these phases, PHILSSEC uses its computer system and technology and provided the necessary manpower to compliment the transfer of the technology to SMC-Magnolia. Complainant Maliksi was one of those employed by PHILSSEC whose principal function was the manual control of data needed during the computerization. Like all assigned to the project, the complainant s work was controlled by PHILSSEC supervisors, his salary paid by the� agency and he reported directly to PHILSSEC. The computerization project was completed on 31 October 1990, and so, the complainant was terminated on the said date.

SMC, on the other hand, submitted its position. In the contract SMC entered with PHILSSEC, the latter undertook to set up the computerization of the provincial sales reporting system of Magnolia Division. To carry out the task, PHILSSEC utilized 3 computer programmers and the rest were data encoders.

SMC likewise contends that PHILSSEC exercised exclusive managerial prerogative over the complainant as to hiring, payment of salary, dismissal and most importantly, the control over his work. SMC was interested only in the result of the work specified in the contract but not as to the means and methods of accomplishing the same. Moreover, PHILSSEC has substantial capital of its own. It has an IBM system, 3 computers, 17 IBM or IBM-compatible computers; it has a building where the computer training center and main office are located. What it markets to clients are computer programs and training systems on computer technology and not the usual labor or manpower supply to establishment concerns. Moreover, what PHILSSEC set up employing the complainant, among others, has no relation to the principal business of SMC, which is food and beverage. It was a single relationship between the people utilized by PHILSSEC and SMC.

Issue:Whether respondent Maliksi was under labor-only contracts and subsequently a regular employee of San Miguel Corporation.

SC Ruling:SMC concedes that Maliksi, before his employment with PHILSSEC, worked in SMC from November 1988 to April 1990, but as

employee of Skillpower7 and that he was previously assigned to SMC between 1981 up to February 1985, "for periods spread apart." The Labor Arbiter found, as earlier stated, that Maliksi rendered service with Lipercon from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division; from July 1983 to April 1985 with Skillpower as accounting clerk assigned to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower as acting clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk. In all, it appears that, while under the employ of either Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC for at least three years and seven months.

The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be labor-only contractors, providing as they do manpower services to the public for a fee. The existence of an employer-employee relationship is factual and we give due deference to the factual findings of both the NLRC and the CA that an employer-employee relationship existed between SMC (or its subsidiaries) and Maliksi. Indeed, having served SMC for an aggregate period of more than three (3) years through employment contracts with these two labor contractors, Maliksi should be considered as SMC’s regular employee. The hard fact is that he was hired and re-hired by SMC to perform administrative and clerical work that was necessary to SMC’s business on a daily basis.

We find respondent Maliksi to be similarly situated with those of the complainants in Madriaga. Indeed, Lipercon and Skillpower have figured in not just a few of our decisions, so much so that we are inclined to believe that these two were involved in labor-only contracting with respect to Maliksi. We hold that the finding of the NLRC and the CA as to SMC’s resorting to labor-only contracting is entitled to consideration in its full weight.

With respect to PHILSSEC, there was no need for Maliksi to be employed under the former’s computerization program to be considered a regular employee of SMC at the time. Moreover, SMC itself admits that Maliksi’s work under the computerization program did "not require the operation of a computer system, such as the software program being developed by PHILSSEC." Given this admission, we are simply at a loss to understand why Maliksi should be included in the computerization project as a project employee. Not being a computer expert, Maliksi’s inclusion in the project was uncalled for. To our mind, his placement in the project was for the purpose of circumventing labor laws. The evidence shows that immediately before he entered the PHILSSEC project in October 1989, Maliksi was fresh out of his employment with SMC (through Skillpower) as acting clerk assigned to SMC-Magnolia Finance (from October 1988 to 1989).

Maliksi’s work under the PHILSSEC project was mainly administrative in nature and necessary to the development of SMC’s business. These were: a. posting manually the daily account balances in the workset; b. fitting the daily totals into the monthly totals; c. comparing the manual totals with the computer generated totals; d. locating the differences between the totals; and, e. adjusting and correcting errors.

Simply put, the data gathered by SMC on a daily basis through Maliksi’s work would be submitted for analysis and evaluation, thereby allowing SMC to make the necessary business decisions that would enable it to market its products better, or monitor its sales and collection with efficiency. Without the data gatherer or encoder, no analysis could occur. SMC would then, for the most part, be kept in the dark.

In San Miguel Corporation v. MAERC Integrated Services, Inc., we took note of the practice of hiring employees through labor contractors that catered exclusively to the employment needs of SMC or its divisions or other specific business interests, such that after the specific SMC business or division ceases to do business, the labor contractor likewise ceases its operations.

The contrivances may be many and the schemes ingenious and imaginative. But this Court will not hesitate to put pen to a line and defend the worker’s right to be secure in his (or her) proprietary right to regular employment and his right to a secure employment, viz, one that is free from fear and doubt, that anytime he could be removed, retrenched, his contract not renewed or he might not be re-hired. The ramifications may seem trivial, but we cannot allow the ordinary Filipino worker’s right to tenurial security to be put in jeopardy by recurrent but abhorrent practices that threaten the very lives of those that depend on him.

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Considering, however, the supervening event that SMC’s Magnolia Division has been acquired by another entity, it appears that private respondent’s reinstatement is no longer feasible. Instead, he should be awarded separation pay as an alternative. Likewise, owing to petitioner’s bad faith, it should be held liable to pay damages for causing undue injury and inconvenience to the private respondent in its contractual hiring-firing-rehiring scheme.

The instant petition is denied and the assailed CA decision is affirmed with the modification that if the reinstatement of private respondent is no longer practicable or feasible, then petitioner SMC is ordered to pay him, in addition to the other monetary awards, separation pay for the period from October 31, 1990 when he was dismissed until he shall have been actually paid at the rate of one (1) month salary for every year of his employment, with a fraction of at least six (6) months being considered as one (1) year, or the rate of separation pay awarded by petitioner to its other regular employees as provided by written agreement, policy or practice, whichever is higher or most beneficial to private respondent.

In addition, petitioner is hereby suffered to indemnify private respondent the amount of P50,000.00 as nominal damages for its bad faith in juggling the latter from one labor contractor to another and causing him unnecessary injury and inconvenience, and for denying him his proprietary right to regular employment.

Eparwa Security and Janitorial Services vs. Liceo De Cagayan University[G.R. No. 150402 November 28, 2006]

Facts:Eparwa and LDCU, through their representatives, entered into a Contract for Security Services. Subsequently 11 security guards

whom Eparwa assigned to LDCU filed a complaint before the NLRC-RAB against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for attorney's fees. LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards.

The LA found that the security guards are entitled to wage differentials and premium for holiday and rest day work. The LA held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor Code and likewise orderd Eparwa to reimburse LDCU for whatever amount the latter may be required to pay the security guards. On appeal to the NLRC, Eparwa and LDCU was held solidarily liable for the wage differentials and premium for holiday and rest day work, but the NLRC did not require Eparwa to reimburse LDCU for its payments to the security guards. Upon motion for reconsideration, NLRC declared that although Eparwa and LDCU are solidarily liable to the security guards for the monetary award, LDCU alone is ultimately liable ordering it to reimburse Eparwa for payments made to the contractual employees. Upon appeal to the CA, the appellate court allowed LDCU to claim reimbursement from Eparwa. Eparwa then filed an action for certiorari before the SC.Issue:

Whether or not LDCU alone is ultimately liable to the security guards for the wage differentials and premium for holiday and rest day pay without any right of reimbursement from Eparwa.

SC Ruling:This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the

provisions therein including the statutory minimum wage. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor's employees for purposes of paying the employees their wages should the contractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers' performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution. For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest day work does not matter as long as they are paid. This is the import of Eparwa and LDCU's solidary liability. Creditors, such as the security guards, may collect from anyone of the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are liable for only half of the payment. LDCU's ultimate liability comes into play because of the expiration of the Contract for Security Services. There is no privity of contract between the security guards and LDCU, but LDCU's liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the expiration of the contract, but Eparwa's liability to the security guards remains because of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it may make to the security guards. However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the security guards.

Lapanday Agri Development Corp., vs. CA [324 SCRA 39]

Facts:In June 1986 private respondent and plaintiff entered into a Guard Service Contract. Respondent provided security guards in

defendant’s banana plantation. The contract called for the payment to a guard of P754.28 on a daily 8-hour basis and an additional P565.72 for a four hour overtime while the shift-in-charge was to be paid P811.40 on a daily 8-hour basis andP808.60 for the 4-hour overtime.- Wage Orders increasing the minimum wage in 1983 were complied with by the defendant. On June 16, 1984, Wage Order No. 5 was promulgated directing an increase of P3.00 per day on the minimum wage of workers in the private sector and a P5.00increase on the ECOLA. This was followed on November 1, 1984by Wage Order No. 6 which further increased said minimum wage by P3.00 on the ECOLA. Both Wage Orders contain the following provision:"In the case of contract for construction projects and for security, janitorial and similar services, the increase in the minimum wage and allowances rates of the workers shall be borne by the principal or client of the construction/service contractor and the contracts shall be deemed amended accordingly, subject to the provisions of Sec. 3 (b) of this order" (Sec. 6 and Sec. 9, Wage Orders No. 5 and 6,respectively).- Respondent demanded that its Guard Service Contract with defendant be upgraded in compliance with Wage Order Nos. 5and 6. Plaintiff refused. Their Contract expired on June 6, 1986 without the rate adjustment called for Wage Order Nos. 5 and 6being implemented. By the time of the filing of respondent’s Complaint, the rate adjustment payable by defendant amounted to P462,346.25. Plaintiff opposed the Complaint.- The trial court decided in favor of the respondent. Plaintiff’s MOR was denied, hence this petition.Issues:1.Whether or not RTC has jurisdiction over the case2.whether or not petitioner is liable to the private respondent for the wage adjustments provided under Wage Order Nos. 5 and 6 and for attorney's feesRuling:

1. YES- The enforcement of the written contract does not fall under the jurisdiction of the NLRC because the money claims involved therein did not arise from employer-employee relations between the parties and is intrinsically a civil dispute. Thus, jurisdiction lies with the regular courts. The RTC has jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no

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employer-employee relationship exists between the parties and no issue is involved which maybe resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and damages on account of petitioner’s alleged breach of its obligation under their Guard Service Contract. The action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While the resolution of the issue involves the application of labor laws, reference to the labor code was only for the determination of the solidary liability of the petitioner to the respondent where no employer-employee relation exists. Article 217 of the Labor Code as amended vests upon the labor arbiters exclusive original jurisdiction only over the following:1.Unfair labor practices;2.Termination disputes;3.If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment;4.Claims for actual, moral exemplary and other form of damages arising from employer-employee relations;5.Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and6.Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousandpesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.- In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite; and there is none in thiscase.2. Private respondent admits that there is no employer-employee relationship between it and the petitioner. The private respondent is an independent/job contractor.

The Contract of Security Services expressly stipulated that the security guards are employees of the Agency and not of the petitioner. Articles 106 and 107 of the Labor Code provides the rule governing the payment of wages of employees in the event that the contractor fails to pay such wagesArt. 106.Contractor or sub contractor . — Whenever an employer enters into contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally- It will be seen from the above provisions that the principal (petitioner) and the contractor (respondent) are jointly and severally liable to the employees for their wages.

Rolando E. Escario, et al. vs. NLRC, et al.[333 SCRA 257 June 08, 2000]

Facts:Private respondents California Marketing Co., Inc. is a domestic corporation principally engaged in the manufacturing of food

products and distribution of such products to wholesalers and retailers. Private respondent Donna Louis Advertising and Marketing Associates, Inc. is a duly registered promotional firm.

Petitioners alleged that they were employed by CMC as merchandisers. They alleged that the hiring, control and supervision of workers and the payment of the salaries were all covered by CMC through its agent D.L Admark in order CMC to avoid its liability under the law. Petitioners filed a case against CMC before the labor arbiter for regularization of their employment status.

During the pendency of the case, D.L Admark terminated the services of the petitioners. The complaint was amended to include alleged dismissal. CMC filed a motion to implead as party-defendant D.L Admark, the latter filed a motion to intervene. Both motions were granted. CMC denied being petitioners employer while D.L Admark asserted it is the employer of the petitioners. Issue:

Whether or not D.L Admark is a labor-only contractor or as independent contractor.SC Ruling:

The Supreme Court denied the petition. There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor only contracting, the following elements are present: (a) The person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipments, machineries, wok premise, among other tools; (b) The workers recruited and placed by such person performing activities which are directly related to the principal business of the employer.

In contract, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance / completion of a specific job, work or services within a definite or predetermined period, regardless of whether such job/ services is to be performed or completed within or outside the premises of the principal. In this arrangement, the following conditions must concur: (a) The contractor carries on a distinct and independent business and undertakes the contract work on his account under the responsibility according to his own manual and methods, free from the control and direction of his employer or principal in all matters connected with the performance of his employer work except as to the results thereof; and (b) The contractor has substantial capital / investment which are necessary in the conduct of his business.

The court reiterated that it is not enough to show substantial capitalization on investment. In addition the following factors need be considered: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring, firing and payment of workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; mode, manner and terms of payment.

Based on the foregoing criteria, the court found that D.L Admark is a legitimate independent contractor. Applying the four-fold test, D.L Admark was found to be the employer of the petitioners. The Supreme Court affirmed the NLRC’s ruling.

Aboitiz Haulers, Inc. vs. Monaorai Dimapatoi, et al.[G. R. No. 148619 September 19, 2006]

Facts:Petitioner Aboitiz Haulers, Inc. is a domestic corporation principally engaged in the nationwide and overseas forwarding and

distribution of cargoes. Private respondents Monaorai Dimapatoi, Cecilia Agawin, Raul Mamate, Emmanuel Guerrero and Gemeniano Bigaw worked as checkers in the Mega Warehouse, which is owned by the petitioner, located at the Tabacalera Compound, United Nations Avenue, Manila.

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The parties rendered conflicting recital of facts. Petitioner claims that respondents are not its employees, rather they are the employees of Grigio Security Agency and General Services (Grigio), a manpower agency that supplies security guards, checkers and stuffers.   It allegedly entered into a Written Contract of Service with Grigio on 1 March 1994.  By virtue of the aforementioned Written Contract of Service, Grigio supplied petitioner with security guards, checkers and stuffers for petitioner’s Mega Warehouse.   The respondents were among the checkers that were assigned to the petitioner’s warehouse. Petitioner emphasizes that Grigio retained control over the respondents by providing their own supervisors to oversee Grigio’s personnel, as well as time cards to monitor the attendance of its personnel. Petitioner also alleges that on 9 May 1996, the respondents left the warehouse and did not report to work thereafter.   As a result of the respondents’ sudden abandonment of their work, there was no orderly and proper turnover of papers and other company property in connection with the termination of the Written Contract for Services. Respondents, on the other hand, claim that most of them worked as checkers in petitioner’s warehouse even before 1 March 1994.

Respondents maintain that during their employment with the petitioner, they were not paid their regular holiday pay, night shift differential, 5-day service incentive leave, and overtime premium.  They also averred that illegal deductions were being made on their wages, particularly the contributions for a Mutual Assistance Fund, a Cash Bond, and claims for damaged and misrouted cargoes incurred by petitioner. Respondents allege that on 15 May 1996, petitioner dismissed them on the pretext that the Written Contract of Service between Grigio and the petitioner had been terminated.  To controvert the allegations of the petitioner that respondents did not report for work starting 9 May 1996, the respondents presented a copy of the pertinent pages of the logbook which served as their daily time record.   Respondents also presented a Certification issued by petitioner’s Warehouse Supervisor in favor of respondent Monaorai Dimapatoi affirming that she worked with the Petitioner as a Warehouse Checker and Document Clerk until 15 May 1996.

On 17 May 1996, respondent Raul Mamate filed a complaint before the Department of Labor and Employment (DOLE) for nonpayment of wages and other benefits, as well as illegal deductions.  The other respondents filed their own complaints. Since the claims of the respondents exceeded Five Thousand Pesos (P5,000.00), the case was referred to the NLRC.  Thereafter, respondents filed their complaint for illegal dismissal and other money claims before the Arbitration Branch of the NLRC.

Issue:Whether or not the petitioner and its contractor engaged in a ‘labor only contracting’ arrangement.

SC Ruling:

Petitioner and its contractor Grigio committed a “labor-only” contracting arrangement. The allegation of the petitioner that Grigio is an independent job contractor, and, therefore, this case is one of permissible job contracting, is without basis.   In this case, the respondents’ work, as warehouse checkers,  is directly related to the principal business of the petitioner.   Petitioner also exercises the right to control and determines not only the end to be achieved, but also the manner and means to be used in reaching that end.   Lastly, petitioner failed to sufficiently prove that Grigio had “substantial capital or investment.” 

The respondents, as checkers, were employed to check and inspect these cargoes, a task which is clearly necessary for the petitioner’s business of forwarding and distributing of cargoes.  The petitioner did not dispute the fact that the respondents were hired as checkers as early as 1992.  The fact that they were employed before the Written Contract of Services took effect on 24 February 1994, and continued with their jobs until 1996, after the said contract had already expired on 24 February 1995 indicates that the respondents’ work was indeed necessary for the petitioner’s business. In addition, Grigio did not undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal. 

The work activities, work shifts, and schedules of the respondents, including the time allowed for “recess” were set under the Written Contract of Services. This clearly indicates that these matters, which consist of the means and methods by which the work is to be accomplished, were not within the absolute control of Grigio.  By stipulating these matters in a contract, Grigio is constrained to follow these provisions and would no longer be able to exercise the freedom to alter these work shifts and schedules at its own convenience.   Such being the case, Grigio cannot be considered as an independent job contractor.

Petitioner’s allegation that Grigio retained control over the respondents by providing supervisors to monitor the performance of the respondents cannot be given much weight.  Instead of exercising their own discretion or referring the matter to the officers of Grigio, Grigio’s supervisors were obligated to refer to petitioner’s supervisors any discrepancy in the performance of the respondents with their specified duties.

Government Service Insurance System (GSIS) vs. NLRC, et al.[GR No. 157647 October 15, 2007]

Facts: LSWA entered into a Security Service Contract to provide security guards to the properties of the GSIS at the contract rate of

P3,000.00 per guard per month. During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the contract rate in view of Wage Order No. 1 and Wage Order No. 2, issued by the RTWPB. Acting on the request, the GSIS, approved the upward adjustments of the contract price from P3,000.00 to P3,716.07 per guard, per month effective November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991.

LSWA assigned security guards. (hereafter complainants) to guard one of GSIS's properties In 1993, GSIS terminated the Security Service Contract with LSWA. In 1994, complainants filed complaints against LSWA for underpayment of wages and non-payment of labor standard benefits from March 1991 to March 1993. LSWA filed a Third-Party Complaint against GSIS for underpayment of complainants' wages.

GSIS avers that it cannot twice be held liable for complainants' salary differentials since it fully paid complainants' salaries by incorporating in the Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2; otherwise, it would be unjust enrichment on the part of complainants and/or LSWA at its expense. It submits that Articles 106 and 107 of the Labor Code were not contemplated by its framers to cover principals or clients of service contractors who had already paid for the wages of the contractor or subcontractor.

SC Ruling :The petition is bereft of merit. In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants' salaries by

incorporating in the Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2.

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The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractor's employees. This liability facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the service contract between itself and the contractor (Rosewood Processing vs. NLRC).

Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed upon the latter because it would be paying twice for complainants' services. Such fears are unfounded. Under Article 1217 of the Civil Code, if the GSIS should pay the money claims of complainants, it has the right to recover from LSWA whatever amount it has paid in accordance with the terms of the service contract between the LSWA and the GSIS. Joint and solidary liability is simply meant to assure aggrieved workers of immediate and sufficient payment of what is due them. This is in line with the policy of the State to protect and alleviate the plight of the working class.

Republic of the Philippines/SSC/SSS vs. Asiapro Cooperative[G.R. No. 172101 November 23, 2007]

Facts: Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories, (1) regular member, who is entitled to all the rights and privileges of membership ; and (2) associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-laws. Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into several Service Contracts with Stanfilco – a division of DOLE Philippines, Inc. and a company based in Bukidnon.

The owners-members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus which Asiapro earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of Asiapro assigned to Stanfilco requested the services of the latter to register them with SSS as self-employed and to remit their contributions as such.

On September 26, 2002, petitioner SSS sent a letter to respondent cooperative informing the latter that based on the Service Contracts it executed with Stanfilco, Asiapro is actually manpower contractor supplying employees to Stanfilco and so, it is an employer of its owners-members working with Stanfilco. Thus, Asiapro should register itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions. Despite letters received, respondent cooperative continuously ignored the demand of petitioner SSS.

Accordingly, SSS filed a petition on June 12, 2003 before SSC against Asiapro and Stanfilco praying that either of them be directed to register as an employer and to report Asiapro’s owners-members as covered employees under the compulsory coverage of SSS and to remit the necessary contributions. Respondent cooperative filed its answer with Motion to Dismiss alleging that no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative.

Issues: 1. Whether or not there exists an employer-employee relationship between Asiapro Cooperative and its owners-members.2. Whether or not petitioner has jurisdiction over the petition-complaint filed before it by SSS against the respondent cooperative.

SC Ruling:1. In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and

engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration. The most important element is the employer’s control. All the aforesaid elements are present in this case.

The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be.

A cooperative acquires juridical personality upon its registration with the Cooperative Development Authority. It has its Board of Directors, which directs and supervises its business; meaning its Board of Directors is the one in charge in the conduct and management of its affairs. With that, a cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and the employer-employee relationship can exist between them.

2. Petitioner SSC’s jurisdiction is clearly stated in Section 5 of R.A. No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.Sec. 5 of R.A. 8282 provides:“Sec. 5 Settlement of Disputes – (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, xxx” (Emphasis Supplied)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:“Section 1. Jurisdiction – Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken action thereon in writing.” (Emphasis supplied)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is important to note that the mandatory coverage under the SSS Law is premised on the existence of an employer-employee relationship. Consequently, the respondent cooperative being the employer of its owners-members must register as employer and report its owners-members as covered members of the SSS and remit the necessary premium contributions in accordance with the Social Security Law of 1997.

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Accordingly, based on the allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction.

Randy Almeda, et al. vs. Asahi Glass Philippines, Inc.[G.R. No. 177785 September 3, 2008]

Facts:Asahi Glass Philippines, Inc. is a domestic corporation engaged in the business of glass manufacturing. Asahi entered into a service contract on March 5, 2002 with San Sebastian Allied Services, Inc. (SSASI) whereby the latter undertook to provide the former with Randy Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass cutters, and petitioner Reynaldo Calicagan as Quality Controller, all assigned to work for respondent Asahi. Petitioners worked for respondent for periods ranging from three to 11 years. On Dec. 1, 2002, respondent terminated its service contract with SSASI, which in turn, terminated the employment of petitioners on the same date.

Believing that SSASI was a labor-only contractor, and having continuously worked as glass cutters and quality controllers for the respondent – functions which are directly related to its main line of business as glass manufacturers – for three to 11 years, petitioners asserted that they should be considered regular employees of the respondent; and that their dismissal from employment without the benefit of due process of law was unlawful.

Respondent, on the other hand, refuted petitioners’ allegations that they were its regular employees. Instead, respondent claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for respondent to perform intermittent services. Respondent denied that petitioners were performing functions that were directly related to respondent’s main business since they were simply tasked to do mirror-cutting, an activity occasionally performed upon a customer’s order. Respondent likewise denied exercising control over petitioners and asserted that such was wielded by SSASI.

Issues:1. Whether or not petitioners were employees of respondent.2. If they were, whether or not they were illegally dismissed.

SC Ruling:1. The court would only be able to deem petitioners as employees of respondent if it is established that SSASI was a labor-only

contractor, and not a legitimate job contractor or subcontractor.

An important element of legitimate job contracting is that the contractor has substantial capital or investment, which respondent failed to prove. There is a dearth of evidence to prove that SSASI possessed substantial capital or investment when respondent began contractual relations with it more than a decade before 2003. The court did not find a single financial statement or record to attest to the economic status and financial capacity of SSASI to venture into and sustain its own business independent from petitioner.

Furthermore, the Court is unconvinced by respondent’s argument that petitioners were performing jobs that were not directly related to respondent’s main line of business. Respondent is engaged in glass manufacturing. One of the petitioners serve as a quality controller, while the rest were glass cutters. The indispensability of petitioners’ services was fortified by the length and continuity of their performance, lasting for periods ranging from three to 11 years.

More importantly, the Court finds that the crucial element of control over petitioners rested in respondent. Petitioners followed the work schedule prepared by respondent. They were required to observe all rules and regulations of the respondent pertaining to the quality of job performance, regularity of job output, and the manner and method of accomplishing the jobs.

Despite respondent’s disavowal of the existence of an employer-employee relationship between it and petitioners, the totality of the facts and the surrounding circumstances of the case convey otherwise. SSASI is a labor-only contractor; hence it is considered as the agent of respondent. Respondent is deemed by law as the employer of petitioners.

2. The court has already declared that petitioners’ employment as quality controllers and glass cutters are directly related to the usual business or trade of respondent as a glass manufacturer. Petitioners have worked for respondent for not less than three years and as much as 11 years, their continued employment clearly demonstrates its continuing necessity and indispensability to the business of respondent, raising their employment to regular status. Thus, having gained regular status, petitioners were entitled to security of tenure and could only be dismissed on just or authorized causes and after they had been accorded due process.

The sole reason given for the dismissal of petitioners by SSASI was the termination of its service contract with respondent. But since SSASI was a labor-only contractor, and petitioners were to be deemed the employees of respondent, then the said reason would not constitute a just or authorized cause for petitioners’ dismissal.

Hence, petitioners have been unjustly dismissed from work, and are entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary equivalents computed from the time compensation was withheld up to the time of actual reinstatement.

Rolando Sasan, et al. vs. National Labor Relations Commission 4 TH   Division, et al. [G.R. No. 176240 October 17, 2008]

FACTS:Respondent Equitable-PCI Bank (E-PCIBank),  a banking entity duly organized and existing under and by virtue of Philippine laws,

entered into a Contract for Services with HI, a domestic corporation primarily engaged in the business of providing janitorial and messengerial services.  Pursuant to their contract, HI shall hire and assign workers to E-PCIBank to perform janitorial/messengerial and maintenance services.  The contract was impliedly renewed year after year.  Petitioners Rolando Sasan, Sr., Leonilo Dayday, Modesto Aguirre, Alejandro Ardimer, Eleuterio Sacil, Wilfredo Juegos, Petronilo Carcedo, and Cesar Peciencia were among those employed and assigned to E-PCIBank at its branch along Gorordo Avenue, Lahug, Cebu City, as well as to its other branches in the Visayas.

Petitioners filed with the Arbitration Branch of the NLRC in Cebu City separate complaintsagainst E-PCIBank and HI for illegal dismissal, with claims for separation pay, service incentive leave pay, allowances, damages, attorney’s fees and costs.   Their complaints were docketed as NLRC RAB-VII Case No. 07-1381-2001 and raffled to Labor Arbiter Jose G. Gutierrez (Labor Arbiter Gutierrez) for their proper disposition.  Subsequently, on 22 August 2001, the petitioners amended their complaints to include a claim for 13th month-pay.

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Petitioners claimed that they had become regular employees of E-PCIBank with respect to the activities for which they were employed, having continuously rendered janitorial and messengerial services to the bank for more than one year; that E-PCIBank had direct control and supervision over the means and methods by which they were to perform their jobs; and that their dismissal by HI was null and void because the latter had no power to do so since they had become regular employees of E-PCIBank.

 Labor Arbiter’s decision: HI was not a legitimate job contractor on the ground that it did not possess the required substantial capital or investment to actually perform the job, work, or service under its own account and responsibility as required under the Labor Code.   HI is therefore a labor-only contractor and the real employer of petitioners is E-PCIBank which is held liable to petitioners.  

Respondents E-PCIBank and HI appealed the same to the NLRC, 4 thDivision, stationed in Cebu City.  In support of its allegation that it was a legitimate job contractor, HI submitted before the NLRC several documents which it did not present before Labor Arbiter Gutierrez.

NLRC’s decision: NLRC took into consideration the documentary evidence presented by HI for the first time on appeal and, on the basis thereof, declared HI as a highly capitalized venture with sufficient capitalization, which cannot be considered engaged in “labor-only contracting.”

CA decision: We affirmed the findings of the NLRC that HI was a legitimate job contractor and that it did not illegally dismiss petitioners: As to the question of whether or not, as a legitimate independent job contractor, respondent HI illegally dismissed the petitioners.   We rule in the negative.

  It is undisputed that the contract between respondent HI and its client E-PCIBank expired on  July 15, 2000.  The record shows that after said expiration, respondent HI offered the petitioners new work assignments to various establishments which are HI’s clients.   The petitioners, therefore, were not even placed on “floating status.”  They simply refused, without justifiable reason, to assume their new work assignments which refusal was tantamount to abandonment.  There being no illegal dismissal, petitioners are not entitled to backwages or separation pay.

RULING:

EVIDENCE PRESENTED BY HI FOR THE FIRST TIME ON APPEALTechnical rules of evidence are not binding in labor cases.  Labor officials should use every reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process.The submission of additional evidence before the NLRC is not prohibited by its New Rules of Procedure. After all, rules of evidence prevailing in courts of law or equity are not controlling in labor cases.  The NLRC and labor arbiters are directed to use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law and procedure all in the interest of substantial justice.  In keeping with this directive, it has been held that the NLRC may consider evidence, such as documents and affidavits, submitted by the parties for the first time on appeal.  The submission of additional evidence on appeal does not prejudice the other party for the latter could submit counter-evidence.

WHETHER HI IS A LABOR-ONLY CONTACTOR AND E-PCIBANK SHOULD BE DEEMED PETITIONERS’ PRINCIPAL EMPLOYER; AND WHETHER PETITIONERS WERE ILLEGALLY DISMISSED FROM THEIR EMPLOYMENT

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

             (a)  The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;           (b)  The contractor or subcontractor has substantial capital or investment; and            (c)  The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.  

 In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present:

 (a)  The contractor or subcontractor does not have substantial capital or investment to actually perform the job,

work or service under its own account and responsibility; and(b)  The employees recruited, supplied or placed by such contractor or subcontractor are performing activities

which are directly related to the main business of the principal.  

In distinguishing between permissible job contracting and prohibited labor-only contracting, we elucidated in Vinoya v. National Labor Relations Commission, that it is not enough to show substantial capitalization or investment in the form of tools, equipment,  etc.  Other facts that may be considered include the following:  whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode and manner or terms of payment. Simply put, the totality of the facts and the surrounding circumstances of the case are to be considered.   Each case must be determined by its own facts and all the features of the relationship are to be considered.

HI has been issued by the Department of Labor and Employment (DOLE) Certificate of Registration. Having been issued by a public officer, this certification carries with it the presumption that it was issued in the regular performance of official duty. In the absence of proof, petitioner’s bare assertion cannot prevail over this presumption. Moreover, the DOLE being the agency primarily responsible for regulating the business of independent job contractors, we can presume in the absence of evidence to the contrary that it thoroughly evaluated the requirements submitted by HI as a precondition to the issuance of the Cerificate of Registration.  

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“Substantial capital or investment” refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipments, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. An independent contractor must have either substantial capital or investment in the form of tools, equipment, machineries, work premises, among others. The law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. It is enough that it has substantial capital. In the case of HI, it has proven both.

  We have  expostulated that once it is established that an entity such as in this case, HI has substantial capital, it was no longer

necessary to adduce further evidence to prove that it does not fall within the purview of “labor-only” contracting. There is even no need for HI to refute the contention of petitioners that some of the activities they performed such as those of messengerial services are directly related to the principal business of E- PCIBank.

 In any event, we have earlier declared that while these services rendered by the petitioners as janitors, messengers and drivers

are  considered directly related to the principal business of a bank, in this case E-PCIBank, nevertheless, they are not necessary in the conduct of its (E-PCIBANK’s) principal business.

We further rule that petitioners were not illegally dismissed by HI.  Upon the termination of the Contract of Service between HI and E-PCIBank, petitioners cannot insist to continue to work for the latter.  Their pull-out from E-PCIBank did not constitute illegal dismissal since, first, petitioners were not employees of E-PCIBank; and second, they were pulled out from said assignment due to the non-renewal of the Contract of Service between HI and E-PCIBank.  At the time they filed their complaints with the Labor Arbiter, petitioners were not even dismissed by HI; they were only “off-detail” pending their re-assignment by HI to another client.  And when they were actually given new assignments by HI with other clients, petitioners even refused the same.  As the NLRC pronounced, petitioners’ complaint for illegal dismissal is apparently premature.

Petition denied.

Purefoods Corporation (now SAN MIGUEL PUREFOODS COMPANY, INC.) vs. NLRC, et al.[G.R. No. 172241 November 20, 2008]

FACTS:

On 8 June 1992, Lolita Neri (Neri) originally filed a claim for nonpayment of additional wage increase, regularization, nonpayment of service incentive leave, underpayment of 13th month pay, and nonpayment of premium pay for holiday and holiday pay against Purefoods Corporation (Purefoods).  By 4 July 1992, however, Neri was dismissed from her work as a Deli-Attendant. Subsequently, or on  13 July 1992, eleven (11) other complainants joined forces with Neri and together they filed an amended complaint, with Neri charging Purefoods with illegal dismissal. All the other complainants, save for Neri, were still working for Purefoods at the time of the filing of the amended complaint.   On 31 August 1993, Labor Arbiter Arthur L. Amansec declared Neri and the complainants as Purefoods’ regular employees; and Neri as having been illegally dismissed and entitled to reinstatement with payment of backwages. Purefoods filed a partial appeal, praying that the claims of complainants be dismissed for lack of merit, or in the alternative, the case be remanded for formal hearing on the merits and to implead D.L. Admark as a party-respondent. The NLRC granted the appeal and remanded the case for further hearings on the factual issues.

LABOR ARBITER’s decision: The case was remanded to Labor Arbiter Felipe P. Pati, who, after finding that Neri is not an employee of petitioner, but rather of D.L. Admark, an independent labor contractor, dismissed the complaint on  14 December 1998. On 15 March 1999, a memorandum on appeal was nominally filed by all the complainants; however, it was only Neri who verified the same.

NLRC’s decision: The pieces of evidence on record established the employer-employee relationship between Purefoods and Neri and the other complainants. It thus ordered Neri’s reinstatement and the payment of backwages or of separation pay if reinstatement is not possible.

CA’s decision: Relying on the case of Escario v. NLRC, held that D.L. Admark is a legitimate independent contractor.  However, it ruled that complainants are regular employees of Purefoods. Citing Art. 280 of the Labor Code, the appellate court  found that complainants were engaged to perform activities  which are usually necessary or desirable in the usual business or trade of Purefoods, and that they were under the control and supervision of Purefoods’ supervisors, and not of  D.L. Admark’s.  It noted that in  the Promotions Agreements between D.L. Admark and Purefoods, there was no mention of the list of D.L. Admark employees   who will handle particular promotions for petitioner, and that complainants’ periods of employment are not fully covered by the  Promotions  Agreements. ISSUE:

Whether there is an employer-employee relationship between PUREFOODS and the complainants.

SC RULING:

Deeply embedded in our jurisprudence is the rule that the findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and, at times, even finality.  There are, however, exceptions, among which is when there is a conflict between the factual findings of the NLRC and the Labor Arbiter. Accordingly, this Court must of necessity review the records to determine which findings should be preferred as more conformable to the evidentiary facts.

The Court agrees with Purefoods’ argument that Art. 280 of the Labor Code finds no application in a trilateral relationship involving a principal, an independent job contractor, and the latter’s employees.  Indeed, the Court has ruled that said provision is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees,  i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute. It  is therefore erroneous on the part of the Court of Appeals to rely on Art. 280 in determining whether an employer-employee relationship exists between respondent Neri and Purefoods.      

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.    In this arrangement, the following conditions must be met:  (a) the contractor carries on a distinct and independent business and undertakes the contract work on his

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account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of  his  work  except as to the results thereof; (b) the contractor has  substantial  capital  or  investment; and (c)  the agreement between the principal and contractor or subcontractor assures the contractual employees’ entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits.

Moreover, applying the four-fold test used in determining employer-employee relationship, the Court found that: the employees therein were selected and hired by D.L. Admark; D.L. Admark paid their salaries, as evidenced by the payroll prepared by D.L. Admark and sample contribution forms; D.L. Admark had the power of dismissal as it admitted that it was the one who terminated the employment of the employees; and finally, it was D.L. Admark who exercised control and supervision over the employees.

The agreements confirm that D.L. Admark is an independent contractor which Purefoods had engaged to supply general promotion services, and not mere manpower services, to it. The provisions expressly permit D.L. Admark  to handle and implement Purefoods’ project, and categorically state that there shall be no employer-employee relationship between D.L. Admark’s employees and Purefoods.  While it may be true that complainants were required to submit regular reports and were introduced as Purefoods merchandisers, these are not enough to establish Purefoods’ control over them. Even if the report requirements are somehow considered as control measures, they were imposed only to ensure the effectiveness of the promotion services rendered by D.L. Admark. It would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. Indeed, it would be foolhardy for any company to completely give the reins and totally ignore the operations it has contracted out.         

Significantly, the pieces of evidence submitted by Neri do not support her claim of having been a regular employee of Purefoods.   We note that two “Statement of Earnings and Deductions” were issued for the same period, December 1989, and in one “Statement,” someone deliberately erased the notation “January 1997,”  thereby casting doubt on the authenticity of the said documents. Even the identification cards presented by Neri are neither binding on Purefoods nor even indicative of her claimed employee status of Purefoods, issued as they were by the supermarkets concerned and not by Purefoods itself.  Moreover, the check voucher issued by Purefoods marked “IN PAYMENT OF DL ADMARK DELI ATTENDANTS 12.00 PESOS ADJUSTMENT JAN 30, 1991 TO JUNE 22, 1992,” signed and received by Neri, is proof that Purefoods never considered Neri as its own employee, but rather as  one of D.L. Admark’s deli attendants.

We hold that Neri is not an employee of Purefoods, but that of  D.L. Admark. In the absence of employer-employee relations between Neri and Purefoods, the complaint for illegal dismissal and other monetary claims must fail.

Petition granted.

Maranaw Hotels and Resort Corp. vs. Court of Appeals, et al.[G.R. No. 149660 January 20, 2009]

FACTS:

The present proceedings emanate from a complaint for regularization, subsequently converted into one for illegal dismissal, filed before Labor Arbiter Madjayran H. Ajan by private respondent Sheryl Oabel.

It appears that private respondent Oabel was initially hired by petitioner as an extra beverage attendant on April 24, 1995. This lasted until February 7, 1997. Respondent worked in Century Park Hotel, an establishment owned by the petitioner.  On September 16, 1996, petitioner contracted with Manila Resource Development Corporation. Subsequently, private respondent Oabel was transferred to MANRED, with the latter deporting itself as her employer.  MANRED has intervened at all stages of these proceedings and has consistently claimed to be the employer of private respondent Oabel.

Private respondent filed before the Labor Arbiter a petition for regularization of employment against the petitioner. On August 1, 1998, however, private respondent Oabel was dismissed from employment. Respondent converted her petition for regularization into a complaint for illegal dismissal.

LABOR ARBITER’s decision: dismissing the complaint against the petitioner.NLRC’s decision: It reversed the ruling of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor, and (2) private respondent was illegally dismissed. Of the first holding, the NLRC observed that under the very terms of the service contract, MANRED shall provide the petitioner not specific jobs or services but personnel and that MANRED had insufficient capitalization and was not sufficiently equipped to provide specific jobs. The NLRC likewise observed that the activities performed by the private respondent were directly related to and usually necessary or desirable in the business of the petitioner. With respect to the termination of private respondent’s employment, the NLRC held that it was not effected for a valid or just cause and was therefore illegal.CA’s decision: The appellate court dismissed the petition on account of the failure of the petitioner to append the board resolution authorizing the counsel for petitioner to file the petition before the Court of Appeals.

ISSUES:1. Whether there is a need of certification of non forum shopping which must be signed by duly authorized officers of a corporation.2. Whether there is employer-employee relationship between petitioner and private respondent, Oabel.

SC RULING:On the first issueWell-settled is the rule that the certificate of non-forum shopping is a mandatory requirement. Substantial compliance applies only

with respect to the contents of the certificate but not as to its presence in the pleading wherein it is required.            Petitioner’s contention that the filing of a motion for reconsideration with an appended certificate of non forum-shopping suffices to cure the defect in the pleading is absolutely specious. It negates the very purpose for which the certification against forum shopping is required: to inform the Court of the pendency of any other case which may present similar issues and involve similar parties as the one before it. The requirement applies to both natural and juridical persons.             Petitioner relies upon this Court’s ruling in Digital Microwave Corp. v. Court of Appeals to show that its Personnel Director has been duly authorized to sign pleadings for and in behalf of the petitioner. Petitioner, however, has taken the ruling in Digital Microwave out of context. The portion of the ruling in Digital Microwave upon which petitioner relies was in response to the issue of impossibility of compliance by juridical persons with the requirements of Circular 28-91. The Court’s identification of duly authorized officers or directors as the proper

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signatories of a certificate of non forum-shopping was in response to that issue.  The ruling does not, however, ipso facto clothe a corporate officer or director with authority to execute a certificate of non-forum shopping by virtue of the former’s position alone.            Any doubt on the matter has been resolved by the Court’s ruling in BPI Leasing Corp. v. Court of Appeals where this Court emphasized that the lawyer acting for the corporation must be specifically authorized to sign pleadings for the corporation. Specific authorization, the Court held, could only come in the form of a board resolution issued by the Board of Directors that specifically authorizes the counsel to institute the petition and execute the certification, to make his actions binding on his principal, i.e., the corporation.

 This Court has not wavered in stressing the need for strict adherence to procedural requirements. The rules of procedure exist to ensure the orderly administration of justice. They are not to be trifled with lightly.

On the second issuePetitioner posits that it has entered into a service agreement with intervenor MANRED. The latter, in turn, maintains that private

respondent Oabel is its employee and subsequently holds itself out as the employer and offers the reinstatement of private respondent.  Notably, private respondent’s purported employment with MANRED commenced only in 1996, way after she was hired by the petitioner as extra beverage attendant on April 24, 1995. There is thus much credence in the private respondent’s claim that the service agreement executed between the petitioner and MANRED is a mere ploy to circumvent the law on employment, in particular that which pertains on regularization.

 In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease with the end of each event or function and that there is an ever present need for individuals to perform certain tasks necessary in the petitioner’s business. Thus, although the tasks themselves may vary, the need for sufficient manpower to carry them out does not. In any event, as borne out by the findings of the NLRC, the petitioner determines the nature of the tasks to be performed by the private respondent, in the process exercising control.   This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a labor-only contractor. Concordantly, the real employer of private respondent Oabel is the petitioner.  It appears further that private respondent has already rendered more than one year of service to the petitioner, for the period 1995-1998, for which she must already be considered a regular employee, pursuant to Article 280 of the Labor Code:

Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

Petition denied.

Coca-Cola Bottlers Phils., Inc. vs. Alan M. Agito, et al.[GR No. 179546 February 13, 2009]

FACTS:

Coca-Cola Bottlers Phils. Inc. (COKE), the petitioner herein is a domestic corporation engaged in manufacturing, bottling and distributing soft drink beverages and other allied products. Respondents were salesmen assigned at Coke Lagro Sales Office for years but were not regularized. Coke averred that respondents were employees of Interserve who were tasked to perform contracted services in accordance with the provisions of the Contract of Services executed between Coke and Interserve on 23 March 2002. Said Contract constituted legitimate job contracting, given that the latter was a bona fide independent contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business.

To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial Statements, of Interserve for 2001; and (4) the Certificate of Registration of Interserve as an independent job contractor, issued by the Department of Labor and Employment (DOLE).

As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages, and supervised their work, as proven by: (1) respondents’ Personal Data Files in the records of Interserve; (2) respondents’ Contract of Temporary Employment with Interserve; and (3) the payroll records of Interserve.

ISSUES:

1. Whether or not Inteserve is a legitimate job contractor;2. Whether or not an employer-employee relationship exists between petitioner Coca-Cola Bottlers Phils. Inc. and respondents.

SC RULING:

Supreme Court DENIED the petition.

There is "labor-only" contracting where the person supplying workers to an employee does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.The afore-quoted provision recognizes two possible relations among the parties: (1) the permitted legitimate job contract, or (2) the prohibited labor-only contracting.A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the former's work, is permitted by law. Thus, the employer-employee relationship between the job contractor and his employees is maintained. In legitimate job contracting, the

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law creates an employer-employee relationship between the employer and the contractor's employees only for a limited purpose, i.e., to ensure that the employees are paid their wages. The employer becomes jointly and severally liable with the job contractor only for the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the employer is not responsible for any claim made by the contractor's employees. 30 TIHDAa

On the other hand, labor-only contracting is an arrangement wherein the contractor merely acts as an agent in recruiting and supplying the principal employer with workers for the purpose of circumventing labor law provisions setting down the rights of employees. It is not condoned by law. A finding by the appropriate authorities that a contractor is a "labor-only" contractor establishes an employer-employee relationship between the principal employer and the contractor's employees and the former becomes solidarily liable for all the rightful claims of the employees.

Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the guidelines in determining whether labor-only contracting exists:Section 5. Prohibition against labor-only contracting. — Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work or service for a principal, and any of the following elements are [is] present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; orii) The contractor does not exercise the right to control the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code, as amended. "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or service contracted out.

The "right to control" shall refer to the right reversed * to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis supplied.)

In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a “labor-only” contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended. It is also apparent that Interserve is a labor-only contractor under Section 5(ii) of the Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the performance of the work of respondents.

The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as the CONTRACTOR) and petitioner (as the CLIENT). The Contract of Services between Interserve and petitioner did not identify the work needed to be performed and the final result required to be accomplished. Instead, the Contract specified the type of workers Interserve must provide petitioner (“Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD”) and their qualifications (technical/vocational course graduates, physically fit, of good moral character, and have not been convicted of any crime). The Contract also states that, “to carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary personnel,” thus, acknowledging that Interserve did not yet have in its employ the personnel needed by petitioner and would still pick out such personnel based on the criteria provided by petitioner. In other words, Interserve did not obligate itself to perform an identifiable job, work, or service for petitioner, but merely bound itself to provide the latter with specific types of employees. These contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency providing petitioner with workers performing tasks directly related to the latter’s principal business.

The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it at face value, since the primary purpose stated in the Articles of Incorporation of Interserve is misleading. According to its Articles of Incorporation, the principal business of Interserve is to provide janitorial and allied services. The delivery and distribution of Coca-Cola products, the work for which respondents were employed and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may have found that the capital and/or investments in tools and equipment of Interserve were sufficient for an independent contractor for janitorial services, this does not mean that such capital and/or investments were likewise sufficient to maintain an independent contracting business for the delivery and distribution of Coca-Cola products.

With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which were alleged or proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents were not its employees. Records also failed to show that petitioner afforded respondents the twin requirements of procedural due process, i.e., notice and hearing, prior to their dismissal. Respondents were not served notices informing them of the particular acts for which their dismissal was sought. Nor were they required to give their side regarding the charges made against them. Certainly, the respondents’ dismissal was not carried out in accordance with law and, therefore, illegal.

South Davao Development Company, Inc., et al. vs. Sergio L. Gamo, et al.

[GR No. 171814 May 8, 2009]

Facts:

South Davao Development Company, the petitioner herein, is the operator of a coconut and mango farm in San Isidro, Davao Oriental and Inawayan/Baracatan, Davao del Sur, hired on August 1963 petitioner respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, petitioner appointed Gamo as a copra maker contractor. All of the abovenamed respondents (copra workers - all employees in petitioner’s coconut and mango farm) were later transferred (except Eleonor Cosep who has a different case) by petitioner to Gamo as the latter’s copraceros. From 1987 to 1999, Gamo and petitioner entered into a profit-sharing agreement wherein 70% of the net proceeds of the sale of copra went to petitioner and 30% to Gamo. The copra workers were paid by Gamo from his 30% share.

On 2 October 1999, petitioner proposed a new payment scheme to Gamo. Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not renew the "contract" of Gamo.

Respondents filed a complaint for illegal dismissal against petitioner. They alleged that sometime in December 1999, petitioner verbally terminated them en masse. The labor arbiter dismissed the complaint.

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Respondents filed a petition for certiorari under Rule 65 with the Court of Appeals. The Court of Appeals ruled that there existed an employer-employee relationship.

Issue: Whether or not Gamo is an independent contractor.

SC Ruling:

Petition was denied.

Supreme Court held that, Gamo is not an independent contractor. Employer-employee relationship exists.In Escario v. NLRC, 20 we ruled that there is permissible job contracting when a principal agrees to put out or farm out with a

contractor or a subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work service is to be performed within or outside the premises of the principal.

To establish the existence of an independent contractor, we apply the following conditions: first, the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and second, the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business. The Implementing Rules and Regulation of the Labor Code defines investment—as tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or service contracted out. The investment must be sufficient to carry out the job at hand.

In the case at bar, Gamo and the copra workers did not exercise independent judgment in the performance of their tasks. The tools used by Gamo and his copra workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient to enable them to complete the job. Reliance on these primitive tools is not enough. In fact, the accomplishment of their task required more expensive machineries and equipment, like the trucks to haul the harvests and the drying facility, which petitioner corporation owns.

In order to determine the existence of an employer-employee relationship, the Court has frequently applied the four-fold test.From the time they were hired by petitioner corporation up to the time that they were reassigned to work under Gamo’s supervision,

their status as petitioner corporation’s employees did not cease. Likewise, payment of their wages was merely coursed through Gamo. As to the most determinative test―the power of control, it is sufficient that the power to control the manner of doing the work exists, it does not require the actual exercise of such power. In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in charge of the copra workers although under a different payment scheme.

Thus, it is clear that an employer-employee relationship has existed between petitioner corporation and respondents since the beginning and such relationship did not cease despite their reassignments and the change of payment scheme.

Oldarico S. Traveño, et al. vs. Bobongon Banana Growers Multi-Purpose Cooperative, et al.[GR No. 164205 September 3, 2009]

FACTS: By the account of petitioner Traveño and the other co-petitioners, respondent TACOR and DFI hired them to work at a banana plantation. Petitioners asseverated that while they worked under the direct control of supervisors assigned by TACOR and DFI, these companies used different schemes to make it appear that petitioners were hired through independent contractors, including individuals, unregistered associations, and cooperatives. They asserted that the nominal individual contractors were required to, as they did, join a cooperative and thus became members of respondent Bobongon Banana Growers Multi-purpose Cooperative. On the other hand, DFI and TACOR denied that it had engaged the services of petitioners. DFI alleged that during the corporate lifetime of TACOR, it had an arrangement with several landowners the former was to extend financial and technical assistance to them for the development of their lands into a banana plantation on the condition that the bananas produced therein would be sold exclusively to TACOR; that the landowners worked on their own farms and hired laborers to assist them; that the landowners themselves decided to form a cooperative in order to better attain their business objectives; and that it was not in a position to state whether petitioners were working on the banana plantation of the landowners who had contracted with TACOR.

Three separate complaints for illegal dismissal were filed by petitioners with the NLRC against DFI and TACOR foor unpaid salaries, overtime pay, 13th month pay, service incentive leave pay, damages, and attorney's fees. But, the Labor Arbiter, found respondent Cooperative guilty of illegal dismissal. The NLRC sustained the Labor Arbiter's ruling that the employer of petitioners is the Cooperative. It partially granted petitioners' appeal, however, by ordering the Cooperative to pay them their unpaid wages. Petitioners posit that the Labor Arbiter and the NLRC disregarded evidence on record showing that while the Cooperative was their employer on paper, the other respondents exercised control and supervision over them; that the Cooperative was a labor-only contractor.

ISSUE: Whether DFI and TACOR should be held solidarily liable with the Cooperative for petitioners' illegal dismissal and money claims.

SC RULING: The matter of whether the Cooperative is an independent contractor or a labor-only contractor may not be used to predicate a ruling in this case. Job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out with a contractor or subcontractor the performance of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. The present case does not involve such an arrangement.

DFI did not farm out to the Cooperative the performance of a specific job, work, or service. Instead, it entered into a Banana Production and Purchase Agreement with the Cooperative, under which the Cooperative would handle and fund the production of bananas and operation of the plantation covering lands owned by its members in consideration of DFI's commitment to provide financial and technical assistance as needed. The Cooperative would hire its own workers and pay their wages and benefits, and sell exclusively to DFI all export quality bananas produced that meet the specifications agreed upon. To the Court, the Contract between the Cooperative and DFI, far from being a job contracting

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arrangement, is in essence a business partnership that partakes of the nature of a joint venture. The rules on job contracting are, therefore, inapposite. The Court may not alter the intention of the contracting parties without violating the autonomy of contracts principle which gives the contracting parties the freedom to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good custom, public order or public policy. There is nothing in the records which indicates the presence of any of the elements of an employer-employee relationship. The contract between DFI and the cooperative stipulated that the latter was to be responsible for the proper conduct and general welfare of its members and workers in the plantation as well as the hiring, and payment of wages. There being no employer-employee relationship between petitioners and the Cooperative's co-respondents, the latter are not solidarily liable with the Cooperative for petitioners' illegal dismissal and money claims. Wherefore, petition is dismissed.

Locsin et al., vs. PLDT [GR No. 185251, October 2, 2009]

Facts:Respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of the Philippines

(SSCP) entered into a Security Services Agreement  (Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various offices.

Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.Respondent issued a Letter terminating the Agreement. Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were allegedly directed to remain at their post by representatives of respondent. Then, petitioners' services were terminated.

Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. The NLRC which rendered a Resolution affirming  in toto the Arbiter's Decision.The CA rendered the assailed decision granting PLDT's petition and dismissing petitioners' complaint.Issue:Whether petitioners became employees of respondent after the Agreement between SSCP and respondent was terminated.CTDAaERuling:An employer-employee relationship existed between the parties.Rule 131, Section 3 (y) of the Rules of Court provides:

SEC. 3.Disputable presumptions. — The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:xxx xxx xxx (y)That things have happened according to the ordinary course of nature and the ordinary habits of life.

In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency with whom the owners or managers have severed ties with to continue to stay within the business' premises. This is because upon the termination of the owners' or managers' agreement with the security agency, the agency's undertaking of liability for any damage that the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such security guards, it would be the business owners and/or managers who would be liable and not the agency. The business owners or managers would, therefore, be opening themselves up to liability for acts of security guards over whom the owners or managers allegedly have no control.Petitioners remained at their post under the instructions of respondent and respondent dictated upon petitioners that the latter perform their regular duties to secure the premises during operating hours. This is sufficient to establish the existence of an employer-employee relationship.

Joeb M. Aliviado, et al. vs. Procter & Gamble Phils., Inc. and PROMM-GEM Inc.[GR No. 160506 March 9, 2010]

FACTS: Petitioners worked as merchandisers of P&G. They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time. They were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS. SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-off without prior notice. P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a wholesale basis to various supermarkets and distributors. To enhance consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products.

Petitioners filed a complaint against P&G for regularization, service incentive leave pay and other benefits with damages. The assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client. They claim that the contractors have neither substantial capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since they had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G, then they are its regular employees. The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship between petitioners and P&G. He further found that Promm-Gem and SAPS were legitimate independent job contractors. Petitioners filed an appeal to NLRC which affirmed the decision of the labor Arbiter and also denied their motion for reconsideration.

ISSUES: Whether or not P&G is the employer of petitioners

SC RULING: In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors. The pertinent Labor Code provision on the matter states:

ART. 106. Contractor or subcontractor. – XXX There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of

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the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

In the case of Promm-Gem, its financial statements show that it has authorized capital stock of P1 million and a capital available for operations. Promm-Gem supplied its complainant-workers with the relevant materials for them to perform their work and also issued uniforms to them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its regular, not merely contractual or project employees. The court finds that Promm-Gem has substantial investment which relates to the work to be performed. Under the circumstances, it cannot be sustained a labor-only contractor but a legitimate independent contractor.

On the other hand, SAPS is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. Consequently, the following petitioners, having been recruited and supplied by SAPS -- which engaged in labor-only contracting -- are considered as the employees of P&G: Parenthetically, unlike Promm-Gem which dismissed its employees for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on its own business because the termination of its contract with P&G automatically meant for it also the termination of its employees’ services. It is obvious from its act that SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising business. From all indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the latter’s merchandising concerns only. Under the circumstances prevailing in the instant case, we cannot consider SAPS as an independent contractor. WHEREFORE, the petition is GRANTED.

San Miguel Corp. vs. Semillano et al., [GR No. 164257, July 5, 2010]

Facts:It appears that AMPCO hired the services of Vicente et al., [Vicente Semillano, Nelson Mondejar, Jovito Remada and Alex Hawod,  

respondents herein] on different dates in December [of 1991 and] 1994. All of them were assigned to work in SMC's Bottling Plant situated at Brgy. Granada Sta. Fe, Bacolod City, in order to perform the following tasks: segregating bottles, removing dirt therefrom, filing them in designated places, loading and unloading the bottles to and from the delivery trucks, and performing other tasks as may be ordered by SMC's officers. [They] were required to work inside the premises of SMC using [SMC's] equipment. [They] rendered service with SMC for more than 6 months.Subsequently, SMC entered into a Contract of Services  with AMPCO designating the latter as the employer of Vicente, et al., As a result, Vicente et al., failed to claim the rights and benefits ordinarily accorded a regular employee of SMC. In fact, they were not paid their 13th month pay. On June 6, 1995, they were not allowed to enter the premises of SMC. The project manager of AMPCO, Merlyn Polidario, told them to wait for further instructions from the SMC's supervisor. Vicente et al., waited for one month, unfortunately, they never heard a word from SMC. TCcIaAConsequently, Vicente et al., as complainants, filed on July 17, 1995 a COMPLAINT FOR ILLEGAL DISMISSAL with the Labor Arbiter against AMPCO, Merlyn V. Polidario, SMC and Rufino I. Yatar [SMC Plant Manager].Issue:Whether or not AMPCO is a legitimate job contractor.Ruling:Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules Implementing Articles 106 to 109 of the Labor Code further provides that:

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job work or service contracted out. (emphasis supplied)The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

The test to determine the existence of independent contractorship is whether or not the one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.In the case at bench, petitioner faults the CA for holding that the respondents were under the control of petitioner whenever they performed the task of loading in the delivery trucks and unloading from them. It, however, fails to show how AMPCO took "entire charge, control and supervision of the work and service agreed upon." AMPCO's Comment on the Petition is likewise utterly silent on this point. Notably, both petitioner and AMPCO chose to ignore the uniform finding of the LA, NLRC (in its original decision) and the CA that one of the assigned jobs of respondents was to "perform other acts as may be ordered by SMC's officers." Significantly, AMPCO, opted not to challenge the original decision of the NLRC that found it a mere labor-only contractor. SCcHIEMoreover, the Court is not convinced that AMPCO wielded "exclusive discretion in the discharge" of respondents.Despite the fact that the service contracts contain stipulations which are earmarks of independent contractorship, they do not make it legally so. The language of a contract is neither determinative nor conclusive of the relationship between the parties. Petitioner SMC and AMPCO cannot dictate, by a declaration in a contract, the character of AMPCO's business, that is, whether as labor-only contractor, or job contractor.

Manila Water Co. vs. Dalumpines [GR No. 175501, October 4, 2010]

Facts:By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis Act of 1995," the Metropolitan Waterworks and

Sewerage System (MWSS) was given the authority to enter into concession agreements allowing the private sector in its operations. Petitioner Manila Water Company, Inc. (Manila Water) was one of two private concessionaires contracted by the MWSS to manage the water distribution system in the east zone of Metro Manila. The east service area included the following towns and cities: Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon City and Manila, Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay, Taytay, Teresa, and San Mateo. 

Under the concession agreement, Manila Water undertook to absorb the regular employees of MWSS listed by the latter effective August 1, 1997. Individual respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga (Pamoraga), were among the one hundred twenty-one (121) employees not included in the list of employees to be absorbed by Manila Water. Nevertheless, Manila Water engaged their services without written contract from August 1, 1997 to August 31, 1997. On September 1, 1997, individual respondents signed a three (3)-month contract to perform collection services on commission basis for Manila Water's branches in the east zone. In December 1997, Manila Water entered into a service agreement with respondent First Classic Courier Services, Inc. (FCCSI) also for its courier needs.

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On various dates between May and October 2002, individual respondents were terminated from employment. Manila Water no longer renewed its contract with FCCSI because it decided to implement a "collectorless" scheme whereby Manila Water customers would instead remit payments through "Bayad Centers." The aggrieved bill collectors individually filed complaints for illegal dismissal, unfair labor practice, damages, and attorney's fees, with prayer for reinstatement and backwages against petitioner Manila Water and respondent FCCSI.Issues:Whether the CA erred (1) in ruling that an employment relationship exists between respondent bill collectors and petitioner Manila Water; and (2) in ruling that respondent FCCSI is not a bona fide independent contractor. Ruling:

"Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal. In legitimate contracting, the trilateral relationship between the parties in these arrangements involves the principal which decides to farm out a job or service to a contractor or subcontractor, which has the capacity to independently undertake the performance of the job, work, or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work, or service. Job contracting is permissible only if the following conditions are met: 1) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and 2) the contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the business. On the other hand, the Labor Code expressly prohibits "labor-only" contracting. Article 106 of the Code provides that there is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and to the same extent as if the latter were directly employed by him.  Department Order No. 18-02, Series of 2002, enunciates that labor-only contracting refers to an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a principal.Based on the four-fold test of employer-employee relationship, Manila Water emerges as the employer of respondent collectors. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The most important of these elements is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. 

Teng vs. Pahagac [GR No. 169704, November 17, 2010]

Facts:Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose, owns boats (basnig), equipment, and other fishing

paraphernalia. As owner of the business, Teng claims that he customarily enters into joint venture agreements with master fishermen (maestros) who are skilled and are experts in deep sea fishing; they take charge of the management of each fishing venture, including the hiring of the members of its complement. He avers that themaestros hired the respondent workers as checkers to determine the volume of the fish caught in every fishing voyage.

On February 20, 2003, the respondent workers filed a complaint for illegal dismissal against Albert Teng Fish Trading, Teng, and Chua before the NCMB, Region Branch No. IX, Zamboanga City.The VA rendered a decision in Teng's favor and declared that no employer-employee relationship existed between Teng and the respondent workers.The CA reversed the VA's decision after finding sufficient evidence showing the existence of employer-employee relationshipIssues:1.Whether or not the VA’s decision is subject to a motion for reconsideration2.Whether or not there exists an employer-employee relationship between Teng and the respondent workers.

Ruling:Article 262-A of the Labor Code does not prohibit the filing of a motion for reconsideration.

On March 21, 1989, Republic Act No. 6715  took effect, amending, among others, Article 263 of the Labor Code which was originally worded as:

Art. 263 . . . Voluntary arbitration awards or decisions shall be final, unappealable, and executory.As amended, Article 263 is now Article 262-A, which states:

Art. 262-A. . . . [T]he award or decision . . . shall contain the facts and the law on which it is based.  It shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties.

Notably, Article 262-A deleted the word "unappealable" from Article 263. The deliberate selection of the language in the amendatory act differing from that of the original act indicates that the legislature intended a change in the law, and the court should endeavor to give effect to such intent. 

There exists an employer-employee relationship between Teng and the respondent workers.We agree with the CA's finding that sufficient evidence exists indicating the existence of an employer-employee relationship between Teng and the respondent workers.While Teng alleged that it was the maestros who hired the respondent workers, it was his company that issued to the respondent workers identification cards (IDs) bearing their names as employees and Teng's signature as the employer. Generally, in a business establishment, IDs are issued to identify the holder as a bona fide employee of the issuing entity.For the 13 years that the respondent workers worked for Teng, they received wages on a regular basis, in addition to their shares in the fish caught. The worksheet showed that the respondent workers received uniform amounts within a given year, which amounts annually increased until the termination of their employment in 2002.  Teng's claim that the amounts received by the respondent workers are mere commissions is incredulous, as it would mean that the fish caught throughout the year is uniform and increases in number each year.More importantly, the element of control — which we have ruled in a number of cases to be a strong indicator of the existence of an employer-employee relationship — is present in this case. Teng not only owned the tools and equipment, he directed how the respondent workers were to perform their job as checkers; they, in fact, acted as Teng's eyes and ears in every fishing expedition.

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GSIS vs. NLRC et al., [GR No. 180045, November 17, 2010]Facts:

Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo D. Rubia, Rogelio A. Alvarez, Dominador A. Escobal, and Rosauro Panis were employed as security guards by DNL Security Agency (DNL Security). By virtue of the service contract entered into by DNL Security and petitioner Government Service Insurance System on May 1, 1978, respondents were assigned to petitioner's Tacloban City office, each receiving a monthly income of P1,400.00. Sometime in July 1989, petitioner voluntarily increased respondents' monthly salary to P3,000.00. 

In February 1993, DNL Security informed respondents that its service contract with petitioner was terminated. This notwithstanding, DNL Security instructed respondents to continue reporting for work to petitioner. Respondents worked as instructed until April 20, 1993, but without receiving their wages; after which, they were terminated from employment.

Labor Arbiter (LA) Benjamin S. Guimoc rendered a decision against DNL Security and petitioner.The NLRC treated DNL Security's motion for reconsideration as an appeal, but dismissed the same, as it was not legally perfected. It likewise dismissed petitioner's appeal, having been filed beyond the reglementary period.The CA rendered the assailed Decision affirming the NLRC ruling.Issue:1.Whether petitioner's appeal was seasonably filed before the NLRC.2.Whether or not the Court of Appeals misapplied the law and mistakenly affirmed the public respondent NLRC's decision that the petitioner GSIS is jointly and severally liable with DNL Security Agency for payment of the unsubstantiated amounts of Salary Differentials and the 13th Month Pay to the private respondent security guardsRuling:Under Section 3, Rule 13 of the Rules of Court, where the filing of pleadings, appearances, motions, notices, orders, judgments, and all other papers with the court/tribunal is made by registered mail, the date of mailing, as shown by the post office stamp on the envelope or the registry receipt, shall be considered as the date of filing.  Thus, the date of filing is determinable from two sources: from the post office stamp on the envelope or from the registry receipt, either of which may suffice to prove the timeliness of the filing of the pleadings. If the date stamped on one is earlier than the other, the former may be accepted as the date of filing. This presupposes, however, that the envelope or registry receipt and the dates appearing thereon are duly authenticated before the tribunal where they are presented.In any case, even if the appeal was filed one day late, the same should have been entertained by the NLRC. Indeed, the appeal must be perfected within the statutory or reglementary period. This is not only mandatory, but also jurisdictional.The fact that there is no actual and direct employer-employee relationship between petitioner and respondents does not absolve the former from liability for the latter's monetary claims. When petitioner contracted DNL Security's services, petitioner became an indirect employer of respondents, pursuant to Article 107 of the Labor Code, which reads: 

ART. 107.Indirect employer. — The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

After DNL Security failed to pay respondents the correct wages and other monetary benefits, petitioner, as principal, became jointly and severally liable, as provided in Articles 106 and 109 of the Labor Code, which state:

ART. 106.Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. . . . .xxx xxx xxxART. 109.Solidary liability. — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

This statutory scheme is designed to give the workers ample protection, consonant with labor and social justice provisions of the 1987 Constitution. Petitioner's liability covers the payment of respondents' salary differential and 13th month pay during the time they worked for petitioner. In addition, petitioner is solidarily liable with DNL Security for respondents' unpaid wages from February 1993 until April 20, 1993. While it is true that respondents continued working for petitioner after the expiration of their contract, based on the instruction of DNL Security, petitioner did not object to such assignment and allowed respondents to render service. Thus, petitioner impliedly approved the extension of respondents' services. Accordingly, petitioner is bound by the provisions of the Labor Code on indirect employment.

Sy et al., vs. Fairland Knitcraft Co Inc. [GR No. 189658, December 12, 2011]

Facts:Fairland is a domestic corporation engaged in garments business, while Susan de Leon (Susan) is the owner/proprietress of Weesan Garments (Weesan). On the other hand, the complaining workers (the workers) are sewers, trimmers, helpers, a guard and a secretary who were hired by Weesan.On December 23, 2002, workers Marialy O. Sy, Vivencia Penullar, Aurora Aguinaldo, Gina Aniano, Gemma dela Peña and Efremia Matias filed with the Arbitration Branch of the NLRC a Complaint  for underpayment and/or non-payment of wages, overtime pay, premium pay for holidays, 13th month pay and other monetary benefits against Susan/Weesan. In January 2003, the rest of the aforementioned workers also filed similar complaints. Eventually all the cases were consolidated as they involved the same causes of action.On February 5, 2003, Weesan filed before the Department of Labor and Employment-National Capital Region (DOLE-NCR) a report on its temporary closure for a period of not less than six months. As the workers were not anymore allowed to work on that same day, they filed on February 18, 2003 an Amended Complaint,  and on March 13, 2003, another pleading entitled Amended Complaints and Position Paper for Complainants, to include the charge of illegal dismissal and impleaded Fairland and its manager, Debbie Manduabas (Debbie), as additional respondents.Issue:1.Whether or not the CA erred in finding that petitioner is a labor-only contractor acting as an agent of respondent fairland2.Can the Labor Arbiter acquire jurisdiction over the person of the respondent without the latter being served with summons?

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Ruling:1.Susan/Weesan is a mere labor-only contractor.

"There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present:(a)The person supplying workers to an employer does not have substantial capital or investment in the form of tools,

equipment, machineries, work premises, among others; and IDESTH(b)The workers recruited and placed by such person are performing activities which are directly related to the principal

business of the employer."  Here, there is no question that the workers, majority of whom are sewers, were recruited by Susan/Weesan and that they performed activities which are directly related to Fairland's principal business of garments. What must be determined is whether Susan/Weesan has substantial capital or investment in the form of tools, equipment, machineries, work premises, among others.2. "It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the respondent without the latter being served with summons."   However, "if there is no valid service of summons, the court can still acquire jurisdiction over the person of the defendant by virtue of the latter's voluntary appearance." It can be recalled that the workers' original complaints for non-payment/underpayment of wages and benefits were only against Susan/Weesan. For these complaints, the Labor Arbiter issued summons to Susan/Weesan which was received by the latter on January 15, 2003.  The workers thereafter amended their then already consolidated complaints to include illegal dismissal as an additional cause of action as well as Fairland and Debbie as additional respondents. We have, however, scanned the records but found nothing to indicate that summons with respect to the said amended complaints was ever served upon Weesan, Susan, or Fairland. True to their claim, Fairland and Debbie were indeed never summoned by the Labor Arbiter.Viewed in its entirety, we thus declare that Fairland is the principal of the labor-only contractor, Weesan.Fairland, therefore, as the principal employer, is solidarily liable with Susan/Weesan, the labor-only contractor, for the rightful claims of the employees. Under this set-up, Susan/Weesan, as the "labor-only" contractor, is deemed an agent of the principal, Fairland, and the law makes the principal responsible to the employees of the "labor-only" contractor as if the principal itself directly hired or employed the employees. 

Worker’s Preference

Development Bank of the Philippines vs. NLRC[242 SCRA 59 (1995)]

Facts: PSC obtained a loan in 1983 from the DBP to finance its iron smelting and steel manufacturing business. To secure said loan, PSC

mortgaged to DBP real properties with all the buildings and improvements thereon and chattels. By virtue of the said loan agreement, DBP became the majority stockholder of PSC, with stockholdings. Subsequently, it took over the management of PSC. When PSC failed to pay its obligation with DBP, DBP foreclosed and acquired the mortgaged real estate and chattels of PSC in the auction sales in 1987. Petitioners filed a Petition for Involuntary Insolvency in the RTC against PSC and DBP, impleading as co-respondents therein Olecram Mining Corporation and Jose Panganiban Ice Plant and Cold Storage, with said petitioners representing themselves as unpaid employees of said private respondents. Herein private respondents filed a complaint with the Department of Labor against PSC, including later on DBP, for non-payment of salaries, 13th month pay, incentive leave pay and separation pay. DBP submits that when it foreclosed the assets of PSC, it did so as a foreclosing creditor.

The pivotal issue for resolution is whether DBP, as foreclosing creditor, could be held liable for the unpaid wages, 13th month pay, incentive leave pay and separation pay of the employees of PSC. The terms 'declaration' of bankruptcy or 'judicial' liquidation in Article 110 of the Labor Code have been eliminated by RA 6715, which took effect on March 21, 1989. Does this mean then that liquidation proceedings have been done away with?

SC Ruling:We opine in the negative. Because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in

isolation but must be read in relation to the Civil Code scheme on classification and preference of credits. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor or workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. The DBP anchors its claim on a mortgage credit, which directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted (Art. 2176, CC). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property, which a preference is not.

Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean `absolute preference,' the same should be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the contrary is provided (Art. 4, CC). Thereby, any infringement on the constitutional guarantee on non-impairment of obligation of contracts (Sec. 10, Art. III, 1987 Consti.) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the amendatory law, RA 6715. To give Article 110 retroactive effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which it sought to protect itself against by requiring a collateral in the form of real property.

In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the `claims of the Government and other creditors' may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preference determined in the course of judicial proceedings which have for their object the subjection of the property of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured; the adjudication made will be binding on all parties-in-interest, since those proceedings are proceedings in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony.

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BATONG BUHAY GOLD MINES, INC. vs. HONORABLE DIONISIO DELA SERNA[G.R. No. 86963 August 6, 1999]

Facts:On February 5, 1987, respondents Ty, Mendelebar, Reyes and 1,247 others filed a complaint against Batong Buhay Gold Mines, Inc.

for: (1) Non-payment of their basic pay and allowances for the period of July 1983 to July 1984, inclusive, under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for the period June 1984 to October 1986, inclusive under Wage Order No. 5; (3) Non-payment of their salaries for the period March 1986 to the present; (4) Non-payment of their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick leave, and the compensatory leaves of mine site employees; and (6) Non-payment of the salaries of employees who were placed on forced leaves since November, 1985 to the present, if this is not feasible, the affected employees be awarded corresponding separation pay. On February 27, 1987, the complainants filed a Motion for the issuance of an inspection authority. After said inspection, the Labor Standards and Welfare Officers submitted their report with the recommendations that an Order of Compliance be issued directing Batong Buhay Gold Mines Inc. to pay complainants' Elsie Rosalina Ty, et al. P4,818,746.40 by way of unpaid salaries of workers from March 16, 1987 to present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months pay for 1985 and 1986, and unpaid (sic) vacation/sick/compensatory leave benefits.

The Regional Director adopted the recommendation of the LSWOs. After said order, the complainants filed an ex-parte motion for the issuance of a writ of execution and appointment of special sheriff. The Regional Director issued an Order directing BBGMI to put up a cash or surety bond otherwise a writ of execution will be issued. When the respondent failed to post a cash/surety bond, and upon motion for the issuance of a writ of execution by the complainants, the Regional Director, on September 14, 1987 issued a writ of execution appointing Mr. John C. Ramos as Special Sheriff and directing him to collect the above-stated amount from the respondent and deposit the same with the Cashier for appropriate disposition to complainants under the supervision of the Office of the Director. Otherwise, the writ be executed by attaching the goods and chattels of the respondent BBGMI not exempt from execution or in case of insufficiency thereof against the real or immovable property of the respondent. The Special Sheriff proceeded to execute the appealed Order and seized three (3) units of Peterbuilt trucks and then sold the same by public auction. Various materials and motor vehicles were also seized on different dates and sold at public auction by said sheriff. Fidel Bermudez was the highest bidder in the auction sale conducted on October 29, 1987. On December 1987, BBGMI finally posted a supersedeas bond which prompted this Office to issue an Order restraining the complainants and Sheriff Ramos from enforcing the writ of execution. Herein petitioner appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent Undersecretary Dionisio de la Serna, contending that the Regional Director had no jurisdiction over the case. But the respondent upheld the jurisdiction of the Regional Director and annulled all the auction sales conducted by Special Sheriff John Ramos.

A Motion for Reconsideration of the aforesaid order was presented by the complainants in Case No. NCR-LSED-CI-2047-87 but the same was denied. A Motion for Intervention was filed by MFT Corporation, inviting attention to a Deed of Sale executed in its favor by Fidel Bermudez. Another Motion for Intervention was filed, this time by Salter Holdings Pty., Ltd., claiming that MFT Corporation assigned its rights over the subject properties in favor of movant as evidenced by a Sales Agreement between MFT Corp. and Salter Holdings Pty., Ltd. The two Motions for intervention were granted in the second questioned order directing the exclusion from annulment of the properties sold at the October 29, 1987 auction sale and claimed by the intervenors, including one cluster of junk mining machineries, equipment and supplies. Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and the respondent employees but to no avail. The same were likewise denied in the third assailed Order.

Issues:(1) Whether the Regional Director has jurisdiction over the complaint filed by the employees of BBGMI; and (2) Whether or not the auction sales conducted by the said Special Sheriff are valid.

SC Ruling:

(1) YES. The Regional Director has jurisdiction over the BBGMI employees who are the complainants in Case Number NCR-LSED-CI-2047-87. The subject labor standards case of the petition arose from the visitorial and enforcement powers by the Regional Director of Department of Labor and Employment (DOLE). Labor standards cases are governed by Article 128(b) of the Labor Code. As can be gleaned from the records on hand, subject labor standards case was filed on February 5, 1987 at which time Article 128 (b) read as follows:

Art. 128 (b) Visitorial and enforcement powers. (b) The Minister of Labor or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.

Respondent Undersecretary Dionisio C. Dela Serna, upheld the jurisdiction of Regional Director Luna C. Piezas by relying on Sec 2 of E.O. 111, which states:The provisions of article 217 of this code to the contrary notwithstanding and in cases where the relationship of employer-employee still exists, the Minister of Labor and Employment or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provision of this Code based on the findings of the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.

The Court would have ruled differently had the petitioner shown that subject labor standards case is within the purview of the exception clause in Article 128 (b) of the Labor Code. Said provision requires the concurrence of the following elements in order to divest the Regional Director or his representatives of jurisdiction, to wit: (a) that the petitioner (employer) contests the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.

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Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds. The only instance when there was a semblance of raising the aforestated grounds, was when they filed an Appeal Memorandum wherein petitioner comes up with the defense that the Regional Director was without jurisdiction, as employer-employee relationship was absent, since petitioner had ceased doing business since 1985.

Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other related documents. The officers of the petitioner alleged that the company is presently under receivership of the Development Bank of the Philippines. In lieu of this, the Regional Director had ordered that a summary investigation be conducted. Despite proper notices, the petitioner refused to appear before the Regional Director. To give it another chance, an order to file its position paper was issued to substantiate its defenses. Notwithstanding all these opportunities to be heard, petitioner chose not to avail of such.

As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, . . . Under Art. 128(a) of the Labor Code, the Secretary of Labor of his duly authorized representatives, such as the Regional Directors, has visitorial powers which authorize him to inspect the records and premises of an employer at any time of the day or night whenever work is being undertaken therein, to question any employee and investigate any fact, condition or matter, and to determine violations of labor laws, wage orders or rules and regulations. If the employer refuses to attend the inspection or conference or to submit any record, such as payrolls and daily time records, he will be deemed to have waived his right to present evidence.

Petitioner's refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the premises of their head office in Makati and the failure to file their position paper is equivalent to a waiver of its right to contest the claims of the employees. This Court had occasion to hold there is no violation of due process where the Regional Director merely required the submission of position papers and resolved the case summarily thereafter. Furthermore, the issuance of the compliance order was well within the jurisdiction of the Regional Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases provides:

Sec. 14. Failure to Appear. Where the employer or the complainant fails or refuses to appear during the investigation, despite proper notice, for two (2) consecutive hearings without justifiable reasons, the hearing officer may recommend to the Regional Director the issuance of a compliance order based on the evidence at hand or an order of dismissal of the complaint as the case may be.

It bears stressing that this petition involves a labor standards case and it is in keeping with the law that "the worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of the Department of Labor exists to insure its expeditious delivery to him free of charge." Thus, their claim of closure for business, among other things, are factual issues which cannot be brought here for the first time. As petitioner refused to participate in the proceedings below where it could have ventilated the appropriate defenses, to do so in this petition is unavailing. The reason for this is that factual issues are not proper subjects of a special civil action for certiorari to the Supreme Court. It is therefore abundantly clear that at the time of the filing of the claims of petitioner's employees, the Regional Director was already exercising visitorial and enforcement powers.

The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the Regional Director has jurisdiction over the present labor standards case. Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor Secretary and his representatives reads:

Art. 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

(2) NOT VALID. The said auction sale are null and void since on the properties of petitioner involved was constituted a mortgage between petitioner and the Development Bank of the Philippines as shown by (a) Deed of Mortgage dated December 28, 1973; (b) Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975; (c) Amendment to Joint Mortgage dated October 18, 1976; (d) Confirmation of Mortgage dated March 27, 1979; and (e) Additional Joint First Mortgage dated March 31, 1981.

The aforementioned documents were executed between the petitioner and Development Bank of the Philippines (DBP) even prior to the filing of the complaint of petitioner's employees. The properties having been mortgaged to DBP, the applicable law is Section 14 of Executive Order No. 81, otherwise known as the "The 1986 Revised Charter of the Development Bank of the Philippines," which exempts the properties of petitioner mortgaged to DBP from attachment or execution sales. Section 14 of E.O. 81, reads:

Sec. 14. Exemption from Attachment. The provisions of any law to the contrary notwithstanding, securities on loans and/or other accommodations granted by the Bank or its predecessor-in-interest shall not be subject to attachment, execution or any other court process, nor shall they be included in the property of insolvent persons or institutions, unless all debts and obligations of the Bank or its predecessor-in-interest, penalties, collection of expenses, and other charges, subject to the provisions of paragraphs (e) of Sec. 9 of this Charter.

In the case of DBP vs. NLRC, the Supreme Court held that the workers preference regarding wages and other monetary claims under Article 110 of the Labor Code, as amended, contemplates bankruptcy or liquidation proceedings of the employer's business. What is more, it does not disregard the preferential lien of mortgagees considered as preferred credits under the provisions of the New Civil Code on the classification, concurrence and preference of credits.

With respect to the second Order, the public respondent had no authority to validate the said auction sale on the ground that the intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as purchasers for value, acquired legal title over subject properties. As regards personal properties, the general rule is that title, like a stream, cannot rise higher than its source. Consequently, a seller without title cannot transfer a title better than what he holds. MFT Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest bidder of a void auction sale over properties exempt from execution. Such being the case, the subsequent sale made by him (Fidel Bermudez) is incapable of vesting title or ownership in the vendee.

ABUNDIO BARAYOGA vs. ASSET PRIVATIZATION TRUST[G.R. No. 160073 October 24, 2005]

Facts:

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Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur. On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created under Proclamation No. 50, as amended, mandated to take title to and possession of, conserve, provisionally manage and dispose of non-performing assets of the Philippine government identified for privatization or disposition. “Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued Administrative Order No. 14 identifying certain assets of government institutions that were to be transferred to the National Government. Among the assets transferred was the financial claim of the Philippine National Bank against BISUDECO in the form of a secured loan. Consequently, by virtue of a Trust Agreement executed between the National Government and APT on February 27, 1987, APT was constituted as trustee over BISUDECO’s account with the PNB. Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar Corporation (Philsucor) to take over the management of the sugar plantation and milling operations until August 31, 1992. Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its mortgaged properties were foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On April 2, 1991, APT was issued a Sheriff’s Certificate of Sale. On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction and underpayment of wages and other labor standard benefits plus damages. In the meantime, on July 15, 1992, APT’s Board of Trustees issued a resolution accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar plantation and mill. Again, on September 23, 1992, the board passed another resolution authorizing the payment of separation benefits to BISUDECO’s employees in the event of the company’s privatization. Then, on October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took over its sugar milling operations under the trade name Peñafrancia Sugar Mill (Pensumil). On December 17, 1992, the union filed a similar complaint, later to be consolidated with its earlier complaint and docketed as RAB V Case No. 07-00184-91. On March 2, 1993, it filed an amended complaint, impleading as additional party respondents APT and Pensumil. In their Position Paper, the union alleged that when Philsucor initially took over the operations of the company, it retained BISUDECO’s existing personnel under the same terms and conditions of employment. Nonetheless, at the start of the season sometime in May 1991, Philsucor started recalling workers back to work, to the exception of the union members. Management told them that they will be re-hired only if they resign from the union. Just the same, thereafter, the company started to employ the services of outsiders under the ‘pakyaw’ system. BISUDECO, Pensumil and APT all interposed the defense of lack of employer-employee relationship.

After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed that APT pay petitioners the mandated employment benefits provided for under Section 27 of Proclamation No. 50 which benefits had been earlier extended to other employees similarly situated. Both the union and APT elevated the labor arbiter’s decision before NLRC. The NLRC affirmed APT’s liability for petitioners’ money claims. While no employer-employee relationship existed between members of the petitioner union and APT, at the time of the employees’ illegal dismissal, the assets of BISUDECO had been transferred to the national government through APT. Moreover, the NLRC held that APT should have treated petitioners’ claim as a lien on the assets of BISUDECO. The Commission opined that APT should have done so, considering its awareness of the pending complaint of petitioners at the time BISUDECO sold its assets to BAPCI, and APT started paying separation pay to the workers. The NLRC awarded to petitioners their money claims for underpayment, labor-standard benefits, and ECOLA. It also awarded them their back wages, computed at the prevailing minimum wage, for the period May 1, 1991 (the date of their illegal dismissal) until October 30, 1992 (the sale of BISUDECO assets to the BAPCI). On the other hand, the NLRC ruled that petitioners were not entitled to separation pay because of the huge business losses incurred by BISUDECO, which had resulted in its bankruptcy.

Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of Court. The CA ruled that APT should not be held liable for petitioners’ claims for unfair labor practice, illegal dismissal, illegal deduction and underpayment of wages, as well as other labor-standard benefits plus damages. As found by the NLRC, APT was not the employer of petitioners, but was impleaded only for possessing BISUDECO’s mortgaged properties as trustee and, later, as the highest bidder in the foreclosure sale of those assets. CA concluded that petitioners’ claims could not be enforced against APT as mortgagee of the foreclosed properties of BISUDECO.

Issue:Whether APT is Liable for the Claims of Petitioners Against Their Former Employer.

SC Ruling: The Petition has no merit. The duties and liabilities of BISUDECO, including its monetary liabilities to its employees, were not all

automatically assumed by APT as purchaser of the foreclosed properties at the auction sale. Any assumption of liability must be specifically and categorically agreed upon. In Sundowner Development Corp. v. Drilon, the Court ruled that, unless expressly assumed, labor contracts like collective bargaining agreements are not enforceable against the transferee of an enterprise. Labor contracts are in personam and thus binding only between the parties.

Contrary to petitioners’ assertions, BISUDECO remained the owner of the mortgaged properties in August 1988, when the Philippine Sugar Corporation (Philsucor) undertook the operation and management of the sugar plantation until August 31, 1992, under a so-called Contract of Lease between the two corporations. At the time, APT was merely a secured creditor of BISUDECO. It was only in September 1992 (after the expiration of the lease/management Contract with Philsucor in August 1992), however, when APT took over BISUDECO assets, preparatory to the latter’s privatization.

No succession of employment rights and obligations can be said to have taken place between the two. Between the employees of BISUDECO and APT, there is no privity of contract that would make the latter a substitute employer that should be burdened with the obligations of the corporation. To rule otherwise would result in unduly imposing upon APT an unwarranted assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of Transfer between the national government and PNB.

Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially all, the properties of the seller or transferor is not obliged to absorb the latter’s employees. The most that the purchasing company may do, for reasons of public policy and social justice, is to give preference of reemployment to the selling company’s qualified separated employees, who in its judgment are necessary to the continued operation of the business establishment.

The liabilities of the previous owner to its employees are not enforceable against the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the monetary claims of petitioners who had been dismissed even before it actually took over BISUDECO’s assets.

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Moreover, it should be remembered that APT merely became a transferee of BISUDECO’s assets for purposes of conservation because of its lien on those assets -- a lien it assumed as assignee of the loan secured by the corporation from PNB. Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the foreclosed properties.

Relevant to this transfer of assets is Article 110 of the Labor Code, which reads: “Article 110. Worker’s preference in case of bankruptcy. – In the event of bankruptcy or liquidation of the employer’s business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims shall be paid in full before the claims of the Government and other creditors may be paid.”

While this provision raises the worker’s money claim to first priority in the order of preference established under Article 2244 of the Civil Code, the claim has no preference over special preferred credits. This Court has ruled in a long line of cases that under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred credit that enjoys preference with respect to a specific/determinate property of the debtor. On the other hand, the worker’s preference under Article 110 of the Labor Code is an ordinary preferred credit. Thus, the right of employees to be paid benefits due them from the properties of their employer cannot have any preference over the latter’s mortgage credit. In other words, being a mortgage credit, APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied first before the claims of the workers.

Development Bank of the Philippines v. NLRC explained the rationale of this ruling as follows: “x x x. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent’s assets. It is a right to a first preference in the discharge of the funds of the judgment debtor. x x x”

Furthermore, workers’ claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcy or judicial liquidation proceedings against the employer. It is settled that the application of Article 110 of the Labor Code is contingent upon the institution of those proceedings, during which all creditors are convened, their claims ascertained and inventoried, and their preferences determined. Assured thereby is an orderly determination of the preference given to creditors’ claims; and preserved in harmony is the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code.

The Court hastens to add that the present Petition was brought against APT alone. In holding that the latter, which has never really been an employer of petitioners, is not liable for their claims, this Court is not reversing or ruling upon their entitlement to back wages and other unpaid benefits from their previous employer. As a mere transferee of the mortgage credit and later as the purchaser in a public auction of BISUDECO’s foreclosed properties, APT cannot be held liable for petitioners’ claims against BISUDECO: illegal dismissal, unpaid back wages and other monetary benefits.

Responsibility for the liabilities of a mortgagor towards its employees cannot be transferred via an auction sale to a purchaser who is also the mortgagee-creditor of the foreclosed assets and chattels. Clearly, the mortgagee-creditor has no employer- employee relations with the mortgagor’s workers. The mortgage constitutes a lien on the determinate properties of the employer-debtor, because it is a specially preferred credit to which the worker’s monetary claims is deemed subordinate.

PHILIPPINE AIRLINES, INCORPORATED vs. BERNARDIN J. ZAMORA[G. R. No. 166996 February 6, 2007]

Facts:Respondent Zamora had been in the employ of petitioner PAL since 9 February 1981 when the former was hired as a Cargo

Representative at petitioner PAL’s Import Operations Division. On 13 November 1995, respondent Zamora was dismissed from service for having been found by petitioner PAL’s management to be liable for insubordination, neglect of customer, disrespect for authority and absence without official leave. On 12 March 1996, respondent Zamora filed a complaint against petitioners PAL and Francisco X. Yngente IV before the NLRC for illegal dismissal, unfair labor practice, non-payment of wages, damages and attorney’s fees.

SC Ruling:At this point, notwithstanding the fact that the present petition alleges three issues, the resolution of the third one relating to the

propriety of the execution of the NLRC’s order of reinstatement despite the verity of the 17 May 1999 SEC Order approving the Amended and Restated Rehabilitation Plan of petitioner PAL and appointing a “permanent rehabilitation receiver for the latter,” is of paramount importance. The overriding legal significance to the instant case of the SEC mandated rehabilitation of petitioner PAL will affect the progress, development or advancement of the present petition.

The relevant law dealing with the suspension of actions for claims against corporations is Presidential Decree No. 902-A,as amended. Particularly, Section 5(d) which reads:

SECTION 5. In addition to the regulatory adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

x x x xd) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the [management of a rehabilitation receiver or] management committee created pursuant to this Decree.

and Section 6(c), to wit:SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following:

x x x xc) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in order to preserve the rights of the parties-litigants and /or protect the interest of the investing public and creditors: x x x Provided, finally, That

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upon appointment of a management committee, the rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly.

The term “claim,” as contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers “to debts or demands of a pecuniary nature. It means ‘the assertion of a right to have money paid.’”

The raison d'être behind the suspension of claims pending rehabilitation proceedings was explained in this wise:In light of these powers, the reason for suspending actions for claims against the corporation should not be difficult to discover. It is not really to enable the management committee or the rehabilitation receiver to substitute the defendant in any pending action against it before any court, tribunal, board or body. Obviously, the real justification is to enable the management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the “rescue” of the debtor company. To allow such other action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation.

No other action may be taken in, including the rendition of judgment during the state of suspension – what are automatically stayed or

suspended are the proceedings of an action or suit and not just the payment of claims during the execution stage after the case had become final and executory.

The suspension of action for claims against a corporation under rehabilitation receiver or management committee embraces all phases of the suit, be it before the trial court or any tribunal or before this Court. Furthermore, the actions that are suspended cover all claims against a distressed corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature.

In the case at bar, the appellate court’s pronouncement that in “disallowing the enforcement to the claim x x x it would unnecessarily add to the burden of management, does not justify the aggravation caused in the delay in execution of the judgment in favor of Zamora,” is quite myopic. In actual fact, allowing such actions to proceed would only increase the work-load of the management committee or the rehabilitation receiver, whose precious time and effort would be dissipated and wasted in defending suits against the corporation, instead of being channeled toward restructuring and rehabilitation.

The instant petition is partially granted in that herein proceedings are hereby suspended until further notice from this Court. Accordingly, petitioner Philippine Airlines, Inc. is hereby directed to quarterly update the Court as to the status of its ongoing rehabilitation.

PHILIPPINE AIRLINES vs. PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION[525 SCRA 29 June 19, 2007]

Facts:The present petition arose from a labor complaint filed by respondent PALEA against petitioners PAL and one Mary Anne del

Rosario, Director of Personnel of petitioner PAL, on 1 March 1989. The labor complaint charged both petitioners with unfair labor practice for the alleged non-payment of the 13th month pay of petitioner PAL’s employees who had not been regularized as of the 30 of April 1988, allegedly in contravention of the Collective Bargaining Agreement (CBA) entered into by petitioner PAL and respondent PALEA.

On 6 February 1987, petitioner PAL and respondent PALEA entered into a CBA covering the period of 1986-1989.

Respondent PALEA assailed the implementation of the guideline on the ground that all employees of PAL, regular or non-regular, must be paid their 13th month pay. In fact, in a letter dated 16 December 1988, respondent PALEA, through Herbert C. Baldovino informed petitioner PAL that there were several employees who failed to receive their 13th Month Pay as of the date of the correspondence.

In response thereto, petitioner PAL informed respondent PALEA that rank and file employees who were regularized after 30 April 1988 were not entitled to the 13th month pay as they were already given their Christmas bonuses on 9 December 1988 per the Implementing Rules of Presidential Decree No. 851.

Disagreeing with petitioner PAL, respondent PALEA filed a labor complaint for unfair labor practice against petitioner PAL before the NLRC on 1 March 1989. The complaint interposed that “the cut-off period for regularization should not be used as the parameter for granting 13th month pay considering that the law does not distinguish the status of employment instead the law covers all employees.”

In its Position Paper submitted before the Labor Arbiter, petitioner PAL countered that those rank and file employees who were not regularized by 30 April of a particular year are, in principle, not denied their 13th month pay considering they receive said mandatory bonus in the form of the Christmas Bonus; that the Christmas Bonus given to all its employees is deemed a compliance with Presidential Decree No. 851 and the latter’s implementing rules; and that the foregoing has been the practice formally adopted in previous CBAs’ as early as 1970.

Issue:Whether or not the Court of Appeals committed reversible error in affirming the order of the NLRC for the payment of the 13th month pay or mid-year bonus to its employees regularized after 30 April 1988.

SC Ruling:In a Resolution dated 19 June 2007, We resolved to suspend the proceedings of the case at bar in view of the on-going rehabilitation

of petitioner PAL as mandated by the Securities and Exchange Commission. On 28 September 2007, however, the SEC issued an Order granting petitioner PAL’s request to

exit from rehabilitation after successfully stabilizing its financial operations. Hence, the suspension earlier issued by this Court is hereby lifted, making the present Petition ripe for resolution.

A cursory reading of the 1986-1989 CBA of the parties herein will instantly reveal that Art. I, Sec. 3 of said agreement made its provision applicable to all employees in the bargaining unit. The particular section specifically defined the scope of application of the CBA, thus:

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Section 3 – Application. All the terms and conditions of employment of employees within the bargaining unit are embodied in this Agreement, and the same shall govern the relationship between the Company and such employees. On the other hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded in accordance with the PAL Personnel Policies and Procedures Manual, shall be deemed also part and parcel of the terms and conditions of employment, or of this Agreement.

Without distinguishing between regular and non-regular employees. As succinctly put by respondent PALEA in its Memorandum: All employees in PAL are entitled to the same benefit as they are within the same collective bargaining unit and the entitlement to such benefit spills over to even non-union members.

It is a well-settled doctrine that the benefits of a CBA extend to the laborers and employees in the collective bargaining unit, including those who do not belong to the chosen bargaining labor organization. Otherwise, it would be a clear case of discrimination.

Hence, to be entitled to the benefits under the CBA, the employees must be members of the bargaining unit, but not necessarily of the labor organization designated as the bargaining agent. A “bargaining unit” has been defined as a group of employees of a given employer, comprised of all or less than all of the entire body of employees, which the collective interest of all the employees, consistent with equity to the employer, indicates to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law. There is no showing that the non-regular status of the concerned employees by said cut-off date sufficiently distinguishes their interests from those of the regular employees so as to exclude them from the collective bargaining unit and the benefits of the CBA.

Having ruled that the benefits provided by the subject CBA are applicable even to non-regular employees who belong to the bargaining unit concerned, the next and crucial query to be addressed is whether the 13th month pay or mid- year bonus can be equated to the Christmas bonus.

As far as non-regular employees are concerned, petitioner PAL alleges that their 13th month pay shall be the same as their Christmas bonus and will be paid according to the terms governing the latter.

We do not agree. From the facts of the present Petition, it is crystal clear that petitioner PAL is claiming an exemption from payment of the 13th month pay or mid-year bonus provided in the CBA under the guise of paying the Christmas bonus which it claims to be the equivalent of the 13th month pay under Presidential Decree No. 851.

Presidential Decree No. 851 mandates that all employers must pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than 24 December of every year.

While employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of the issuance of Presidential Decree No. 851 are already exempted from the mandatory coverage of said law, petitioner PAL cannot escape liability in this case by virtue thereof.

It must be stressed that in the 1986-1989 CBA, petitioner PAL agreed to pay its employees 1) the 13th month pay or the mid-year bonus, and 2) the Christmas bonus. The 13th month pay, guaranteed by Presidential Decree No. 851, is explicitly covered or provided for as the mid-year bonus in the CBA, while the Christmas bonus is evidently and distinctly a separate benefit. Petitioner PAL may not be allowed to brush off said distinction, and unilaterally and arbitrarily declare that for non-regular employees, their Christmas bonus is the same as or equivalent to the 13th month pay.

Presidential Decree No. 851 mandates the payment of the 13th month pay to uniformly provide the low-paid employees with additional income. It but sets a minimum requirement that employers must comply with. It does not intend, however, to preclude the employers from voluntarily granting additional bonuses that will benefit their employees. A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. We deem that the Christmas bonus in this case is of this nature, although, by virtue of its incorporation into the CBA, it has become more than just an act of generosity on the part of petitioner PAL, but a contractual obligation it has undertaken.

The inclusion of a provision for the continued payment of the Christmas bonus in the 1986-1989 CBA between respondent PALEA and petitioner PAL contradicts the company’s claim that the grant of such benefit was intended to be credited as compliance with the statutory mandate to give the 13th month pay. Memorandum Order No. 28, extending Presidential Decree No. 851 to all employees regardless of the amount of their monthly salaries, was issued on 13 August 1986. As early as said date, therefore, petitioner PAL was already fully aware that it was lawfully compelled to accord all its employees a 13th month pay. Accordingly, if petitioner PAL truly intended that the Christmas bonus be treated as the “equivalent” of the 13th month pay required by law, then said intention should have been expressly declared in their 1986-1989 CBA, or the separate provision therein on the Christmas bonus should have been removed because it would only be superfluous.

In the case under consideration, the provision for the payment of the Christmas bonus, apart from the 13th month pay, was incorporated into the 1986-1989 CBA between respondent PALEA and petitioner PAL without any condition. The Christmas bonus, payable in December of every year, is distinguished from the 13th month pay, due yearly in

May, for which reason it was denominated as the mid-year bonus. Such being the case, the only logical inference that could be derived therefrom is that petitioner PAL intended to give the members of the bargaining unit, represented by respondent PALEA, a Christmas bonus over and above its legally mandated obligation to grant the 13th month pay.

The non-regular rank and file employees of petitioner PAL as of 30 April 1988, are not actually seeking more benefits than what the other member-employees of the same bargaining unit are already enjoying. They are only requesting that all members of the bargaining unit be treated equally and afforded the same privileges and benefits as agreed upon between respondent PALEA and petitioner PAL in the CBA.

A collective bargaining agreement refers to a negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all other contracts, the parties to a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties, and compliance therewith is mandated by the express policy of the law.

Garcia vs. Phil Air Lines [GR No. 164856, January 20, 2009]

Facts:Philippine Airlines filed a case against its employees –herein petitioners for allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL Technical Center’s Tool room Section. After due notice, PAL dismissed petitioner for transgressing company’s Code of Discipline prompting them to file a Complaint for illegal dismissal which the Labor Arbiter (LA) in its decision ruled on their favor ordering PAL to immediately comply with the reinstatement aspect of the decision. Prior to the judgment, SEC placed PAL under Interim Rehabilitation Receiver who subsequently replaced by Permanent Rehabilitation Receiver. On appeal, NLRC reversed said decision and dismissed petitioner’s complaint for lack of merit.

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Subsequently, LA issued a Writ of Execution respecting the reinstatement aspect of his decision. Respondent filed an Urgent Petition for Injunction with the NLRC. The NLRC affirmed the validity of the Writ and the Notice issued by LA but suspended and referred the action to the Rehabilitation Receiver for appropriate action. On appeal, the appellate court partially granted the petition and effectively reinstated the NLRC resolution insofar as it suspended the proceedings. By manifestation, respondent informed the Court that SEC issued an Order granting its request to exit from rehabilitation proceedings.Issue:Whether petitioner may collect their wages during the period between the LA’s Order of reinstatement pending appeal and the NLRC decision overturning that of the LA, now that PAL has exited from rehabilitation proceedings.Ruling:A dismissed employee whose case was favorably decided by the LA is entitled to receive wages pending appeal upon reinstatement, which is immediately executor. Unless there is are straining order, it is ministerial upon the LA to implement the order of reinstatement and it is mandatory on the employer to comply therewith. The Court reaffirms the prevailing principle that even if the order of reinstatement of the LA is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. It settles the view that the LA’s order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that filing to exercise the options in the alternative, employer must pay the employee’s salaries. When reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to survive.

Attorney’s Fees and Appearance of Lawyers

BANK OF THE PHILIPPINE ISLANDS EMPLOYEES UNION-ALU vs. NLRC and BANK OF THE PHILIPPINE ISLANDS [G.R. No. L-69746-47 March 31, 1989]

Facts:In the course of their negotiations with the Bank of the Philippine Islands for a new CBA to replace the one expiring on March 31,

1982, serious differences arose between the BPI Employees Union-Metro Manila and its mother federation, the Associated Labor Unions. This prompted the former to manifest that it would henceforth negotiate alone with BPI independently of ALU, which in turn, suspended all the elective officers of BPIEU-Metro Manila led by its president, Carlito Reyes, who was replaced by Rolando Valdez as acting president. In retaliation, Reyes and his followers, claiming to be the legal and sole representatives of BPIEU-Metro Manila, formally disaffiliated from ALU on November 16, 1982.

As no agreement could be reached on a wide variety of economic issues, the dispute between BPI and its employees was certified by the Minister of Labor for compulsory arbitration and docketed in the National Labor Relations Commission as Certified Cases Nos. 0279 and 0281. These cases were later consolidated with the Manifestation and Motion for Interpleader and to Consign Union Dues, which was filed by BPI in view of the conflicting claims of the Reyes and Valdez groups for the said dues.

On March 22, 1983, the NLRC resolved the bargaining deadlock by fixing the wage increases and other economic benefits and ordering them to be embodied in a new collective bargaining agreement to be concluded by BPIEU-Metro Manila and ALU with BPI. It did not decide the intra-union dispute, however, holding that this was under the original jurisdiction of the med-arbiter and the exclusive appellate jurisdiction of the Bureau of Labor Relations.

Claiming to be the labor union referred to in the decision, the Reyes group filed a petition with the Bureau of Labor Relations for direct certification on the ground of its disaffiliation from ALU. This petition was denied in a decision dated June 13, 1983, where BLR Director Cresenciano Trajano held that the disaffiliation was invalid because it was done beyond the freedom period.

The Reyes group then came to this Court in a petition for certiorari, with a prayer for a temporary restraining order, which we issued on July 11, 1983, to prevent the BLR and the BPI from enforcing the above-cited decision. We eventually dismissed the petition for lack of merit and lifted the temporary restraining order on February 16, 1985, later denying the motion for reconsideration on March 27, 1985.

SC Ruling:The Court has studied the arguments of the parties and is unable to accept the petitioner's contention. Our finding is that although the

temporary restraining order was strictly speaking addressed only to BPI and ALU, it was entirely proper for the NLRC itself to abide by it, and not only out of respect for this Court. The decision sought to be enforced called for the conclusion of a collective bargaining agreement between BPI and the members of BPIEU-ALU. The question precisely before the Court then was which as between the Reyes and Valdez groups should be recognized as the legitimate representative of the employees in general to negotiate with BPI NLRC had no jurisdiction to resolve that question. Obviously, its own decision of March 23, 1983, could not be enforced until that question was first cleared. Second Issue

As a result of its merger with the Commercial Bank and Trust Company in 1981, the BPI found it necessary to close the COMTRUST branch in Davao City and transfer it to General Santos City. Pursuant to an earlier understanding, seven of the employees of the said branch who were absorbed by BPI were transferred to the General Santos City branch. However, three of them, namely Glenna, Ongkiko, Arturo Napales, and Gregorio Gito, refused to move. After efforts to persuade them failed, BPI dismissed them. This triggered a strike by the Davao Chapter of the BPIEU-ALU which was followed by sympathy strikes by other local chapters.

On October 19, 1983, the Minister of Labor sustained the transfer of the three employees by the BPI and issued a return-to-work order. This was ignored by the striking workers, who continued to question the transfer. Another return-to-work order was issued, this time by the NLRC, which was obeyed by the strikers upon admission by the BPI of the three recalcitrant employees to their original stations in Davao City. This was done pending the opening of the General Santos City branch.

Upon the inauguration of the said branch, BPI filed a motion to transfer the said employees thereto as sanctioned earlier by the Minister of Labor. The situation was complicated when another employee, Lennie Aninon who had earlier agreed to transfer, now insisted on remaining in the Davao City branch. She too was included in the motion, which was granted by the NLRC in its decision dated December 5, 1984. Napales and Gito agreed to move to General Santos City, but the two lady employees, to wit Ongkiko and Aninon remained adamant.

The petitioners contend that the decision of the NLRC of December 5, 1984, directing the transfer of the four employees is also tainted with grave abuse of discretion and should be set aside. This matter need not detain us too long for the issue is hardly debatable. Indeed, the right of the employer to transfer the employees in the interest of the efficient and economic operation of its business cannot be seriously challenged. That is its prerogative. The only limitation on the discretion of management in this regard is its mala fides. The only time the employer cannot

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exercise this right is where it is vitiated by improper motive and is merely a disguised attempt to remove or punish the employee sought to be transferred.

Such improper motive has not been shown in the case at bar. On the contrary, it has been established that the transfer was necessitated by the fact that the COMBANK branch in Davao City had to be closed because it was just across the street from the BPI branch. There was certainly no justification to maintain the two branches as they both belonged now to the BPI. Moreover, it is not disputed that the lateral transfer of the employees involved no demotion in their rank or salary or other benefits. G.R. Nos. 76842-44

Following the dismissal of its petition against the BLR the Reyes group, on April 26, 1985, filed a motion with the NLRC for the release to it of the union dues consigned by BPI. 16 This motion was opposed by the Valdez group, which subsequently filed its own petition for the payment to it of the said dues, on the ground that it was the legitimate BPIEU recognized by the BLR. 17 In its decision dated September 26, 1986.

The petitioner is obviously in error. As the disaffiliation of the Reyes group was disallowed by the BLR because it was done beyond the freedom period, the Reyes group could not have claimed an Identity distinct from that of the original BPIEU-Metro Manila. For the same reason, the Valdez group could not exclude the Reyes group from the same BPIEU-Metro Manila because both of them were still part of that original local union. In other words, BPIEU-Metro Manila then consisted of the members of the two contending groups whose affiliation with ALU, as the mother federation, remained intact.

In any event, this issue of dues-sharing has also become moot and academic now because the Reyes group has finally succeeded in disaffiliating from ALU and is now a separate and independent union. As such, it does not have to share with ALU whatever union dues it may now collect from its members. But at the time this petition was filed, the issue was very much alive and had to be resolved to determine who were entitled to the union dues and in what proportion. The NLRC therefore did not commit any grave abuse of discretion in rendering the challenged decision as we have here interpreted it. G.R. Nos. 76916-17

On April 7, 1983, the Labor Arbiter issued an order directing the respondent bank to check off the amount of 5 % of the total economic benefits due its employees under the new collective bargaining agreement between the bank and the union corresponding to the first year of effectivity thereof and to deliver the amount collected to Atty. Lacsina or to his duly authorized representative.

BPI deducted the amount of P 200.00 from each of the employees who had signed the authorization. Upon learning about this, the petitioners challenged the said order, on the ground that it was not authorized under the Labor Code. On April 15, 1983, the NLRC issued a resolution setting aside the order and requiring BPI to safekeep the amounts sought to be deducted "until the rights thereto of the interested parties shall have been determined in appropriate proceedings. Subsequently, the NLRC issued an en banc resolution dated September 27, 1983, ordering the release to Lacsina of the amounts deducted "except with respect to any portion thereof as to which no individual signed authorization has been given by the members concerned or where such authorization has been withdrawn.

Art. 222. Appearances and Fees.- . . . (b) No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or conclusions of the collective agreement shall be imposed on any individual member of the contracting union: Provided, however, that attorney's fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void. The case of Pacific Banking Corporation v. Clave where the lawyer's fee was taken not from the total economic benefits received by

the workers but from the funds of their labor union. The Court reads the afore-cited provision as prohibiting the payment of attorney's fees only when it is effected through forced

contributions from the workers from their own funds as distinguished from the union funds. The purpose of the provision is to prevent imposition on the workers of the duty to individually contribute their respective shares in the fee to be paid the attorney for his services on behalf of the union in its negotiations with the management. The obligation to pay the attorney's fees belongs to the union and cannot be shunted to the workers as their direct responsibility. Neither the lawyer nor the union itself may require the individual workers to assume the obligation to pay the attorney's fees from their own pockets. So categorical is this intent that the law also makes it clear that any agreement to the contrary shall be null and void ab initio.

The court sees no such imposition in the case at bar. A reading of the above-cited resolution will clearly show that the signatories thereof have not been in any manner compelled to undertake the obligation they have there assumed. On the contrary it is plain that they were voluntarily authorizing the check-off of the attorney's fees from their payment of benefits and the turnover to Lacsina of the amounts deducted, conformably to their agreement with him. There is no compulsion here. And significantly, the authorized deductions affected only the workers who adopted and signed the resolution and who were the only ones from whose benefits the deductions were made by BPI. No similar deductions were taken from the other workers who did not sign the resolution and so were not bound by it.

That only those who signed the resolution could be subjected to the authorized deductions was recognized and made clear by the order itself of the NLRC. It was there categorically declared that the check-off could not be made where "no individual signed authorization has been given by the members concerned or where such authorization has been withdrawn."

The Pacific Banking Corporation case is not applicable to the present case because there was there no similar agreement as that entered into between Lacsina and the signatories of the resolution in question. Absent such an agreement, there was no question that the basic proscription in Article 222 would have to operate.

Moreover, the case is covered squarely by the mandatory and explicit prescription of Art. 222 which is another guarantee intended to protect the employee against unwarranted practices that would diminish his compensation without his knowledge and consent. (Emphasis supplied.)

A similar recognition was made in Galvadores v. Trajano, 22 where the payment of the attorney's fees from the wages of the employees was not allowed because: "No check-offs from any amount due to employees may be effected without individual written authorities duly signed by the employees specifically stating the amount, purpose and beneficiary of the deduction. The required individual authorizations in this case are wanting."

Finally, the court hold that the agreement in question is in every respect a valid contract as it satisfies all the elements thereof and does not contravene law, morals, good customs, public order, or public policy. On the contrary, it enables the workers to avail themselves of the services of the lawyer of their choice and confidence under terms mutually acceptable to the parties and, hopefully, also for their mutual benefit. The petitions in G.R. Nos. 69746-47, 76842-44, and 76916-17 are DISMISSED.

TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT vs. NLRC [269 SCRA 733  March 14, 1997]

Facts:Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of E.N.A. Cruz and

Associates law firm, entered into a retainer agreement whereby the former obligated itself to pay the latter a monthly retainer fee of P3,000.00 in

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consideration of the law firm’s undertaking to render the services enumerated in their contract. During the existence of that agreement, petitioner union referred to private respondent the claims of its members for holiday, mid – year and year – end bonuses against their employer, Traders Royal Bank. The NLRC rendered a decision in favor of the employees, awarding them the said differentials. However, pending the hearing of the application for the writ of execution, TRC challenged the decision of the NLRC before the Supreme Court. The Court modified the decision of the NLRC by deleting the award of holiday pay differentials. After private respondent received decision, he notified the petitioner union, the TRB management and the NLRC of his right to exercise and enforce the attorney’s lien over the award of holiday pay differential. He filed a motion before the Labor Arbiter for the determination of the attorney’s fees, praying that 10% of the total award be declared as his attorneys fees. The Labor Arbiter granted the motion of the private respondent. The NLRC affirmed the order. Petitioner maintains that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in upholding the award of attorney’s fees. It contends that the award for attorney’s fees should have been incorporated in the main case and not after the Supreme Court had already reviewed and passed upon the decision of the NLRC. All attorney’s fees due to private respondent were covered by the retainer fee of P3,000.00 which it has been regularly paying to private respondent under their retainer agreement. Private respondent maintains that his motion to determine attorney’s fees was just an incident of the main case where petitioner was awarded its money claims. The grant of attorney’s fees was the consequence of his exercise of his attorney’s lien. Private respondent contends that a retainer fee is not the attorney’s fees contemplated for and commensurate to the services he rendered to petitioner. Hence, the petition at bar.

Issues:(1) Whether or not Private respondent is entitled to attorney’s fees even if no claim for such was filed before the NLRC.(2) Whether or not Private respondent is entitled to an additional remuneration under the retainer agreement entered into by him and petitioner.

SC Ruling:1. Yes. Private respondent is entitled to attorney’s fees.

There are two commonly accepted concepts of attorney’s fee, the so – called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with his client.

In its extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the court to be paid by the losing party in litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized under Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.

A claim for attorney’s fees may be asserted either in the very action in which the services of a lawyer had been rendered or in separate action. Private respondent was well within his rights when he made his claim and waited for the finality of the judgment for holiday pay differential, instead of filing it ahead of the award’s complete resolution. To declare that a lawyer may file a claim for fees in the same action only before the judgment is reviewed by a higher tribunal would deprive him of his options and render ineffective the pronouncements of the Court.

2. Yes, Private respondent is entitled to an additional remuneration.

There are two kinds of retainer fees a client may pay his lawyer. These are a general retainer, or a retaining fee, and a special retainer. A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as general counsel for any ordinary legal problem that may arise in the routinary business of the client and referred to him for legal action. The future services of the lawyer are secured and committed to the retaining client. For this, the client pays the lawyer a fixed retainer fee which could be monthly or otherwise, depending upon their arrangement. The reason for the remuneration is that the lawyer is that the lawyer is deprived of the opportunity of rendering services for a fee to the opposing party or other parties. In fine, it is a compensation for lost opportunities.

Meanwhile, a special retainer is a fee for a specific case handled or special service rendered by the lawyer for a client. A client may have several cases demanding special or individual attention. If for every case there is a separate and independent contract for attorney’s fees, each fee is considered a special retainer.

The P3.000.00 which petitioner pays monthly to private respondent does not cover the services the latter actually rendered before the labor arbiter and the NLRC in behalf of the former. The P3,000.00 monthly fee provided in the retainer agreement between the union and the law firm refers to a general retainer, or a retaining fee, as said monthly fee covers only the law firm’s pledge, or as expressly stated therein, its “commitment to render the legal services enumerated.” The fee is not payment for private respondent’s execution or performance of the services listed in the contract, subject to some particular qualifications or permutations stated there. It is independent and different from the compensation which private respondent should receive in payment for his services.

It is not necessary that the parties agree on a definite fee for the special services rendered by private respondent in order that petitioner may be obligated to pay compensation to the former. Equity and fair play dictate that petitioner should pay the same after it accepted, availed itself of, and benefited from private respondent’s services.

Whether there is an agreement or not, the courts can fix a reasonable compensation which lawyers should receive for their professional services.

The measure of compensation for private respondent's services as against his client should properly be addressed by the rule of quantum meruit long adopted in this jurisdiction. Quantum meruit, meaning "as much as he deserves," is used as the basis for determining the lawyer's professional fees in the absence of a contract, but recoverable by him from his client. The doctrine of quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain benefit without paying for it.

BRAHM INDUSTRIES, INC. vs. NLRC, et al.[280 SCRA 824 October 16, 1997]

Facts : Roberto M. Durian, Jone M. Comendador and Reynaldo C. Gagarino filed a case for illegal suspension, illegal dismissal, illegal lay-

off, illegal deductions, non-payment of service incentive leave, 13th month pay, and damages against Brahm Industries, Inc. (BRAHM) before the Labor Arbiter. In their complaints, they alleged that they were employed by BRAHM on various dates with varying salary rates and for different positions. All three (3) claimed that they worked seven (7) days a week from eight o'clock in the morning to five o'clock in the afternoon; that they were required to work overtime three (3) times a week from five o'clock in the afternoon until midnight and at least once a week for the whole night; that they were paid overtime pay based on the minimum wage only; and that without cause and due process, Gagarino's employment was terminated in October 1990, while Durian and Comendador were dismissed in December 1992.

For its part, BRAHM maintained that Gagarino left the company sometime in 1990 to work abroad. With respect to Durian and Comendador, Brahm claimed that they abandoned their jobs in 1992 after having been reprimanded by their employer for not finishing some

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welding work assigned to them and abandonment of their jobs due to their inability to account for some tools worth P10,000.00 which were under their custody and accountability. Moreover, BRAHM asserted that they were never employed on a regular basis as the latter had their own customers who required them to render home service. That being a small-scale enterprise engaged in contracting and subcontracting projects for the construction of water purifiers and waste control devices, most of its laborers, including complainants, were contractual employees hired on a per project basis. Since its business depended on the availability of contracts or projects, the character of employment of its work force was not permanent but rather coterminous with the project to which they were assigned.

Labor Arbiter Fatima J. France ruled that Roberto M. Durian and Jone M. Comendador were illegally dismissed by BRAHM and must be paid accordingly. As regards the case of Reynaldo C. Gagarino, the same was dismissed when the Labor Arbiter found that he filed his complaint only after more than two (2) years from the date of his dismissal. According to the Labor Arbiter, "this lukewarm attitude of complainant (Gagarino) bolstered the conclusion that the filing of his case was merely an afterthought. Gagarino did not appeal the dismissal of his case. Upon appeal by BRAHM, the NLRC affirmed the decision of the Labor Arbiter. BRAHM now argues that the NLRC gravely abused its discretion.

SC Ruling:We find no merit in the petition. A project employee is one whose employment has been fixed for a specific project or undertaking,

the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. Before an employee hired on a per project basis can be dismissed, a report must be made to the nearest employment office of the termination of the services of the workers every time it completed a project, pursuant to Policy Instruction No. 20.

There was no showing that BRAHM observed the above-mentioned requirement. In fact, it even admitted in the petition its failure to comply with Policy Instruction No. 20. The work performed by private respondents as "welders" were undoubtedly necessary and desirable to BRAHM's business or trade of manufacturing water purifiers and waste control devices. Without the performance of such services on a regular basis, BRAHM's business is expected to grind to a halt. Likewise, BRAHM's practice of re-hiring private respondents after the completion of every project, which practice continued throughout Comendador's nine (9) years and Durian's five (5) years of employment in the company confirms that they were considered by BRAHM as regular employees.

On the validity of private respondents' dismissal, there are two (2) facets of valid termination of employment: (a) the legality of the act of dismissal, i.e., the dismissal must be under any of the just causes provided under Art. 282 of the Labor Code; and, (b) the legality of the manner of dismissal, which means that there must be observance of the requirements of due process. In this connection, the employer is required to furnish the worker sought to be dismissed with two (2) written notices before his dismissal can be legally effected, namely, notice which apprises the employee of the particular acts or omissions for which his dismissal is sought (in cases of abandonment of work, the notice shall be served at the worker's last known address); and, subsequent notice which informs the employee of the employer's decision to dismiss him. These requirements are mandatory, non-compliance with which renders any judgment reached by management void and in existent.

Petitioner failed to satisfy these requisites. Even assuming abandonment, the dismissal of private respondents is still illegal for lack of due process. As correctly observed by the Labor Arbiter and sustained by the NLRC, petitioner failed to furnish private respondents with the first of the required two (2) notices at their last known addresses, which could have apprised them of petitioner's intention to dismiss them.

With regard to the propriety of the award of attorney's fees in favor of private respondents, petitioner contends that it was erroneous for the NLRC to merely reduce the award of attorney's fees when it should have been completely deleted. Petitioner claims that the award is baseless since the matter of attorney's fees was touched only once in the dispositive portion of the Labor Arbiter's decision and no discussion or reason was stated. This argument is unfounded.

A perusal of the decision shows that the reason for the award of attorney's fees is clearly and unequivocally set forth in the body of the Labor Arbiter's decision, to wit: "Having been compelled to litigate, complainants should be paid an amount equivalent to ten percent (10%) of the total award as and for attorney's fees." It used as basis Art. 2208 of the Civil Code which allows attorney's fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought.

However, nothing precludes the appellate courts from reducing the award of attorney's fees when it is found to be unconscionable or excessive under the circumstances. Thus, we agree with the NLRC's ruling that "the award of attorney's fees is proper on account of complainants' being compelled to litigate their claims against respondent. The amount is however reduced to five percent (5%) of the adjudged relief, it appearing that the substantial portion of the award refers to complainants' back wages and not to withheld salaries."

The instant petition is dismissed for lack of merit.HEIRS OF REYNALDO ANIBAN vs. NLRC

[282 SCRA 377 December 4, 1997]

Facts:Reynaldo Aniban was employed by the Philippine Transmarine Carriers, Inc. (TRANSMARINE) acting in behalf of its foreign

principal Norwegian Ship Management A/S (NORWEGIAN) as radio operator (R/O) on board the vessel "Kassel" for a contract period of 9 to 11 months. During the period of his employment, Aniban died due to myocardial infarction. He was survived by a pregnant wife and 3 minor children who prayed for death benefits provided under the POEA Standard Employment Contract. A claim was also made for additional death benefits under the Collective Bargaining Agreement executed between Associated Marine Officers and Seamen's Union of the Philippines and NORWEGIAN represented by TRANSMARINE which provided for additional compensation of US$30,000.00 plus US$8,000.00 to each child under the age of 18 years, maximum US$24,000.00 (not exceeding 3 children) in the event of death of an officer due to an occupational injury or disease while serving on board, while traveling to and from the vessel on Company's business or due to marine peril. The claim under the CBA was rejected on the ground that myocardial infarction of which R/O Aniban died was not an occupational disease as to entitle his heirs to the additional death benefits provided therein. Consequently, Brigida Aniban and her children filed a formal complaint for non-payment of death compensation benefits under the CBA.

Issues : (a) Whether the POEA has jurisdiction to determine the claim of petitioners for death benefits, (b) Whether myocardial infarction is an occupational disease as to entitle petitioners to the death benefits provided under the CBA.

SC Ruling:

The law applicable at the time the complaint was filed on 13 November 1992 was Art. 20 of the Labor Code as amended which clearly provided that "original and exclusive jurisdiction over all matters or cases including money claims, involving employer-employee relations, arising out of or by virtue of any law or contract involving Filipino seamen for overseas employment is vested with the POEA. On the other hand, the jurisdiction of the Employment Compensation Commission comes into play only when the liability of the State Insurance Fund is in issue, as correctly suggested by the Solicitor General. The ECC was created under Title II, Bk. IV, of the Labor Code with the heading of Employees Compensation and State Insurance Fund. In addition to its powers and duties enumerated in Art. 177, Art. 180 explicitly provides that

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the Commission exercises appellate jurisdiction only over decisions rendered by either the GSIS or SSS in the exercise of their respective original and exclusive jurisdictions. Hence, the ECC may not be considered as having jurisdiction over money claims, albeit death compensation benefits, of overseas contract workers. Myocardial infarction is an occupational disease. Although it may be conceded in the instant case that the physical exertion involved in carrying out the functions of a radio operator may have been quite minimal, we cannot discount the pressure and strain that went with the position of radio operator. As radio operator, Reynaldo Aniban had to place his full attention in hearing the exact messages received by the vessel and to relay those that needed to be transmitted to the mainland or to other vessels. We have already recognized that any kind of work or labor produces stress and strain normally resulting in the wear and tear of the human body. It is not required that the occupation be the only cause of the disease as it is enough that the employment contributed even in a small degree to its development. It must be stressed that the strict rules of evidence are not applicable in claims for compensation considering that probability and not the ultimate degree of certainty is the test of proof in compensation proceedings.

VIRGILIO SAPIO vs. UNDALOC CONSTRUCTION[G.R. No. 155034   May 22, 2008]

Facts:The controversy started with a complaint filed by petitioner against Undaloc Construction and/or Engineer Cirilo Undaloc for illegal

dismissal, underpayment of wages and nonpayment of statutory benefits. Respondent Undaloc Construction, a single proprietorship owned by Cirilo Undaloc, is engaged in road construction business in Cebu City. Petitioner had been employed as watchman from 1 May 1995 to 30 May 1998 when he was terminated on the ground that the project he was assigned to was already finished, he being allegedly a project employee. But petitioner asserted that he was a regular employee having been engaged to perform works which are "usually necessary or desirable" in respondents' business. In the Labor Arbiter’s decision, it awarded P3,000 as attorney’s fees but when this case was elevated to the Court of Appeals, the award for attorney’s fees was deleted together with the award of salary differential. Hence this petition for review.

Issue:Whether or not he is entitled to attorney’s fees.

SC Ruling:While we adhere to the position of the appellate court that the "tendency" to alter the entries in the payrolls was not substantiated, we

cannot however subscribe to the total deletion of the award of salary differential and attorney's fees, as it so ruled. The award of attorney's fees is warranted under the circumstances of this case. Under Article 2208 of the New Civil Code, attorney's fees can be recovered in actions for the recovery of wages of laborers and actions for indemnity under employer's liability laws but shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party. Thus, the petition is partially granted. Petitioner is awarded the salary differential in the reduced amount of P13,156.00 and respondents are directed to pay the same, as well as ten percent (10%) of the award as attorney's fees.

JOSE MAX S. ORTIZ vs. SAN MIGUEL CORPORATION[G.R. Nos. 151983-84 July 31, 2008]

FACTS:The petitioner in this case, Jose Max S. Ortiz, is a member of the Philippine Barwho represented the complainants in NLRC Cases

No. V-0255-94 (hereinafter referred to as the Aguirre Cases) and No. V-0068-95 (hereinafter referred to as the Toquero Case) instituted against herein private respondent San Miguel Corporation sometime in 1992 and 1993. The complainants in NLRC Cases, Aguirre Cases and Toquero Case were employees at private respondent's Sales Offices in the Province of Negros Occidental. The complainants of Cases, Aguire and Toquero got a favorable decision in NLRC regarding their money claims against San Miguel Corporation. In effect, San Miguel Corporation filed a Petitions for Certiorari. While this respondent’s petitions were pending before the Court of Appeals, all but one of the remaining complainants in Aguirre and Toquero Cases on various dates before two Labor Arbiters and in the presence of two witnesses, signed separate Deeds of Release, Waiver and Quitclaim in favor of private respondent. Based on the Deeds they executed, complainants agreed to settle their claims against private respondent for amounts less than what the NLRC actually awarded. Private respondent withheld 10% of the total amount agreed upon by the parties in the said Deeds as attorney's fees and handed it over to petitioner. Private respondent then attached the Deeds to its Manifestation and Motion filed before the appellate court. Then the Court of appeals rendered a decision affirming the NLRC decisions, only in so far as it concerned complainant Alfredo Gadian, Jr. (complainant Gadian), the only complainant who did not execute a Deed of Release, Waiver and Quitclaim. With respect to the other complainants in the Aguirre and Toquero Cases, their complaints were dismissed on account of their duly executed Deeds of Release, Waiver and Quitclaim. In a Resolution dated 9 January 2002, the appellate court denied the motion of complainant Gadian and his counsel, herein petitioner , that the award of attorney's fees of 10% should be based on the monetary awards adjudged by the NLRC.

Thus, this petition filed before the Court praying to affirm the award of attorney's fees equivalent to 10% of the monetary award adjudged by the NLRC in its Decisions dated 21 July 1995 and 25 July 1995 in Toquero Case and Aguirre Cases respectively.

ISSUE: Whether he is entitled to the amount of attorney's fees as adjudged by the NLRC in its Decisions in the Aguirre and Toquero Cases or only to the 10% of the amounts actually paid to his clients, the complainants who signed the Deeds of Release, Waiver and Quitclaim.

SC RULING:The aforesaid issue evidently involves a question of law. What it needs to do is ascertain and apply the relevant law and jurisprudence

on the award of attorney's fees to the prevailing parties in labor casesArticle 111 of the Labor Code, as amended, specifically provides:

ART. 111. ATTORNEY'S FEES. — (a) In cases of unlawful withholding of wages the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of wages recovered.b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorney's fees which exceed ten percent of the amount of wages recovered.

In PCL Shipping Philippines, Inc. v. National Labor Relations Commission citing Dr. Reyes v. Court of Appeals, this Court enunciated that there are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services the former has rendered to the latter. The basis of this compensation is the fact of the attorney's employment by and his agreement with the client. In its extraordinary concept, attorney's fees are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation. The instances in which these may be awarded are those enumerated in Article 2208 of the Civil Code, specifically paragraph 7 thereof, which pertains to actions for recovery of wages, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof. Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of attorney's fees.

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Based on the foregoing, the attorney's fees awarded by the NLRC in its Decisions in the Aguirre and Toquero Cases pertain to the complainants, petitioner's clients, as indemnity for damages; and not to petitioner as compensation for his legal services. Records show that the petitioner neither alleged nor proved that his clients, the complainants, willingly agreed that the award of attorney's fees would accrue to him as an additional compensation or part thereof. What the complainants explicitly agreed to in their individual Deeds of Release, Waiver, and Quitclaim was that the 10% attorney's fees of the petitioner shall be deducted from the amount of the gross settlement.

Thus, this Court has no recourse but to interpret the award of attorney's fees by the NLRC in its extraordinary concept. And since the attorney's fees pertained to the complainants as indemnity for damages, it was totally within the complainants' right to waive the amount of said attorney's fees and settle for a lesser amount thereof in exchange for the immediate end to litigation. Petitioner cannot prevent complainants from compromising and/or withdrawing their complaints at any stage of the proceedings just to protect his anticipated attorney's fees.

Even assuming arguendo that the complainants in the Aguirre and Toquero Cases did indeed agree that the attorney's fees awarded by the NLRC should be considered in their ordinary concept, i.e., as compensation for petitioner's services, we refer back to Article 111 of the Labor Code, as amended, which provides that the attorney's fees should be equivalent to 10% of the amount of wages recovered. Since the complainants decided to settle their complaints against the private respondent, the amounts actually received by them pursuant to the Deeds of Release, Waiver and Quitclaim are the amounts "recovered" and the proper basis for determining the 10% attorney's fees.

In the case at bar, it is beyond cavil that the petitioner is not the real party in interest; hence, he cannot file this Petition to recover the attorney's fees as adjudged by the NLRC in its Decisions dated 21 July 1995 and 25 July 1995 in the Aguirre and Toquero Cases, respectively. To reiterate, the award of attorney's fees pertain to the prevailing parties in the NLRC cases, namely, the complainants, all but one of whom no longer pursued their complaints against private respondent after executing Deeds of Release, Waiver and Quitclaim. Not being the party to whom the NLRC awarded the attorney's fees, neither is the petitioner the proper party to question the non-awarding of the same by the appellate court.

This would show that petitioner has been compensated for the services he rendered the complainants. It may do well for petitioner to remember that as a lawyer, he is a member of an honorable profession, the primary vision of which is justice. The practice of law is a decent profession and not a money-making trade. Compensation should be but a mere incident.

If petitioner earnestly believes that the amounts he already received are grossly deficient, petitioner's remedy is not against the private respondent, but against his own clients, the complainants. He should file a separate action for collection of sum of money against complainants to recover just compensation for his legal services, and not the present Petition for Review to claim from private respondent the attorney's fees which were adjudged by the NLRC in favor of complainants as the prevailing parties in the Aguirre and Toquero Cases. WHEREFORE, the instant Petition is hereby DENIED.

EVANGELINA MASMUD (as substitute complainant for ALEXANDER J. MASMUD) vs. NATIONAL LABOR RELATIONS COMMISSION (First Division) and ATTY. ROLANDO B. GO, JR.

[G.R. No. 183385 February 13, 2009]

FACTS: The late Alexander J. Masmud (Alexander), the husband of Evangelina Masmudn (Evangelina) filed a complaint against First Victory

Shipping Services and Angelakos (Hellas) S.A. on July 9, 2003 for non-payment of permanent disability benefits, medical expenses, sickness allowance, moral and exemplary damages, and attorney's fees. Alexander engaged the services of Atty. Rolando B. Go, Jr. (Atty. Go) as his counsel. In consideration of Atty. Go's legal services, Alexander agreed to pay attorney's fees on a contingent basis, as follows: twenty percent (20%) of total monetary claims as settled or paid and an additional ten percent (10%) in case of appeal. On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the monetary claims of Alexander. Alexander's employer filed an appeal before the National Labor Relations Commission (NLRC). During the pendency of the proceedings before the NLRC, Alexander died. After explaining the terms of the lawyer's fees to Evangelina, Atty. Go caused her substitution as complainant. On April 30, 2004, the NLRC rendered a Decision dismissing the appeal of Alexander's employer. On appeal before the CA, the decision of the LA was affirmed with modification. Thereafter, Alexander’s employer appealed to the Supreme Court. On February 6, 2006, the Court issued a Resolution dismissing the case for lack of merit.

On January 10, 2005, the LA directed the NLRC Cashier to release the amount of P3,454,079.20 to Evangelina. Out of the said amount, Evangelina paid Atty. Go the sum of P680,000.00. Dissatisfied, Atty. Go filed a motion to record and enforce the attorney's lien alleging that Evangelina reneged on their contingent fee agreement. Evangelina paid only the amount of P680,000.00, equivalent to 20% of the award as attorney's fees, thus, leaving a balance of 10%, plus the award pertaining to the counsel as attorney's fees. In her comment, Evangelina manifested that Atty. Go's claim for attorney's fees of 40% of the total monetary award was null and void based on Article 111 of the Labor Code.The Labor Arbiter issued an Order granting Atty. Go's motion. Then, Evangelina questioned the decision of the Labor Arbiter before the NLRC. However, the NLRC dismissed her appeal. Then, she elevated the case to the Court of Appeals. The CA partially gramted the petition with some modification declaring that Atty. Go is fully compensated by the amount of P1,347,950.11 that he has already received. Dissatisfied, Angelina filed this petition.

ISSUE:Whether or not the legal compensation of a lawyer in a labor proceeding should be based on Article 111 of the Labor Code.

SC RULING:There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer

by his client for the legal services rendered to the latter. On the other hand, in its extraordinary concept, attorney's fees may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party, such that, in any of the cases provided by law where such award can be made, e.g., those authorized in Article 2208 of the Civil Code, the amount is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.

Here, we apply the ordinary concept of attorney's fees, or the compensation that Atty. Go is entitled to receive for representing Evangelina, in substitution of her husband, before the labor tribunals and before the court. The retainer contract between Atty. Go and Evangelina provides for a contingent fee. The contract shall control in the determination of the amount to be paid, unless found by the court to be unconscionable or unreasonable. Attorney's fees are unconscionable if they affront one's sense of justice, decency or reasonableness. The decree of unconscionability or unreasonableness of a stipulated amount in a contingent fee contract will not preclude recovery. It merely justifies the fixing by the court of a reasonable compensation for the lawyer's services.

Contingent fee contracts are subject to the supervision and close scrutiny of the court in order that clients may be protected from unjust charges. The amount of contingent fees agreed upon by the parties is subject to the stipulation that counsel will be paid for his legal services only if the suit or litigation prospers. A much higher compensation is allowed as contingent fees because of the risk that the lawyer may get nothing if the suit fails. The Court finds nothing illegal in the contingent fee contract between Atty. Go and Evangelina's husband. The CA committed no error of law when it awarded the attorney's fees of Atty. Go and allowed him to receive an equivalent of 39% of the monetary award.

Considering that Atty. Go successfully represented his client, it is only proper that he should receive adequate compensation for his efforts. With his capital consisting of his brains and with his skill acquired at tremendous cost not only in money but in expenditure of time and

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energy, he is entitled to the protection of any judicial tribunal against any attempt on the part of his client to escape payment of his just compensation. It would be ironic if after putting forth the best in him to secure justice for his client, he himself would not get his due.In view of the foregoing, the Decision and Resolution of the Court of Appeals are hereby AFFIRMED.

Kaisahan at Kapatiran ng mga Manggagawa at Kawanisa MWC-East Zone Unit vs. Manila Water Company

[GR No. 174179, November 16, 2011]

Facts:The Union is the duly-recognized bargaining agent of the rank-and-file employees of the respondent Manila Water Company,

Inc. (Company) while Borela is the Union President.  On February 21, 1997, the Metropolitan Waterworks and Sewerage System (MWSS) entered into a Concession Agreement(Agreement) with the Company to privatize the operations of the MWSS.  Article 6.1.3 of the Agreement provides that "the Concessionaire shall grant [its] employees benefits no less favorable than those granted to MWSS employees at the time of [their] separation from MWSS." 7 Among the benefits enjoyed by the employees of the MWSS were the amelioration allowance (AA) and the cost-of-living allowance (COLA) granted in August 1979, pursuant to Letter of Implementation No. 97 issued by the Office of the President. The payment of the AA and the COLA was discontinued pursuant to Republic Act No. 6758, otherwise known as the "Salary Standardization Law," which integrated the allowances into the standardized salary.  Nonetheless, in 2001, the Union demanded from the Company the payment of the AA and the COLA during the renegotiation of the parties' Collective Bargaining Agreement  (CBA).  The Company initially turned down this demand, however, it subsequently agreed to an amendment of the CBA on the matter.Thereafter, the Company integrated the AA into the monthly payroll of all its employees beginning August 1, 2002, payment of the AA and the COLA after an appropriation was made and approved by the MWSS Board of Trustees. The Company, however, did not subsequently include the COLA since the Commission on Audit disapproved its payment because the Company had no funds to cover this benefit.  TCaIAs a result, the Union and Borela filed on April 15, 2003 a complaint against the Company for payment of the AA, COLA, moral and exemplary damages, legal interest, and attorney's fees before the National Labor Relations Commission (NLRC). Issue:(1) Whether the CA can review the factual findings of the NLRC in a Rule 65 petition; and (2) Whether the NLRC gravely abused its discretion in awarding ten percent (10%) attorney's fees to the petitioners.Ruling:

The CA cannot undertake a re-assessment of the evidence presented in the case in  certiorari proceedings under Rule 65 of the Rules of Court.  However, the rule admits of exceptions. In Mercado v. AMA Computer College-Parañaque City, Inc., the SC held that the CA may examine the factual findings of the NLRC to determine whether or not its conclusions are supported by substantial evidence, whose absence justifies a finding of grave abuse of discretion.In this case, the CA decision shows that the CA erred in ruling that the NLRC gravely abused its discretion in awarding the petitioners ten percent (10%) attorney's fees without basis in fact and in law.

On the Award of Attorney's FeesArticle 111 of the Labor Code, as amended, governs the grant of attorney's fees in labor cases: CSaITDArt. 111.Attorney's fees. — (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of wages recovered.(b)It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of wages, attorney's fees which exceed ten percent of the amount of wages recovered.Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:Section 8.Attorney's fees. — Attorney's fees in any judicial or administrative proceedings for the recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party.In the present case, the ten percent (10%) attorney's fees awarded by the NLRC on the basis of Article 111 of the Labor Code

accrue to the Union's members as indemnity for damages and not to the Union's counsel as compensation for his legal services,  unless, they agreed that the award shall be given to their counsel as additional or part of his compensation; in this case  the Union bound itself to pay 10% attorney's fees to its counsel under the MOA and also gave up the attorney's fees awarded to the Union's members in favor of their counsel. This is supported by Borela's affidavit which stated that "[t]he 10% attorney's fees paid by the members/employees is separate and distinct from the obligation of the company to pay the 10% awarded attorney's fees which we also gave to our counsel as part of our contingent fee agreement."  The limit to this agreement is that the indemnity for damages imposed by the NLRC on the losing party ( i.e., the Company) cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an additional grant of attorney's fees, in violation of the ten percent (10%) limit under Article 111 of the Labor Code since it rests on an entirely different legal obligation than the one contracted under the MOA. Simply stated, the attorney's fees contracted under the MOA do not refer to the amount of attorney's fees awarded by the NLRC; the MOA provision on attorney's fees does not have any bearing at all to the attorney's fees awarded by the NLRC under Article 111 of the Labor Code. Based on these considerations, it is clear that the CA erred in ruling that the LA's award of attorney's fees violated the maximum limit of ten percent (10%) fixed by Article 111 of the Labor Code.

Special Types of Workers

Marites Bernardo, et al. vs. NLRC and Far East Bank and Trust Company[310 SCRA 186 July 12, 1999]

Facts:Complainants numbering 43 are deaf-mutes who were hired on various periods from 1988 to 1993 by respondent Far East Bank

and Trust Co. as Money Sorters and Counters through a uniformly worded agreement called ‘Employment Contract for Handicapped Workers’.   The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one month, after which the employer shall determine whether or not they should be allowed to finish the 6-month term of the contract.   Furthermore, the employer may terminate the contract at any time for a just and reasonable cause.  Unless renewed in writing by the employer, the contract shall automatically expire at the end of the term. Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the contracts of 37 of them. 

Disclaiming that complainants were regular employees, respondent Far East Bank and Trust Company maintained that complainants who are a special class of workers – the hearing impaired employees were hired temporarily under [a] special employment arrangement which was a result of overtures made by some civic and political personalities to the respondent Bank.

Issues:

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Whether or not petitioners became regular employees.

SC Ruling:The petition is meritorious.  However, only the employees, who worked for more than six months and whose contracts were renewed are

deemed regular.  Hence, their dismissal from employment was illegal. Though the stipulations in the employment contracts indubitably conform with Article 80 of the Labor Code, succeeding events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons), however, justify the application of Article 280 of the Labor Code. This Magna Carta mandates that a qualified disabled employee should be given the same terms and conditions of employment as a qualified able-bodied person.  Section 5 of the Magna Carta provides: Equal Opportunity for Employment.—No disabled person shall be denied access to opportunities for suitable employment.  A qualified disabled employee shall be subject to the same terms and conditions of employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able bodied person.” Thus, once they have attained the status of regular workers, they should be accorded all the benefits granted by law, notwithstanding written or verbal contracts to the contrary.  This treatment is rooted not merely on charity or accommodation, but on justice for all.

In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work.   The eloquent proof of this statement is the repeated renewal of their employment contracts and the hiring of others which lead to the conclusion that their tasks were beneficial and necessary to the bank and more importantly that they were qualified to perform the responsibilities of their positions.  In other words, their disability did not render them unqualified or unfit for the tasks assigned to them.   This fact necessarily removes the employment contracts from the ambit of Article 80.  Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code, which provides: Regular and Casual Employment. -- The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph:  Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

Moreover, the test of whether an employee is regular was laid down in De Leon v. NLRC, in which this Court held: “The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer.  The test is whether the former is usually necessary or desirable in the usual business or trade of the employer.  The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety.  Also if the employee has been performing the job for at least one year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business.  Hence, the employment is considered regular, but only with respect to such activity, and while such activity exists.”

As held by the Court, “Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum.” The contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees’ fitness for the job.   When the bank renewed the contract after the lapse of the six-month probationary period, the employees thereby became regular employees. No employer is allowed to determine indefinitely the fitness of its employees.

As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services may be terminated only for a just or authorized cause.  Because respondent failed to show such cause, these twenty-seven petitioners are deemed illegally dismissed and therefore entitled to back wages and reinstatement without loss of seniority rights and other privileges. Considering the allegation of respondent that  the job of money sorting is no longer available because it has been assigned back to the tellers to whom it originally belonged, petitioners are hereby awarded separation pay in lieu of reinstatement.

Because the other sixteen worked only for six months, they are not deemed regular employees and hence not entitled to the same benefits.

Employment of Women

Philippine Telegraph and Telephone Company vs. NLRC and Grace de Guzman[272 SCRA 596 May 23, 1997]

Facts:Grace de Guzman was initially hired by PT&T as a reliever (Supernumerary Project Worker) for a fixed period from November 21,

1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave. Under the Reliever Agreement she signed, her employment was to be immediately terminated upon expiration of the agreed period. From June 10, 1991 to July 1, 1991 and from July 19, 1991 to August 8, 1991, De Guzman’s services as reliever were again engaged in replacement of one Erlinda F. Dizon who went on leave during both periods. After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated. On September 2, 1991, de Guzman was asked to join the company as a probationary employee for 150 days. In the application form, she indicated that her civil status was single although she had contracted marriage a few months earlier and appears that she had made the same representation in the two successive reliever agreements. When PT&T learned about it, de Guzman was required to explain and was reminded about the company’s policy of not accepting married women for employment. De Guzman alleged she was unaware of PT&T’s policy regarding married women at the time and had not deliberately hidden her true civil status. De Guzman was dismissed which she contested by initiating a complaint for illegal dismissal.

Issue:Whether or not the dismissal of the Grace de Guzman on the account of her married status against the company policy of PT&T was lawful.

SC Ruling:Court ruled that the dismissal was unlawful and violative of Art. 36 of the Labor Code –Stipulation against marriage. Court ruled that

petitioner’s policy of not accepting or considering as disqualified from work any woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution. Contrary to PT&T’s assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of the company’s policy that married women are not qualified for employment in PT&T, and not merely because of her supposed acts of dishonesty.

The government abhors any stipulation or policy in the nature of that adopted by PT&T. The Labor Code states, in no uncertain terms, as follows:

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ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman shall not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.PT&T’s policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from

any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law, morals, good customs, public order, or public policy. Carried to its logical consequences, it may even be said that PT&T’s policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage.

Del Monte Philippines, Inc. vs. Lolita Velasco[G.R. No. 153477 March 6, 2007]

Facts: Lolita M. Velasco (respondent) started working with Del Monte Philippines (petitioner) on October 21, 1976 as a seasonal employee

and was regularized on May 1, 1977. Her latest assignment was as Field Laborer.On June 16, 1987, respondent was warned in writing due to her absences. On May 4, 1991, respondent, thru a letter, was again warned

in writing by petitioner about her absences without permission and a forfeiture of her vacation leave entitlement for the year 1990-1991 was imposed against her.

On September 14, 1992, another warning letter was sent to respondent regarding her absences without permission during the year 1991-1992. Her vacation entitlement for the said employment year affected was consequently forfeited.

In view of the said alleged absences without permission, on September 17, 1994, a notice of hearing was sent to respondent notifying her of the charges filed against her for violating the Absence Without Official Leave rule: that is for excessive absence without permission on August 15-18, 29-31 and September 1-10, 1994. The hearing was set on September 23, 1994.

Respondent filed a case for illegal dismissal against petitioner asserting that her dismissal was illegal because she was on the family way suffering from urinary tract infection, a pregnancy-borne, at the time she committed the alleged absences.

Issue: Whether or not the employment of respondent had been validly terminated on the ground of excessive absences without

permission.

SC Ruling: The Court agrees with the CA in concluding that respondent’s sickness was pregnancy-related and, therefore, the petitioner cannot

terminate respondent’s services because in doing so, petitioner will, in effect, be violating the Labor Code which prohibits an employer to discharge an employee on account of the latter’s pregnancy.Art. 137. Prohibited acts. It shall be unlawful for any employer:

(1) To deny any woman employee the benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided under this Code;(2) To discharge such woman on account of her pregnancy, while on leave or in confinement due to her pregnancy; or(3) To discharge or refuse the admission of such woman upon returning to her work for fear that she may again be pregnant. The Court is convinced that the petitioner terminated the services of respondent on account of her pregnancy which justified her

absences and, thus, committed a prohibited act rendering the dismissal illegal.

Employment of Children

Employment of Househelper

Ultra Villa Food Haus, and/or Rosie Tio vs. Renato Geniston[309 SCRA 17 June 23, 1999]

Facts:Renato Geniston,private respondent herein filed a complaint for illegal dismissal againtsthe Ultra Vires Food Haus restaurant and/or

its alleged owner Rosie Tio. Private respondent alleged that he was employed as a "do it all guy," acting as waiter, driver, and maintenance man, in said restaurant. His employment therein spanned from March 1, 1989 until he was dismissed on May 13, 1992. For his services, private respondent was paid P60.00 in 1989, P70.00 in 1990, P80.00 in 1991 and P90.00 when he was dismissed in 1992. Petitioner Rosie Tio, on the other hand, maintained that private respondent was her personal driver, not an employee of the Ultra Villa Food Haus. As petitioner's personal driver, private respondent was required to report for work at 7:00 a.m. to drive petitioner to Mandaue City where petitioner worked as the Manager of the CFC Corporation. Private respondent was likewise given free meals as well as 13th month pay at the end of the year. Petitioner denied dismissing private respondent whom she claimed abandoned his job. During the elections of May 11, 1992, private respondent acted as a Poll Watcher for the National Union of Christian Democrats. Though well aware that May 12, 1992 was a holiday, petitioner called up private respondent that day to ask him to report for work as she had some important matters to attend to. Private respondent's wife, however, coldly told petitioner that private respondent was helping in the counting of ballots. Petitioner was thus forced to hire another driver to replace private respondent. Private respondent came back a week after but only to collect his salary. The Labor Arbiter concluded that private respondent, being a personal driver, was not entitled to overtime pay, premium pay, service incentive leave pay and 13th month pay. The Labor Arbiter noted Private respondent's admission that he was petitioner's driver contained in the mandatory conference order issued by the Labor Arbiter on January 10, 1994The NLRC ruled that private respondent was an employee of the Ultra Villa Food Haus.

Issues:(1) Whether private respondent was an employee of the Ultra Villa Food Haus or the personal

driver of petitioner; (2) Whether private respondent was illegally dismissed from employment.

SC Ruling:

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(1) The Supreme Court find that private respondent was indeed the personal driver of petitioner, and not an employee of the Ultra Villa Food Haus. There is substantial evidence to support such conclusion, such as Private respondent's admission during the mandatory conference that he was petitioner's personal driver, Copies of the Ultra Villa Food Haus payroll which do not contain private respondent's name and other pertinent documents. Thus, Article 141 of the Labor Code applies, which provides: Art. 141. Coverage. - This Chapter shall apply to all persons rendering services in households for compensation. "Domestic or household service" shall mean services in the employers home which is usually necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the employers household, including services of family drivers. The Labor Code is silent on the grant of overtime pay, holiday pay, premium pay and service incentive leave to those engaged in the domestic or household service. Moreover, the specific provisions of LC and Article 82, which defines the scope of the application of these provisions, expressly excludes domestic helpers from its coverage: Art. 82. Coverage. - The provision of this title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by Secretary of Labor in appropriate regulations. Clearly then, petitioner is not obliged by law to grant private respondent any of these benefits. Employing the same line of analysis, it would seem that private respondent is not entitled to13 month pay. Nevertheless, we deem it just to award private respondent 13th month pay in view of petitioner's practice of according private respondent such benefit. Indeed, petitioner admitted that she gave private respondent 13th month pay every December

(2) No. The Supreme Court disagrees with Petitioner which submits that private respondent abandoned his job, preferring to work as an election watcher instead. To constitute abandonment, two requisites must concur: (1) the failure to report to work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship as manifested by some overt acts, with the second requisite as the more determinative factor. The burden of proving abandonment as a just cause for dismissal is on the employer. Petitioner failed to discharge this burden. It is quite unbelievable that private respondent would leave a stable and relatively well paying job as petitioner's family driver to work as an election watcher. Consequently, we do not find private respondent to have abandoned his job. His dismissal from petitioner's employ being unjust, petitioner is entitled to an indemnity under Article 149 of the Labor Code: Art. 149. Indemnity for unjust termination of services. If the period of household service is fixed, neither the employer nor the househelper may terminate the contract before the expiration of the term, except for a just cause. If the househelper is unjustly dismissed, he or she shall be paid the compensation already earned plus that for fifteen (15) days by way of indemnity. If the househelper leaves without justifiable reason he or she shall forfeit any unpaid salary due him or her not exceeding fifteen (15) days.

Remington Industrial Sales Corporation vs. Erlinda Castaneda[G.R. Nos. 169295-96   November 20, 2006 ]

Facts:Erlinda alleged that she started working in August 1983 as company cook with a salary of Php 4,000.00 for Remington, a corporation

engaged in the trading business; She averred that she reported for work at the new site in Caloocan City on January 15, 1998, only to be informed that Remington no longer needed her services. Erlinda believed that her dismissal was illegal because she was not given the notices required by law; hence, she filed her complaint for reinstatement without loss of seniority rights, salary differentials, service incentive leave pay, 13 th month pay and 10% attorney’s fees.

Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic helper, not a regular employee; Erlinda worked as a cook and this job had nothing to do with Remington’s business of trading in construction or hardware materials, steel plates and wire rope products.

Issues:(1) Whether or not respondent is considered to be a regular employee or a mere domestic helper.(2) Whether or not burden of proof rests upon the employer to show that the dismissal is for a just cause.

SC Ruling: In this case, there was no allegation by respondent that complainant had ever worked in the residence of Mr. Tan. What is clear from

the facts narrated by the parties is that complainant continuously did her job as a cook in the office of respondent serving the needed food for lunch and merienda of the employees. Thus, her work as cook inured not for the benefit of the family members of Mr. Tan but solely for the individual employees of respondent.

Complainant as an employee of respondent company is even bolstered by no less than the certification dated May 23, 1997 issued by the corporate secretary of the company certifying that complainant is their bonafide employee. This is a solid evidence which the Labor Arbiter simply brushed aside. But, such error would not be committed here as it would be at the height of injustice if we are to declare that complainant is a domestic helper.

The petitioner itself admits in its position paper that respondent worked at the company premises and her duty was to cook and prepare its employees’ lunch and merienda. Clearly, the nature of respondent’s work as a cook, who caters not only to the needs of Mr. Tan and his family but also to that of the petitioner’s employees, makes her fall squarely within the definition of a regular employee.

In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a just and valid cause; failure to do so would necessarily mean that the dismissal was illegal. If doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.

The petition is denied for lack of merit.

Co vs. Vargas [GR No. 195167, November 16, 2011]Facts:

Respondent alleged that she started working at the bakeshop in October 1994 as a baker and worked from 8:00 a.m. until 8:30 p.m., Monday to Saturday. Aside from baking, respondent also served the customers and supervised the other workers in the absence of the owner. Furthermore, respondent claimed that she sometimes cooked and did the chores of a housemaid whenever the latter was not available. Respondent had a salary of P220 per day, which she received every Saturday afternoon. During the period of her employment, respondent was not given a payslip and she was never asked to sign a payroll.On 6 April 2003, petitioner Co's wife, Nely Co, told respondent to cook their lunch because the housemaid was ironing clothes. Since respondent was busy preparing customers' orders, she lost track of time and was unable to cook lunch as instructed. Irate at respondent's failure to cook, Nely Co cussed respondent and told her to leave and never to return because she was not needed anymore. Respondent was so humiliated and could no longer bear the treatment she received from her employers that she decided to take her salary and leave that same day. Respondent later filed the complaint against Nathaniel Bakeshop and its owner Fernando Co.

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The Labor Arbiter found that the place of business of petitioner is the same as his place of residence and that respondent works for petitioner as well as for his business which is based in his home. The NLRC reversed and set aside the Labor Arbiter's Decision. The Court of Appeals promulgated its Decision in favor of respondent.Issue:

Whether the "Court of Appeals erred in ruling that at the time Respondent was working with the Co family, the business was being conducted at the residence."Ruling:

The issue raised by petitioner is clearly a question of fact which requires a review of the evidence presented. The Supreme Court is not a trier of facts.  It is not the function of this Court to examine, review or evaluate the evidence all over again,  specially on evidence raised for the first time on appeal.

A petition for review under Rule 45 of the Rules of Court should cover only questions of law, thus:Section 1.Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.As a rule, the findings of fact of the Court of Appeals are final and conclusive and this Court will not review them on appeal,   subject to exceptions such as those enumerated by this Court in Development Bank of the Philippines v. Traders Royal Bank: 

The jurisdiction of the Court in cases brought before it from the appellate court is limited to reviewing errors of law, and findings of fact of the Court of Appeals are conclusive upon the Court since it is not the Court's function to analyze and weigh the evidence all over again. Nevertheless, in several cases, the Court enumerated the exceptions to the rule that factual findings of the Court of Appeals are binding on the Court: (1) when the findings are grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to that of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; or (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. 

Petitioner failed to show that this case falls under any of the exceptions. The finding of the Labor Arbiter that petitioner's bakery and his residence are located at the same place was not reversed by the NLRC.  Furthermore, the Court of Appeals upheld this finding of the Labor Arbiter.

Employment of Homeworkers

Employment of Non-Resident Aliens

Employment of Students and Working Scholar

Employment of Academic/Non-Academic Personnel in Private Educational Institution

Topic XIV. Medical, Dental and Occupational Safety

Evelyn Tolosa vs. National Labor Relations Commission[G.R. No. 149578  April 10, 2003]

Facts:Captain Virgilio Tolosa was hired by Qwana-Kaiun, through its manning agent, Asia Bulk Transport Phils. Inc., to be the master of

the Vessel named M/V Lady Dona. The vessel departed for Long Beach California, passing by Hawaii in the middle of the voyage.   At the time of embarkation, CAPT. TOLOSA was allegedly shown to be in good health.

Sometime on November 6, 1992, CAPT. TOLOSA was drenched with rainwater.   The following day, he had a slight fever and in the succeeding twelve (12) days, his health rapidly deteriorated resulting in his death on November 18, 1992.

On November 17, 1992, CAPT. TOLOSA was ‘losing resistance’ and his ‘condition was getting serious.’   At 2215 GMT, a telex was sent to ASIA BULK requesting for the immediate evacuation of CAPT. TOLOSA and thereafter an airlift was set on November 19, 1992.   However, on November 18, 1992, at 0753 GMT, CAPT. TOLOSA was officially recorded as having breathed his last.

Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a Complaint/Position Paper before the POEA (POEA Case No. 93-06-1080) against Qwana-Kaiun, thru its resident-agent, Mr. Fumio Nakagawa, ASIA BULK, Pedro Garate and Mario Asis, as respondents.

After initial hearings and submissions of pleadings, the case was however transferred to the Department of Labor and Employment, National Labor Relations Commission (NLRC), when the amendatory legislation expanding its jurisdiction, and removing overseas employment related claims from the ambit of POEA jurisdiction.  The case was then raffled to Labor Arbiter, Vladimir Sampang.

On July 8, 1997, the Labor Arbiter Vladimir P. L. Sampang, granted all the damages, (plus legal interest), as prayed for by the petitioner. 

On September 10, 1998, NLRC vacated the appealed decision dated July 8, 1997 of the Labor Arbiter and dismissed petitioner’s case for lack of jurisdiction over the subject matter of the action pursuant to the provisions of the Labor Code, as amended.

The CA ruled that the labor commission had no jurisdiction over the subject matter of the action filed by petitioner.   Her cause did not arise from an employer-employee relation, but from a quasi delict or tort.

Issue:Whether or not the NLRC has jurisdiction over the case.

SC Ruling:

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The Petition has no merit. Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of private respondents -- as employers of her husband (Captain Tolosa) -- to provide him with timely, adequate and competent medical services under Article 161 of the Labor Code:

ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency.”Likewise, she contends that Article 217 (a) (4) of the Labor Code vests labor arbiters and the NLRC with jurisdiction to award all

kinds of damages in cases arising from employer-employee relations.We disagree.  We affirm the CA’s ruling that the NLRC and the labor arbiter had no jurisdiction over petitioner’s claim for damages,

because that ruling was based on a quasi delict or tort per Article 2176 of the Civil Code. We stress that the case does not involve the adjudication of a labor dispute, but the recovery of damages based on a quasi delict.   The

jurisdiction of labor tribunals is limited to disputes arising from employer-employee relations.It must be noted that a worker’s loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or

separation pay, and other labor benefits that are generally cognized in labor disputes.   The loss of earning capacity is a relief or claim resulting from a quasi delict or a similar cause within the realm of civil law.

It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the employer-employee relation is merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort. Since petitioner’s claim for damages is predicated on a quasi delict or tort that has no reasonable causal connection with any of the claims provided for in Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts not with the NLRC or the labor arbiters.

The Petition is hereby denied, and the assailed Decision and Resolution affirmed.U-BIX CORPORATION vs. RICHEL BANDIOLA

[525 SCRA 566 June 26, 2007]

Facts:Sometime in April 1995, Bandiola was employed by U-BIX to install furniture for its customers. On 13 April 1997, Bandiola and two

other U-BIX employees were involved in a vehicular accident on their way to Baguio, where they were assigned by U-BIX to install furniture for an exhibit. As a result of the accident, Bandiola sustained a fracture on his left leg.

Bandiola and his co-employees were initially brought to the Rosario District Hospital. The next day, 14 April 1997, they were transferred to the Philippine Orthopedic Hospital (Orthopedic). After his broken leg was cemented, Bandiola was advised to go back for further medical treatment. U-BIX paid for the medical expenses incurred in both hospitals.

Bandiola claims that he asked U-BIX for financial assistance but that the latter refused. He attached the receipts, issued by Medical Center Parañaque (MCP) and Dr. Celestino Musngi, for medical expenses with a total amount of P7,742.50. He also attached a copy of the Roentgenological Report by a Radiologist in MCP. Bandiola added that he paid for other medical expenses for which no receipts were issued.

On September 1998, Bandiola filed a Complaint before the Labor Arbiter, where he alleged underpayment of salary; non-payment of overtime pay; premium pay for work performed on holidays and rest days; separation pay; service incentive leave pay; 13th month pay; and the payment of actual, moral and exemplary damages. The Labor Arbiter ordered in its Decision that respondent pay the complainant: Salary Differential, Service incentive and 13th Month pay while dismissing all other claims.

Bandiola filed an appeal before the NLRC. The NLRC amended the Decision rendered by the Labor Arbiter. It ruled that U-BIX should reimburse Bandiola the amount of P12,742.50 for the medical expenses he incurred in connection with his fractured leg. It further ruled that U-BIX is liable to pay Bandiola P25,000.00 in moral damages and P25,000.00 in exemplary damages for refusing to reimburse Bandiola for the medical expenses he incurred after it failed to report to the Social Security System (SSS) the injuries sustained by Bandiola. Thereafter, U-BIX filed a Motion for Reconsideration, which was denied by the NLRC.

On appeal, the Court of Appeals modified the NLRC Resolution. It affirmed Bandiola's entitlement to reimbursement of his medical expenses, but reduced the amount to P7,742.50, the amount of actual damages he was able to prove. It also affirmed without modification the award of moral and exemplary damages, and the monetary award granted by the Labor Arbiter.

Issue:Whether or not the Honorable Court of Appeals erred in ordering petitioner U-Bix to reimburse respondent Bandiola for the

alleged medical expenses when there was no evidence submitted by respondent in support thereof.

SC Ruling:The petition is without merit. Contrary to the arguments put forward by U-BIX, it is liable to reimburse Bandiola the amount of

P7,742.50 for medical expenses because its failure to comply with its duty to record and report Bandiola's injury to the SSS precluded Bandiola from making any claims. Moreover, U-BIX, by its own admission, reimbursed its other employees who were involved in the same accident for their medical expenses.

Clearly, the reimbursement of medical expenses for injuries incurred in the course of employment is part of the benefits enjoyed by U-BIX's employees. The only justification for its refusal to reimburse Bandiola was that he intended to defraud the company by presenting spurious receipts amounting to P7,742.50 that were allegedly issued four months before their presentation.ART. 205 RECORD OF DEATH OR DISABILITY

(a) All employers shall keep a logbook to record chronologically the sickness, injury or death of their employees, setting forth therein their names, dates and places of the contingency, nature of the contingency and absences. Entries in the logbook shall be made within five days from notice or knowledge of the occurrence of contingency. Within five days after entry in the logbook, the employer shall report to the System only those contingencies he deems to be work-connected.

(b) All entries in the employers logbook shall be made by the employer or any of his authorized official after verification of the contingencies or the employees absences for a period of a day or more. Upon request by the System, the employer shall furnish the necessary certificate regarding information about any contingency appearing in the logbook, citing the entry number, page number and date. Such logbook shall be made available for inspection to the duly authorized representatives of the System.

ART 206. NOTICE OF SICKNESS, INJURY OR DEATHNotice of sickness, injury or death shall be given to the employer by the employee or by his dependents or anybody on his behalf

within five days from the occurrence of the contingency. No notice to the employer shall be required if the contingency is known to the employer or his agents or representatives.

As a general rule, the injured employee must notify his employer, who is obligated to enter the notice in a logbook within five days after notification. Within five days after making the entry, the employer of a private company reports the work-related sickness or injury to the SSS. The claim is forwarded to the SSS, which decides on the validity of the claim. When the SSS denies the claim, the denial may be appealed to the Employees' Compensation Commission (ECC) within 30 days.

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However, the law provides an exception to the rule requiring an employee to notify his or her employer of his injuries. Under Section B of ECC Board Resolution No. 2127, issued on 5 August 1982, notice of injury, sickness or death of the employee need not be given to the employer in any of the following situations: (1) When the employee suffers the contingency within the employer's premises; (2) When the employee officially files an application for leave of absence by reason of the contingency from which he suffers; (3) When the employer provides medical services and/or medical supplies to the employee who suffers from the contingency; and (4) When the employer can be reasonably presumed to have had knowledge of the employee's contingency, in view of the following circumstances:(4.1) The employee was performing an official function for the employer when the contingency occurred; (4.2) The employee's contingency has been publicized through mass media outlets; or (4.3) The specific circumstances of the occurrence of the contingency have been such that the employer can be reasonably presumed to have readily known it soon thereafter; or (4.4) Any other circumstances that may give rise to a reasonable presumption that the employer has been aware of the contingency.

In the present case, there is no dispute that Bandiola's leg injury was sustained in the course of his employment with U-BIX. At the time of the accident, Bandiola was on the way to Baguio, where he was ordered by U-BIX to install furniture for an exhibit. Moreover, U-BIX was aware that Bandiola, as well as his other co-employees, were injured during the accident. U-BIX admitted to providing Bandiola and his co-employees with medical assistance and it even sent its representative, Rey Reynes, to Rosario District Hospital, where they were confined, and had them transferred to the Orthopedic. U-BIX was also aware that the Orthopedic instructed Bandiola to return for further medical treatment. It is implicit that Bandiola needed further treatment for his broken leg and was, thus, incapacitated to work.

Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent information in connection with the injuries sustained by Bandiola in its logbook within five days after it had known about the injuries; and to report the same to the SSS within five days after it was recorded in the logbook, in accordance with Articles 205 and 206 of the Labor Code. Had U-BIX performed its lawful duties, the SSS, or the ECC on appeal, could have properly considered whether or not Bandiola was entitled to reimbursement for his medical expenses, as well as disability benefits while he was unable to work. However, U-BIX did not present any evidence showing that it had complied with these legal requirements. It had not even replied to Bandiola's allegations in his Position Paper, dated 13 April 1998, that its employees were not even members of the SSS.

By failing to report Bandiola's injury to the SSS, U-BIX disregarded the law and its purpose; that is, to provide a proper and prompt settlement of his claims. Instead, U-BIX arrogated upon itself the duty of determining which medical expenses are proper for reimbursement. In doing so, it could unnecessarily delay and unjustifiably refuse to reimburse Bandiola for medical expenses even if they were adequately supported by receipts, as was done in this instance. The expense and delay undergone by Bandiola since 1997 in obtaining reimbursement for his medical expenses of P7,742.50 very clearly defeat the purpose of the law.

The instant Petition is denied.Ocean Builders Construction vs. Sps. Cubacub

[GR No. 150898, April 13, 2011]

Facts:Bladimir Cubacub (Bladimir) was employed as maintenance man by petitioner company Ocean Builders Construction Corp. at its

office in Caloocan City.On April 9, 1995, Bladimir was afflicted with chicken pox. He was thus advised by petitioner Dennis Hao (Hao), the company's

general manager, to rest for three days which he did at the company's "barracks" where he lives free of charge.Three days later or on April 12, 1995, Bladimir went about his usual chores of manning the gate of the company premises and even cleaned the company vehicles. Later in the afternoon, however, he asked a co-worker, Ignacio Silangga (Silangga), to accompany him to his house in Capas, Tarlac so he could rest. Informed by Silangga of Bladimir's intention, Hao gave Bladimir P1,000.00 and ordered Silangga to instead bring Bladimir to the nearest hospital.

Along with co-workers Narding and Tito Vergado, Silangga thus brought Bladimir to the Caybiga Community Hospital (Caybiga Hospital), a primary-care hospital around one kilometer away from the office of the company.The hospital did not allow Bladimir to leave the hospital. He was then confined, with Narding keeping watch over him. The next day, April 13, 1995, a doctor of the hospital informed Narding that they needed to talk to Bladimir's parents, hence, on Silangga's request, their co-workers June Matias and Joel Edrene fetched Bladimir's parents from Tarlac. AIcaDCAt about 8 o'clock in the evening of the same day, April 13, 1995, Bladimir's parents-respondent spouses Cubacub, with their friend Dr. Hermes Frias (Dr. Frias), arrived at the Caybiga Hospital and transferred Bladimir to the Quezon City General Hospital (QCGH) where he was placed in the intensive care unit and died the following day. The death certificate issued by the QCGH recorded Bladimir's immediate cause of death as cardio-respiratory arrest and the antecedent cause as pneumonia. On the other hand, the death certificate issued by Dr. Frias recorded the causes of death as cardiac arrest, multiple organ system failure, septicemia and chicken pox.Issue:Whether or not the petitioners are guilty of negligence and if they were, can the respondents claims for damages based on torts?Ruling:To successfully prosecute an action anchored on torts, three elements must be present, viz.: (1) duty (2) breach (3) injury and proximate causation. The assailed decision of the appellate court held that it was the duty of petitioners to provide adequate medical assistance to the employees under Art. 161 of the Labor Code, failing which a breach is committed.Art. 161 of the Labor Code provides:

ART. 161.Assistance of employer. — It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency. (emphasis and underscoring supplied)

The Implementing Rules of the Code do not enlighten what the phrase "adequate and immediate" medical attendance means in relation to an "emergency."In the present case, there is no allegation that the company premises are hazardous. Neither is there any allegation on the number of employees the company has. If Hao's testimony would be believed, the company had only seven regular employees and 20 contractual employees — still short of the minimum 50 workers that an establishment must have for it to be required to have a full-time registered nurse.The Court can thus only determine whether the actions taken by petitioners when Bladimir became ill amounted to the "necessary assistance" to ensure "adequate and immediate medical . . . attendance" to Bladimir as required under Art. 161 of the Labor Code.As found by the trial court and borne by the records, petitioner Hao's advice for Bladimir to, as he did, take a 3-day rest and to later have him brought to the nearest hospital constituted "adequate and immediate medical" attendance that he is mandated, under Art. 161, to provide to a sick employee in an emergency.Chicken pox is self-limiting. Hao does not appear to have a medical background. He may not be thus expected to have known that Bladimir needed to be brought to a hospital with better facilities than the Caybiga Hospital, contrary to appellate court's ruling. aDSAEIAT ALL EVENTS, the alleged negligence of Hao cannot be considered as the proximate cause of the death of Bladimir. Proximate cause is that which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces injury, and without which, the result would not have occurred.

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IN FINE, petitioner company and its co-petitioner manager Dennis Hao are not guilty of negligence.

Topic XV. Migrant Workers' Act and Overseas Filipino Act of 1995 & Recruitment and Placement

JSS Indochina Corporation vs. Gerardo R. Ferrer, et al.[ G.R. No. 156381 October 14, 2005]

Facts:Petitioner hired the respondents as construction workers for its Taiwan-based principal employer Sr Formosa Plastics Corp. (FPC).

Pursuant to the parties’ contracts of employment, each respondent would receive monthly salary of NT$15,360. Their employment covered a period of 1 year of from May 1, 1997 to May 1, 1998.

As scheduled, respondents, along with other Filipino contract workers, were deployed to Taiwan. But upon their arrival, only 20 workers, excluding respondents, were employed as construction workers at FPC. Aggrieved, they were assisted by the officials of Manila Economic Cultural Office who directed them to sign affidavits alleging that they were assigned, not as construction workers for FPC, but as cable tray I pipe tracts workers at Shin Kwan Enterprises Co., Ltd. They were then repatriated to the Philippines.

Thus, respondents filed a complaint for illegal dismissed, payment of salaries, refund of placement fee, damages and attorney’s fees with the Office of the Labor Arbiter against JSS Indochina Corp.

SC Ruling: The decision to resign from their employment were made by force of circumstances not attributable to their own fault, and it was not

their fault that they were left out from among those workers who were considered for employment by the foreign employer. Evidently, petitioner is guilty for breach of contract because upon arrival of respondents at the jobsite, there was no employer on hand, which then made respondents to decide to go home to the Philippines. Therefore, the termination of respondent’s services is, undoubtedly, without just or valid cause. Consequently, the respondents are entitled to an amount representing their 3 months salaries considering that their employment contract has a term of exactly 1 year, plus a full refused of their placement fee with interest at 12% per annum.

Such award is in accordance to Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act, which provides: “SECTION 10. Money claims.-xxx

xxxIn case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the

worker shall be entitled to the full reimbursement of his placement fee with 12% interest per annum, plus his salaries for the unexpired portion of his employment contract or for 3 months for every year of the unexpired term, whichever is less.

People of the Philippines vs. Capt. Florencio O. Gasacao[G.R. No. 168445 November 11, 2005]

Facts:Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed local manning agency, while his nephew and

co-accused, Jose Gasacao, was the President. As the crewing manager, Capt. Gasacao's duties included receiving job applications, interviewing the applicants and informing them of the agency's requirement of payment of performance or cash bond prior to deployment. On August 4, 2000, Capt. Gasacao and Jose Gasacao were charged with Large Scale Illegal Recruitment defined under Section 6, paragraphs (a), (l) and (m) of Republic Act (RA) No. 8042 or the Migrant Workers and Overseas Filipinos Act of 1995, and penalized under Section 7(b) of the same law, before the RTC of Quezon City. Only Capt. Gasacao was arrested while Jose Gasacao remained at large. When arraigned, appellant pleaded not guilty to the offense charged. Thereafter, trial on the merits ensued. On March 5, 2001, the RTC of Quezon City, rendered its Joint Decision convicting appellant of Large Scale Illegal Recruitment.

Issue:Whether or not Capt. Gasacao was guilty beyond reasonable doubt of the crime of large scale illegal recruitment

SC Ruling:RA No. 8042 defines illegal recruitment as follows:

II. ILLEGAL RECRUITMENTSec. 6. DEFINITIONS. – For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services, promising or advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated under Article 13(f) of Pd 442, as amended: Provided, that such non-licensee or non-holder who, in any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by any persons, whether a non-licensee, non-holder, licensee or holder of authority.

(a) To charge or accept directly or indirectly any amount greater than the specified in the schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than that actually received by him as a loan or advance; xxx xxx xxx(l) Failure to actually deploy without valid reason as determined by the Department of Labor and Employment; and (m) Failure to reimburse expenses incurred by the workers in connection with his documentation and processing for purposes of deployment, in cases where the deployment does not actually take place without the worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered as offense involving economic sabotage. Illegal recruitment is deemed committed by a syndicate carried out by a group of 3 or more persons conspiring or confederating with one another. It is deemed committed in large scale if committed against 3 or more persons individually or as a group. A license is a document issued by the DOLE authorizing a person or entity to operate a private employment agency, while an authority is a document issued by the DOLE authorizing a person or association to engage in recruitment and placement activities as a private recruitment entity. However, it appears that even licensees or holders of authority can be held liable for illegal recruitment should they commit any of the above-enumerated acts. Thus, it is inconsequential that appellant committed large scale illegal recruitment while Great Eastern Shipping Agency, Inc. was holding a valid authority. We thus find that the court below committed no reversible error in not appreciating that the manning agency

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was a holder of a valid authority when appellant recruited the private complainants. There is no merit in appellant's contention that he could not be held liable for illegal recruitment since he was a mere employee of the manning agency, pursuant to Section 6 of RA No. 8042 which provides: The persons criminally liable for the above offenses are the principals, accomplices and accessories. In case of juridical persons, the officers having control, management or direction of their business shall be liable. Contrary to Capt. Gasacao's claim, he is not a mere employee of the manning agency but the crewing manager. As such, he receives

job applications, interviews applicants and informs them of the agency's requirement of payment of performance or cash bond prior to the applicant's deployment. As the crewing manager, he was at the forefront of the company's recruitment activities. The foregoing testimonies of the private complainantsclearly established that Gasacao is not a mere employee of Great Eastern Shipping Agency Inc. As the crewing manager, it was appellant who made representations with the private complainants that he can secure overseas employment for them upon payment of the cash bond. It is well settled that to prove illegal recruitment, it must be shown that appellant gave complainants the distinct impression that he had the power or ability to send complainants abroad for work such that the latter were convinced to part with their money in order to be employed. Appellant's act of promising the private complainants that they will be deployed abroad within three months after they have paid the cash bond clearly shows that he is engaged in illegal recruitment.

Even assuming that Capt. Gasacao was a mere employee, such fact is not a shield against his conviction for large scale illegal recruitment. Clearly, the acts of Capt. Gasacao vis-à-vis the private complainants, either as the crewing manager of Great Eastern Shipping Agency Inc. or as a mere employee of the same, constitute acts of large scale illegal recruitment which should not be countenanced.

Although he informed them that it is optional, he collected cash bonds and promised their deployment notwithstanding the proscription against its collection under Section 60 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 which state that:

SEC. 60. Prohibition on Bonds and Deposits. – In no case shall anemployment agency require any bond or cash deposit from the worker to guarantee performance under the contract or his/her repatriation. Illegal recruitment is deemed committed in large scale if committed against three or more persons individually or as a group. In this case, five complainants testified against appellant's acts of illegalrecruitment, thereby rendering his acts tantamount to

economic sabotage.

Mercedita Acuña, et al. vs. CA and Join International Corp. and/or Elizabeth Alañon[G.R. No. 159832 May 05, 2006]

Facts:Petitioners are Filipino overseas workers deployed by private respondent Join International Corporation (JIC), a licensed recruitment

agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in Taiwan, Republic of China, under a uniformly-worded employment contract for a period of two years. Herein private respondent Elizabeth Alañon is the president of Join International Corporation. After their papers were processed, petitioners claimed they signed a uniformly-worded employment contract with private respondents which stipulated that they were to work as machine operators with a monthly salary of NT$15,840.00, exclusive of overtime, for a period of two years. On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the job site, a factory owned by 3D, they were made to sign another contract which stated that their salary was only NT$11,840.00. They were likewise informed that the dormitory which would serve as their living quarters was still under construction. They were requested to temporarily bear with the inconvenience but were assured that their dormitory would be completed in a short time The petitioners averred that on December 16, 1999, due to unbearable working conditions, they were constrained to inform management that they were leaving. They booked a flight home, at their own expense. Before they left, they were made to sign a written waiver. In addition, petitioners were not paid any salary for work rendered on December 11-15, 1999.

Issue: Whether petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits plus damages.

SC Ruling:As we have held previously, constructive dismissal covers the involuntary resignation resorted to when continued employment

becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee.

In this case, the appellate court found that petitioners did not deny that the accommodations were not as homely as expected. In the petitioners’ memorandum, they admitted that they were told by the principal, upon their arrival, that the dormitory was still under construction and were requested to bear with the temporary inconvenience and the dormitory would soon be finished. We likewise note that petitioners did not refute private respondents’ assertion that they had deployed approximately sixty other workers to their principal, and to the best of their knowledge, no other worker assigned to the same principal has resigned, much less, filed a case for illegal dismissal.

To our mind these cited circumstances do not reflect malice by private respondents nor do they show the principal’s intention to subject petitioners to unhealthy accommodations. Under these facts, we cannot rule that there was constructive dismissal.

Asian International Manpower Services, Inc. (AIMS) vs. CA and Aniceta Lacerna[ G.R. No. 169652 October 09, 2006]

Facts:Private respondent Lacerna alleges the facts of the case being: That she was hired by Proxy Maid Services Centre (hereinafter referred

to as Proxy) thru petitioner AIMS, a recruitment entity in the Philippines; That on February 10, 2000, she signed an employment contract as a domestic helper of Low See Ting, who later on cancelled the same sometime in March 2000; That subsequent to the cancellation of the contract, Lacerna, with the assurance of a new employer from AIMS, proceeded to Hongkong, and that upon her arrival, she was fetched by Tan Kmin Shwe Lin Charmain, her new employer; That on May 2, 2000, she was dismissed by Charmain on the ground of “difficulty in communication”; That on May 20, 2000, she was transferred by Proxy to Tam Ching-yee, Donna, who later on dismissed her without stating the reason(s) thereof; Proxy neither gave her an explanation regarding this; That on July 1, 2000, she agreed to take a three-day trial period with another employer, Daisy Lee; that before she could sign her contract with Daisy Lee, she was denied of her request for change of employer by the Hongkong government and was advised instead to submit a fresh application with her country of domicile. That upon her return to the Philippines, she was informed by AIMS that Daisy Lee was no longer interested in hiring her; and, That upon knowing this, she demanded the return of her placement fee but was denied; Hence, this instant case of illegal dismissal.

Petitioner AIMS on the other hand, alleges the facts to be: That Lacerna resigned after working for 5 days as a domestic worker for Low See Ting, as evidenced by her resignation letter; That Proxy paid her wages and return ticket to the Philippines, but respondent refused to be repatriated; That thereafter, Proxy assisted her to be employed by Charmain, who subsequently dismissed her for difficulty in communication; and,

That the Hongkong government permitted her an extension of her stay in Hongkong, but that this was her last chance.

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Respondent argued that her first employer was Chairman, and not Low See Ting, as she never got the chance to work for the latter. She also contend that the signature on the resignation and on the receipt of payment was not hers, nor was the handwriting. On June 28, 2001, the Labor Arbiter ruled in favor of petitioner AIMS, stating that Lacerna was not illegally dismissed as shown by her resignation letter. However, this decision was later on reversed by the Court of Appeals due to the lack of just or authorized cause to justify Lacerna’s dismissal. The court also ruled that AIMS is solidarily liable with Proxy, as provided by Sec. 10 of RA 8042, stating that the liability of the principal employer and the recruitment agency shall not be affected by any substitution, amendment or modification of the contract of employment.

Issue:Was Lacerna illegally dismissed? If yes, may AIMS be held liable for the monetary claims of Lacerna?

SC Ruling:The High Court rules in the affirmative for both questions.(1) There is no dispute that the last employer of Lacerna was Donna and not Daisy Lee because the Hong Kong government directed

her repatriation before she could sign her contract with the latter. In dismissing her, Donna gave no reason for her termination. Neither did Proxy explain the ground for her dismissal. And where there is no showing of a clear, valid, and legal cause for the termination, the law considers the matter, a case of illegal dismissal.9 In termination cases involving Filipino workers recruited for overseas employment, the burden of proving just or authorized cause for termination rests with the foreign based employer/principal and the local based entity which recruited the worker both being solidarily liable for liabilities arising from the illegal dismissal of the worker. In this case, the Court of Appeals correctly declared Lacerna s termination illegal since no reason was given to justify her termination�

The employment contract signed by Lacerna, as approved by the POEA, reveals that Proxy was her designated principal employer. Since AIMS was the local agency responsible for the recruitment of domestic helpers, such as Lacerna, for Proxy, it is solidarily liable with the latter for liabilities arising from her illegal dismissal. To absolve AIMS from liability would run in contravention to the avowed policy of the state to protect the labor sector. The Court says that “the joint and solidary liability imposed by law against recruitment agencies and foreign employers is meant to assure the aggrieved worker of immediate and sufficient payment of what is due him.”

(2) As for the monetary claims, the Supreme Court cited Section 10 of R.A. No. 8042, which provides that: The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a condition precedent for its approval. The performance bond to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be affected by any substitution, amendment or modification made locally or in a foreign country of the said contract.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of the employment contract or for three (3) months for every year of the unexpired term, whichever is less.

As such, Lacerna is entitled to the full reimbursement of her placement fee with interest ate 12% per annum, plus salaries for the unexpired portion of her employment contract, or for 3 months for every year of the unexpired term, whichever is less. But the award for moral and exemplary damages cannot be credited in as much as Lacerna failed to prove that AIMS and Proxy are guilty of bad faith.

Corazon C. Sim vs. NLRC and Equitable PCI-Bank[ G.R. NO. 157376 October 02, 2007]

Facts:Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging that she was initially employed by Equitable

PCI-Bank (respondent) in 1990 as Italian Remittance Marketing Consultant to the Frankfurt Representative Office. Eventually, she was promoted to Manager position, until September 1999, when she received a letter from Remegio David -- the Senior Officer, European Head of PCIBank, and Managing Director of PCIB- Europe -- informing her that she was being dismissed due to loss of trust and confidence based on alleged mismanagement and misappropriation of funds.

Issue:Whether or not the Labor Arbiter has jurisdiction over the case.

SC Ruling:The rule is that the Court is bound by the findings of facts of the Labor Arbiter or the NLRC, unless it is shown that grave abuse of

discretion or lack or excess of jurisdiction has been committed by said quasi-judicial bodies. The Court will not deviate from said doctrine without any clear showing that the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft of sufficient substantiation.

The Court notes palpable error in the Labor Arbiter's disposition of the case, which was affirmed by the NLRC, with regard to the issue on jurisdiction. It was wrong for the Labor Arbiter to rule that “labor relations system in the Philippines has no extra-territorial jurisdiction.

Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the National Labor Relations Commission, viz.:ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this

Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: (1) Unfair labor practice cases; (2) Termination disputes; (3) If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay, hours of work and other terms and conditions of employment; (4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; (5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and (6) Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount of exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.(b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995, provides:SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral,

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exemplary and other forms of damages.Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 provides that the Labor Arbiters of the NLRC

shall have the original and exclusive jurisdiction to hear and decide all claims arising out of employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of damages, subject to the rules and procedures of the NLRC.

Under these provisions, it is clear that labor arbiters have original and exclusive jurisdiction over claims arising from employer-employee relations, including termination disputes involving all workers, among whom are overseas Filipino workers. In Philippine National Bank v. Cabansag, the Court pronounced: x x x Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. For the State assures the basic rights of all workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws “which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determination or conventions agreed upon in a foreign country.”

Bahia Shipping Services, Inc. vs. Reynaldo Chua[G.R. No. 162195 April 08, 2008]

Facts:Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping Services, Inc., as a restaurant waiter

on board a luxury cruise ship liner M/S Black Watch pursuant to a Philippine Overseas Employment Administration (POEA) approved employment contract dated October 9, 1996 for a period of nine (9) months from October 18, 1996 to July 17, 1997. On October 18, 1996, the private respondent left Manila for Heathrow, England to board the said sea vessel where he will be assigned to work.

On February 15, 1997, the private respondent reported for his working station one and one-half hours late. On February 17, 1997, the master of the vessel served to the private respondent an official warning-termination form pertaining to the said incident. On March 8, 1997, the vessel's master, ship captain Thor Fleten conducted an inquisitorial hearing to investigate the said incident. Thereafter, on March 9, 1997, private respondent was dismissed from the service on the strength of an unsigned and undated notice of dismissal. An alleged record or minutes of the said investigation was attached to the said dismissal notice.

On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other monetary claims, which case was assigned to Labor Arbiter Manuel M. Manansala.

Issues:1. Whether or not respondent is entitled to overtime pay which was incorporated in his award for the unexpired portion of the contract

despite the fact that he did not render overtime work; and 2. Whether or not it is proper for the NLRC to award money claims despite the fact that the NLRC decision, and affirmed by the Court of

Appeals, did not state clearly the facts and the evidence upon which such conclusions are based.

SC Ruling:It being settled that the dismissal of respondent was illegal, it follows that the latter is entitled to payment of his salary for the

unexpired portion of his contract, as provided under Republic Act (R.A.) No. 8042, considering that his employment was pre-terminated on March 9, 1997 or four months prior to the expiration of his employment contract on July 17, 1997.

However, the LA limited the award to an amount equivalent to respondent's salary for three months. The NLRC affirmed said award but deducted therefrom his salary for one day as penalty for the tardiness incurred. The CA affirmed the one-day salary deduction imposed by the NLRC but removed the three months - salary cap imposed by the LA. In effect, as this particular monetary award now stands, it is to be computed based on the salary of respondent covering the period March 9, 1997 to July 17, 1997, less his salary for one day.

Petitioner questions the CA for lifting the three-month salary cap, pointing out that the LA and NLRC decisions which imposed the cap can no longer be altered as said decisions were not questioned by respondent.

Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and can no longer obtain from the appellate court any affirmative relief other that what was already granted under said judgment. However, when strict adherence to such technical rule will impair a substantive right, such as that of an illegally dismissed employee to monetary compensation as provided by law, then equity dictates that the Court set aside the rule to pave the way for a full and just adjudication of the case.

The Court has consistently applied the foregoing exception to the general rule. It does so yet again in the present case.Section 10 of R.A. No. 8042, entitles an overseas worker who has been illegally dismissed to "his salaries for the unexpired portion of

the employment contract or for three (3) months for every year of the unexpired term, whichever is less."The CA correctly applied the interpretation of the Court in Marsaman Manning Agency, Inc. v. National Labor Relations Commission

that the second option which imposes a three months � salary cap applies only when the term of the overseas contract is fixed at one year or longer; otherwise, the first option applies in that the overseas worker shall be entitled payment of all his salaries for the entire unexpired period of his contract.

In Skippers Pacific, Inc. v. Mira,wherein the overseas contract involved was only for six months, the Court held that it is the first option provided under Section 10 of R.A. No. 8042 which is applicable in that the overseas worker who was illegally dismissed is entitled to payment of all his salaries covering the entire unexpired period of his contract. The CA committed no error in adhering to the prevailing interpretation of Section 10 of R.A. No. 8042.

Finally, the Court comes to the last issue on whether in the computation of the foregoing award, respondent's "guaranteed overtime" pay amounting to US$197.00 per month should be included as part of his salary. Petitioner contends that there is no factual or legal basis for the inclusion of said amount because, after respondent's repatriation, he could not have rendered any overtime work.

This time, petitioner's contention is well-taken. The Court had occasion to rule on a similar issue in Stolt-Nielsen Marine Services (Phils.), Inc. v. National Labor Relations

Commission, where the NLRC was questioned for awarding to an illegally dismissed overseas worker fixed overtime pay equivalent to the unexpired portion of the latter's contract. In resolving the question, the Court, citing Cagampan v. National Labor Relations Commission, held that although an overseas employment contract may guarantee the right to overtime pay, entitlement to such benefit must first be established, otherwise the same cannot be allowed.

Hence, it being improbable that respondent rendered overtime work during the unexpired term of his contract, the inclusion of his "guaranteed overtime" pay into his monthly salary as basis in the computation of his salaries for the entire unexpired period of his contract has no factual or legal basis and the same should have been disallowed.

Marciano L. Masangcay vs. Trans-Global Maritime Agency, Inc. and Ventnor Navigation, Inc.

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[G. R. No. 172800 October 17, 2008]

Facts:

On September 2, 2002, Marciano Masangcay was hired by Ventnor (a foreign company based in Liberia and engaged in maritime commerce), through its manning agent, Trans-Global (a corporation organized and existing under Philippine laws), as an oiler on M/T Eastern Jewel, an oil tanker. His employment was to run for a period of seven (7) months. He was to receive, inter alia, a basic monthly salary of US$445.00. While on board M/T Eastern Jewel, Marciano Masangcay noticed a “reddish discoloration of his urine upon micturation (urination). Masangcay was brought to the Fujairah Hospital, Fujairah, United Arab Emirates, because of lower abdominal pain and left loin pain of ten (10) days duration with difficulty in urinating. He was advised surgery but opted to be repatriated back to the Philippines. On repatriation, he was confined at Makati Medical Center on October 8, 2002 where he underwent ESWL, left. On December 17-23, 2003, he was confined at National Kidney Institute and he underwent right ureterolithotomy

Dr. dela Cruz pronounced Masangcay fit to resume work as all his laboratory examinations showed normal results. Accordingly, on 30 January 2003, Trans-Global’s designated physician, Dr. Barrientos of the Associated Medical & Clinical Services, Inc., declared Masangcay fit to go back to work after a regular medical examination and pegged the disability period of the latter to be from 3 October 2002 until 3 February 2003.

Trans-Global, in behalf of Ventnor, paid Masangcay his full 120 days Sick Leave pay of Ninety Five Thousand Five Hundred Sixty Four and 52/100 (P95,564.52) Pesos representing One Thousand Seven Hundred Seventy Nine Dollars and 60/100 (US$1,779.60) U.S. Dollars, as well as all his medical and hospital expenses, professional fees of his attending physicians, the total amount of which reached One Hundred Seventy Four Thousand Seventy Five and 10/100 (P174,075.10) Pesos.

Masangcay was asked to report back to the office of Trans-Global for deployment line-up. He was also asked to undergo medical examination in view of his impending deployment. He was informed by the Port Captain that he can no longer be deployed due to negative reports about him coming from its principal, Ventnor.

More than six months later, armed with a Medical Certificate issued by one Dr. Efren R. Vicaldo (Dr. Vicaldo), a cardiologist, Masangcay instituted a complaint against Trans-Global and Ventnor, including Trans-Global’s President, Michael Estaniel, before the National Labor Relations Commission (NLRC) for the payment of disability benefit, damages and attorney’s fees.

Dr. Vicaldo justified the finding of Impediment Grade III (78.36%) in this wise: Masangcay is now unfit to resume work as seaman in any capacity. His illness is considered work aggravated. He needs regular monitoring of his renal function for deterioration and possible recurrence of kidney stones. His right kidney is non-functioning and his left kidney has impaired function. There’s a likelihood that he would need dialysis in the future. He cannot land a gainful employment given his medical background.

Masangcay is claiming that his disability was contracted during the term of his Contract of Employment , therefore claiming benefit under Section 20(b), paragraph 5 of the Philippine Overseas Employment Administration (POEA) Revised Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels, as amended by Memorandum Circular No. 55, Series of 1996, which is deemed integrated in every contract of employment of Filipino seafarers on ocean-going vessels.

Trans-Global, Ventnor, and Estaniel, countered that Masangcay had fully recovered and was pronounced fit for employment, his claim for disability benefits has no basis” ;the right to compensation for disability arises only when it is shown that the seafarer is disabled on account of an illness or injury suffered while in the employ of his employer”.

15 April 2004, Labor Arbiter Daisy G. Cauton-Barcelona found Masangcay’s complaint meritorious and ordered Trans-Global, Ventnor, and Estaniel to pay Masangcay the amount of Thirty Nine Thousand One Hundred Eighty U.S. Dollars (US$39,180.00) representing the latter’s disability benefit at Impediment Grade III (78.36%). Labor arbiter opined that the compensability of an ailment does not depend on whether or not the injury or disease was pre-existing at the time of employment, but rather, if the injury or disease was related to or was aggravated by Masangcay’s work. The labor arbiter gave great weight to the medical opinion of Dr. Vicaldo rather than that of Trans-Global’s designated physicians considering that “respondents’ accredited doctors’ opinion has (sic) more than meets the eye and should not be taken at face value. For most often than not, they are palpably self-serving and bias (sic) in favor of the employer and certainly cannot be considered independent.”

Trans-Global and Ventnor filed an original action for certiorari before the Court of Appeals imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the NLRC for affirming the decision of the labor arbiter.

On 10 February 2006, the appellate court granted the petition for certiorari of Trans-Global and Ventnor. It nullified and set aside the challenged Resolutions of the NLRC for having been issued in grave abuse of discretion amounting to lack or excess of jurisdiction, considering that the claimant was already full (sic) paid the benefits to which he was lawfully entitled to.

The Court of Appeals reasoned in its decision that, the Labor Arbiter, the NLRC arbitrarily set aside the fact that Masangcay was precluded from any entitlement to disability benefits after he was already fully recovered and declared to be fit for employment by the company-designated physician. The right to compensation for disability arises only when the seafarer has been disabled on account of his illness or injury that he suffered while in the employ of his employer; otherwise, gross injustice would result to the petitioners.

The NLRC could not simply sweep away the opinions of Dr. Barrientos and Dr. Agustin, as well s that of Dr. dela Cruz, by generalizing that company-designated or company-referred physicians were often biased in favor of the company and that their opinions were self-serving without specifically indicating how their specific findings were biased and why such opinions were self-serving. The generalization was, at the very least, most unfair to Dr. Agustin and Dr. dela Cruz, specialists in urology that covered the ailment of Masangcay. The arbitrariness and capriciousness became even more blatant in the face of the fact that such company-designated or company-referred physicians had themselves personally attended to, examined and treated Masangcay in a professional capacity. Thereby, their findings and conclusions were far from speculation and conjecture.

Issue: Whether or not Marciano Masangcay can legally demand and claim disability benefits from Trans- Global and Ventnor for an illness

that became apparent during his contract of employment with the shipping company.

SC Ruling:As set forth in Sec. 20(b) of the POEA Standard Employment Contract, the employer-vessel owner/principal shall be liable for

disability benefits to the seafarer only in case the latter was declared disabled by the company designated physician in view of a work-related illness or injury that he suffered onboard the vessel. Since petitioner-seafarer was declared FIT TO WORK by the company designated physician, clearly then he is not entitled to disability benefits under the POEA Standard Employment Contract.” As with all other kinds of worker, the terms and conditions of a seafarer’s employment is governed by the provisions of the contract he signs at the time he is hired.Considering that Masangcay was employed on 3 September 2002, it is the 2000 POEA Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels that is considered appended in his contract of employment and is controlling for purposes of resolving the issue at hand and not the 1996 POEA Revised Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels as alluded to by Masangcay.

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Under Sec. 20(b), paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels, viz:SECTION 20. COMPENSATION AND BENEFITS

Seafarer , to be entitled to compensation and benefits under said provision, it is not sufficient to establish that the seafarer’s illness or injury has rendered him permanently or partially disabled, but it must also be shown that there is a causal connection between the seafarer’s illness or injury and the work for which he had been contracted for.

Masangcay must prove that he is suffering from permanent total or partial disability due to a work-related illness occurring during the term of his contract. Proof that he not only acquired or contracted his illness during the term of his employment contract is clearly not enough; must also present evidence that such infirmity was work-related, or at the very least aggravated by the conditions of the work for which he was contracted for. There is no substantiation that the progression of his ailment was brought about largely by the conditions of his job as an oiler. His medical history and/or records prior to his deployment as an oiler in M/T Eastern Jewel were neither presented nor alluded to in order to demonstrate that the working conditions on board said vessel increased the risk of contracting renal failure, chronic or otherwise. It is, therefore, highly improbable that Masangcay’s chronic renal failure developed in just a month’s time, the length of time he was on board M/T Eastern Jewel before the symptoms became

Moreover, chronic renal failure, is neither listed as a disability under Sec. 32 of the 2000 POEA Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels; nor an occupational disease under Sec. 32-A thereof, which provides for the schedule of disability or impediment for injuries suffered and diseases including occupational diseases or illness.

The only similarity between the two cases, Crystal Shipping and the present petition, is the fact that the seafarers in both have the same personal physician, Dr. Efren R. Vicaldo, a cardiologist, who declared them permanently disabled to return to work. The factual circumstances of the Crystal Shipping case are poles apart from that attendant to the case at bar. The seafarer in said case had been employed as a Chief Mate of an ocean-going vessel when he complained of coughing and hoarseness and was later diagnosed with thyroid cancer.

The company-designated physician and seafarer’s physician were both in agreement that the seafarer had been rendered disabled by his illness; they only differed in their assessments of the degree and the impediment grade of such disability in accordance with the schedule of disability or impediment for injuries suffered and diseases including occupational diseases or illness contracted under Sec. 32 of the 1996 POEA Revised Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels.

In contrast, Trans-Global and Ventnor are contesting the right of Masangcay to claim disability benefits as the company-designated physicians have certified the latter fit to return to work, not to mention the fact that he was not suffering from a work-related and/or work-aggravated illness.

All told, except for the bare assertion that he is no longer fit to work due to the illness that became manifest during his contract of employment with Trans-Global and Ventnor, Masangcay makes no allegation, much less presents no proof, that the illness was caused or aggravated by his employment.

The evidence on record is totally bare of essential facts on how he contracted or developed such disease and on how and why his working conditions increased the risk of contracting the same. Consequently, the labor arbiter and the NLRC had no basis at all to rule that Masangcay is deserving of other disability benefits espoused by Sec. 20(b), paragraph 6 of the 2000 POEA Amended Standard Terms and Conditions other than that already extended to him by Trans-Global and Ventnor.WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The assailed Decision dated 10 February 2006 and Resolution dated 30 May 2006 both of the Court of Appeals in CA-G.R. SP No. 91393 are hereby AFFIRMED. Costs against petitioner Marciano L. Masangcay.

Magsaysay Maritime Corp., et al. vs. Jaime M. Velasquez[ G.R. No. 179802 November 14, 2008]

FACTS:Jaime M. Velasquez (respondent) was hired by Magsaysay Maritime Corporation(petitioner) as second cook for its foreign principal,

co-petitioner ODF Jell ASA. The parties had a considerably long employment history covered by about ten (10) employment contracts wherein Velasquez engaged respondent’s services on board vessels owned by ODF Jell ASA.

On July 28, 2003, on board the vessel M/T Bow Favour, Jaime M. Velasquez suffered high fever and was unable to work. By the fourth day, his body temperature reached 40.9°C. His extremities were swollen and he could not walk. He also had edema in the abdominal area. Respondent was brought to a hospital in Singapore where he was confined from August 12 to October 13, 2003. Thereafter, he was repatriated to the Philippines.

It is from this point onwards that the allegations of the parties differ. Jaime M. Velasquez alleged that upon his repatriation, he was not confined to St. Luke’s Medical Center as he expected. He claimed that he was compelled to seek medical treatment from an independent doctor. On November 13, 2003, he consulted a certain Dr. Efren Vicaldo (Dr. Vicaldo) who diagnosed him to be suffering from staphylococcal bacteremia, multiple metastatic abcesses, pleural effusion and hypertension and declared his disability as Impediment Grade 1 (120%). Dr. Vicaldo further concluded that respondent was “unfit to resume work as seaman in any capacity.”

Respondent filed a claim for disability benefits, illness allowance/ reimbursement of medical expenses, damages and attorney’s fees but petitioners refused to pay.

Petitioners, on the other hand, maintained that upon respondent’s repatriation on October 13, 2003, he was immediately referred to a company designated physician for further medical care and treatment; that the initial impression was Systemic Staphylococcal Infections; Resolving; that he was under the care of said physician for three (3) months during which he underwent extensive medications and treatment; that he was admitted and confined at St. Luke’s Medical Center from October 13, 2003 to November 11, 2003; that progress reports on his recovery have been issued; that by January 5, 2004, respondent was declared as “cleared to work resumption as seafarer”; and that petitioners were the ones who shouldered respondent’s hospitalization expenses.

On March 29, 2005, the Labor Arbiter rendered a decision in favor of Jaime M. Velasquez, ordering Magsaysay Maritime Corporation and/or Conrado N. Dela Cruz and ODF Jell ASA to pay complainant Jaime M. Velasquez the amount of SIXTY TWO THOUSAND TWO HUNDRED SIXTY US DOLLARS (US$62,260.00) or its equivalent in Philippine Peso at the prevailing rate of exchange at the time of actual payment representing his disability benefits and sickness allowance and 10% of the total monetary award by way of attorney’s fees.

Magsaysay Maritime Corporation and/or Conrado N. Dela Cruz and ODF Jell ASA filed an appeal with the NLRC, alleging serious errors in the factual findings of the Labor Arbiter.NLRC made the following findings:

By way of a contrary medical finding, assail the diagnosis arrived at by the company designated physician, Dr. Natalio G. Alegre II. As noted, the findings of Dr. Efren Vicaldo, complainant’s private physician, and those of Dr. Alegre, bear consistency with each other save for his hypertensive condition. Above all these, complainant’s credibility suffered a serious setback when he declared that he was seen by Dr. Alegre only twice and that there was no treatment given to him since repatriation (Records, pp. 88-89). Records belie such assertion. Copies of the medical reports accomplished by the company accredited physician would show that he was examined and treated by the latter for no less than eight (8) times (Records, pp. 128-135).

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ISSUE:Whether or not it is the company designated physician or a private physician who should determine the disability grading or fitness

of a seafarer.

SC RULING: As gleaned therefrom, complainant was placed under the care and supervision of Dr. Alegre for about ninety (90) days, his admission

at St. Luke’s Medical Center being on 13 October 2003 and with his discharge being had only on 11 November 2003. NLRC rendered a decision reversing that of the Labor Arbiter and dismissed respondent’s complaint for lack of merit. Under the

POEA Standard Employment Contract (Article 1159, Civil Code of the Philippines). Court of Appeals rendered the herein challenged Decision setting aside the decision of the NLRC and reinstating that of the labor

arbiter. That the company-designated physician did declare that petitioner is fit to sea duty should not prejudice petitioner’s claim for disability benefits. In the first instance, it is well to note that there is doubt and question as to the accuracy of the declaration of the Dr. Alegre’s “cleared to work resumption as seafarer.” Such certification should not be taken as the only primary consideration, especially when there is contra finding by another doctor giving doubt to the findings of the company-designated physician.

As held in the case of Wallem Maritime Services, Inc. vs. NLRC, “opinions of petitioner’s doctor to this effect should not be given evidentiary weight as they are palpably self-serving and biased in favor of petitioners, and certainly could not be considered independent.”

Petitioner having substantially established that he could not able to perform the same work as he used to before his repatriation, and was found both by his independent physician and Gleneagles Hospital in Singapore suffering from severe hypertension as well as other diagnosed illnesses which were contracted as a result of his exposure to the risks involved in the performance of his job, we find the NLRC to have acted in grave abuse of discretion in reversing and setting aside the decision of the Labor Arbiter awarding disability claims to petitioner.

The POEA Contract is clear in its provisions when it provided who should determine the disability grading or fitness to work of seafarers. The POEA contract recognizes only the disability grading provided by the company-designated physicians. Section 20 B.3 of the POEA contract provides:

Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his basic wage until he is declared fit to work or the degree of permanent disability has been assessed by the company-designated physician but in no case shall exceed one hundred twenty (120) days.

For this purpose the seafarer shall submit himself to a post-employment medical examination by a company designated physician within three working days upon his return except when he is physically incapacitated to do so, in which case, a written notice to the agency within the same period is deemed as compliance. Failure of the seafarer to comply with the mandatory reporting requirement shall resort in his forfeiture of the right to claim the above benefits.

Moreover, Section 20 (B), no. 2, paragraph 2 of the POEA Contract provides:However, if after the repatriation the seafarer still requires medical attention arising from said injury or illness, he shall be so provided at cost to the employer until such time he is declared fit or the degree of his disability has been established by the company-designated physician.

These provisions clearly illustrate that respondent’s disability can only be assessed by the company-designated physician. If the company-designated physician declares him fit to work, then the seaman is bound by such declaration.Further, it should be noted that the claim for sickness and permanent disability benefits arose from the stipulations in the standard format contract of employment pursuant to a circular of the POEA. Such circular was intended for all parties involved in the employment of Filipino seamen on board any ocean-going vessel.[6] The POEA Contract, of which the parties are both signatories, is the law between them and as such, its provisions bind both of them.[7] Thus, the parties are both bound by the provisions of the POEA Contract which declares that the degree of disability or fitness to work of a seafarer should be assessed by the company-designated physician.

In German Marine Agencies v. NLRC, [8] the Court explicitly laid that it is the company-designated physician who should determine the degree of disability of the seaman or his fitness to work, thus: In order to claim disability benefits under the Standard Employment Contract, it is the “company-designated” physician who must proclaim that the seaman suffered a permanent disability, whether total or partial, due to either injury or illness, during the term of the latter’s employment. It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. There is no ambiguity in the wording of the Standard Employment Contract – the only qualification prescribed for the physician entrusted with the task of assessing the seaman’s disability is that he be “company-designated.

Again, in Benjamin L. Sarocam v. Interorient Maritime Ent., Inc., and Demaco United Ltd, [9] the Court ruled that the opinion of the company-designated physician should be upheld over that of the doctors appointed by the seafarer considering that the basis of the findings of the seafarer’s doctor are the medical findings of the company physician.

Undoubtedly, jurisprudence is replete with pronouncements that it is the company-designated physician’s findings which should form the basis of any disability claim of the seafarer. In this particular case, respondent refused to accept the assessment made by the company-designated physician that he is fit to work.

Under the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessel or the POEA Contract issued pursuant to DOLE Department Order No. 4 and POEA Memorandum Circular No. 9, both Series of 2000, respondent could not disregard the findings of the company-designated physician. Section 20-B, paragraph 3 of the POEA Contract provides.

It is beyond cavil that it is the company-designated physician who is entrusted with the task of assessing the seaman’s disability. But under the aforecited provision, when the seaman’s private physician disagrees with the assessment of the company-designated physician, as here, a third doctor’s opinion may be availed of in determining his disability. This however was not resorted to by the parties. As such, the credibility of the findings of their respective doctors was properly evaluated by the NLRC.

The Court has applied the Labor Code concept of permanent total disability to the case of seafarers. In a catena of cases,[10] the Court declared that disability should not be understood more on its medical significance but on the loss of earning capacity. Permanent total disability means disablement of an employee to earn wages in the same kind of work, or work of similar nature that he was trained for or accustomed to perform, or any kind of work which a person of his mentality and attainment could do. In addition, the Court in GSIS v. Cadiz[11] and Ijares v. CA[12] held that permanent disability is the inability of a worker to perform his job for more than 120 days, regardless of whether or not he loses the use of any part of his body.

The company-designated physician cleared respondent for work resumption upon finding that his infection has subsided after successful medication. We agree with the NLRC that the doctor more qualified to assess the disability grade of the respondent seaman is the doctor who regularly monitored and treated him. The company-designated physician possessed personal knowledge of the actual condition of respondent. Since the company-designated physician in this case deemed the respondent as fit to work, then such declaration should be given credence, considering the amount of time and effort the company doctor gave to monitoring and treating respondent’s condition. It is undisputed that the recommendation of Dr. Vicaldo was based on a single medical report which outlined the alleged findings and medical history of respondent despite the fact that Dr. Vicaldo treated or examined respondent only once.

On the other hand, the company-designated physician outlined the progress of respondent’s successful treatment over a period of several months in several reports, as can be gleaned from the record. As between the findings of the company-designated physician (Dr. Alegre)

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and the physician appointed by respondent (Dr. Vicaldo), the former deserves to be given greater evidentiary weight.All told, the Court finds and so rules that the CA committed reversible error in ignoring the medical assessment of the company-

designated physician that respondent was cleared for work resumption as a seafarer and granting respondent’s claim for disability on the basis of a single medical examination report of respondent’s appointed physician contrary to the clear, unambiguous provisions regarding disability benefit claims contained in the POEA Contract between the parties.WHEREFORE, the instant petition is GRANTED. The assailed decision of the Court of Appeals in CA-G.R. SP No. 97098 is REVERSED and SET ASIDE. The decision of the NLRC, 2nd Division, is hereby REINSTATED. SO ORDERED.

Antonio M. Serrano vs. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.[GR No. 167614 March 24, 2009]

Facts : Sailor Antonio Serrano entered into a 12-month overseas employment contract with respondents Gallant Maritime Services, Inc. and

Marlow Navigation Co., Ltd., initially signing up for the position of Chief Officer. Sailor Serrano, however, was persuaded to submit to a “downgraded” contract as Second Officer, on the assurance of eventual promotion to Chief Officer by the end of the following month. Having wandered around respondents’ ship for more than two months without being granted any promotion whatsoever, “he refused to stay on as Second Officer and was repatriated back to the Philippines,” with still nine (9) months and twenty- three (23) days left unserved. Sailor Serrano afterwards filed a complaint with the Labor Arbiter, charging respondents with constructive dismissal and demanding that he be paid the salary as corresponds to the remaining term of his contract. The Arbiter ruled for him, concluding that there was illegal dismissal; however, Sailor Serrano was only awarded with salary equivalent to 3 months. The Arbiter relied on Section 10, parag. 5 of R.A. 8042 (the Migrant Workers and Overseas Filipino Act of 1995), which puts forth that—

“In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less”.

Gritty, our man now condemns the provision as unconstitutional, wailing how it “impairs the terms of their contract, deprives them of equal protection and denies them due process.”

SC Ruling:Though it scoffed at the argument that the law unduly impairs their contract—enacted in 1995, the law is thus deemed read into the

agreement forged between the parties in 1998— the Court, with straitlaced hesitation, declared the assailed clause “ for three (3) months for every year of the unexpired term, whichever is less” unconstitutional, in that it did deny workers in similar situations (particularly OFWs) the right to equal protection and due process.

“…the subject clause creates a sub-layer of discrimination among OFWs** …those who are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries for three months only.”

Further magnifying the clause’s incompatibility with the right to equal protection of laws is the fact that it deprives overseas workers of a benefit granted without exception to domestic workers (the right to recover in cases of illegal dismissal the salary for the entire unexpired portion of the contract), with the government not being able to prove any compelling state interest warranting such damaging discrimination. As a matter of fact, before the law’s enactment, both domestic and overseas workers enjoyed the same right.

“...the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.”

Bravo, sailor. Becmen Service Exporter and Promotion Inc., vs. Sps. Cuaresma

[GR No. 182978-79 & 184298-99, April 7, 2009]

Facts:On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and Promotion, Inc.  (Becmen) to serve as

assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia (KSA), for a contract duration of three years, with a corresponding salary of US$247.00 per month.Over a year later, she died allegedly of poisoning.

Jessie Fajardo, a co-worker of Jasmin, narrated that on June 21, 1998, Jasmin was found dead by a female cleaner lying on the floor inside her dormitory room with her mouth foaming and smelling of poison.  Based on the police report and the medical report of the examining physician of the Al-Birk Hospital, who conducted an autopsy of Jasmin's body, the likely cause of her death was poisoning.

Jasmin's body was repatriated to Manila on September 3, 1998. The following day, the City Health Officer of Cabanatuan City conducted an autopsy and the resulting medical report indicated that Jasmin died under violent circumstances, and not poisoning as originally found by the KSA examining physician. The City Health Officer found that Jasmin had abrasions at her inner lip and gums; lacerated wounds and abrasions on her left and right ears; lacerated wounds and hematoma (contusions) on her elbows; abrasions and hematoma on her thigh and legs; intra-muscular hemorrhage at the anterior chest; rib fracture; puncture wounds; and abrasions on the labia minora of the vaginal area.  On March 11, 1999, Jasmin's remains were exhumed and examined by the National Bureau of Investigation (NBI). The toxicology report of the NBI, however, tested negative for non-volatile, metallic poison and insecticides.  Simplicio and Mila Cuaresma (the Cuaresmas), Jasmin's parents and her surviving heirs, received from the Overseas Workers Welfare Administration (OWWA) the following amounts: P50,000.00 for death benefits; P50,000.00 for loss of life; P20,000.00 for funeral expenses; and P10,000.00 for medical reimbursement.On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the KSA, Rajab & Silsilah Company (Rajab), claiming death and insurance benefits, as well as moral and exemplary damages for Jasmin's death. Issue:

Whether the Cuaresmas are entitled to monetary claims, by way of benefits and damages, for the death of their daughter Jasmin.Ruling:

The agreement between Jasmin and employer Rajab does not include provisions for insurance, or for accident, death or other benefits that the Cuaresmas seek to recover, and which the labor tribunals and appellate court granted variably in the guise of compensatory damages.

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However, the absence of provisions for social security and other benefits does not make Jasmin's employment contract infirm. Under KSA law, her foreign employer is not obliged to provide her these benefits; and neither is Jasmin entitled to minimum wage — unless of course the KSA labor laws have been amended to the opposite effect, or that a bilateral wage agreement has been entered into.At the time of her death, she was not on duty, or else evidence to the contrary would have been adduced. Neither was she within hospital premises at the time. Instead, she was at her dormitory room on personal time when she died. Neither has it been shown, nor does the evidence suggest, that at the time she died, Jasmin was performing an act reasonably necessary or incidental to her employment as nurse, because she was at her dormitory room. It is reasonable to suppose that all her work is performed at the Al-Birk Hospital, and not at her dormitory room.It is not fair to require employers to answer even for their employees' personal time away from work, which the latter are free to spend of their own choosing. Whether they choose to spend their free time in the pursuit of safe or perilous undertakings, in the company of friends or strangers, lovers or enemies, this is not one area which their employers should be made accountable for.However, giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it just to protect Rajab and Becmen's material interest — despite evidence to the contrary — is against the moral law and runs contrary to the good custom of not denouncing one's fellowmen for alleged grave wrongdoings that undermine their good name and honor.Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral damages, which Becmen and White Falcon are jointly and solidarily liable to pay, together with exemplary damages for wanton and oppressive behavior, and by way of example for the public good.

People of the Philippines vs. Larry “Lauro” Domingo[GR No. 181475 April 07, 2009]

FACTS:Larry "Lauro" Domingo was accused of the crime of illegal recruitment for recruiting and/or placing several workers under local or

overseas employment despite being a non-licensee or non-holder of authority from the Department of Labor and Employment. This offense involved economic sabotage, as it was committed in large scale.

Informations for 23 counts of Estafa were also filed, all of which were similarly worded but varying with respect to the name of each complainant and the amount which each purportedly gave to appellant.

Of the 23 complainants, only five testified. One complainant later recanted his testimony. The substance of their respective testimonies state that Domingo deceived the complainants by assuring them of employment abroad provided that they submit certain documents and pay the required placement fee and that complainants paid appellant the amount he asked on account of appellant’s representations which turned out to be false.

By Joint Decision dated October 19, 2004, the trial court found appellant guilty beyond reasonable doubt of Illegal Recruitment (Large Scale) and of 2 counts of Estafa

The appellate court affirmed the trial court’s decision holding that the straightforward and consistent testimonies of the complaining witnesses sufficiently supported the trial court’s conclusion that appellant undertook recruitment activities beginning September up to December 1999 in Malolos, Bulacan without the license therefor, and failed to deploy those he recruited.

As for the estafa cases, the appellate court held that the elements constituting the crime were sufficiently established.Hence, the present appeal.

SC RULING:The appeal is bereft of merit. The term "recruitment and placement" is defined under Article 13(b) of the Labor Code of the Philippines as follows:

(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not. Provided, That any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement. (Emphasis supplied)On the other hand, Article 38, paragraph (a) of the Labor Code, as amended, under which the accused stands charged, provides: Art. 38. Illegal Recruitment. - (a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of this Code. The Ministry of Labor and Employment or any law enforcement officer may initiate complaints under this Article.(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage and shall be penalized in accordance with Article 39 hereof.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group. (Emphasis supplied)

From the foregoing provisions, it is clear that any recruitment activities to be undertaken by non-licensee or non-holder of authority shall be deemed illegal and punishable under Article 39 of the Labor Code of the Philippines. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group.To prove illegal recruitment in large scale, the prosecution must prove three essential elements, to wit: (1) the person charged undertook a recruitment activity under Article 13(b) or any prohibited practice under Article 34 of the Labor Code; (2) he/she did not have the license or the authority to lawfully engage in the recruitment and placement of workers; and (3) he/she committed the prohibited practice against three or more persons individually or as a group.7

The Court finds that the prosecution ably discharged its onus of proving the guilt beyond reasonable doubt of appellant of the crimes charged.

That no receipt or document in which appellant acknowledged receipt of money for the promised jobs was adduced in evidence does not free him of liability. For even if at the time appellant was promising employment no cash was given to him, he is still considered as having been engaged in recruitment activities, since Article 13(b) of the Labor Code states that the act of recruitment may be for profit or not. It suffices that appellant promised or offered employment for a fee to the complaining witnesses to warrant his conviction for illegal recruitment.That one of the original complaining witnesses, Cabigao, later recanted, via an affidavit and his testimony in open court, does not necessarily cancel an earlier declaration. Like any other testimony, the same is subject to the test of credibility and should be received with caution. 8 For a

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testimony solemnly given in court should not be set aside lightly, least of all by a mere affidavit executed after the lapse of considerable time. In the case at bar, the Affidavit of Recantation was executed three years after the complaint was filed. It is thus not unreasonable to consider his retraction an afterthought to deny its probative value. AT ALL EVENTS, the Court finds that the prosecution evidence consisting of the testimonies of the four complainants, whose credibility has not been impaired, has not been overcome. WHEREFORE, the petition is DENIED.

ATCI Overseas Corp. et al., vs. Echin [GR No. 178551, October 11, 2010]Facts:

Respondent Echin was hired by petitioner ATCI in behalf of its principal co-petitioner, Ministry of Public Health of Kuwait, for the position of medical technologist under a two-year contract with a monthly salary of US$1,200.00.Within a year, Respondent was terminated for not passing the probationary period which was under the Memorandum of Agreement.

Ministry denied respondent’s request and she returned to the Philippines shouldering her own fair. Respondent filed with the National Labor Relations Commission (NLRC) a complaint against ATCI forillegal dismissal. Labor

Arbiter rendered judgment in favor of respondent and ordered ATCI to pay her $3,600.00, her salary for the three months unexpired portion of the contract.

ATCI appealed Labor Arbiter’s decision, however, NLRC affirmed the latter’s decision and denied petitioner ATCI’s motion for reconsideration. Petitioner appealed to the Court Appeals contending that their principal being a foreign government agency is immune from suit, and as such, immunity extended to them.

Appellate Court affirmed NLRC’s decision. It noted that under the law, a private employment agency shall assume all responsibilities for the implementation of the contract of employment of an overseas worker; hence, it can be sued jointly and severally with the foreign principal for any violation of the recruitment agreement or contract of employment.Petitioner’s motion for reconsideration was denied; hence, this present petition.Issue:

Whether or not petitioners be held liable considering that the contract specifically stipulates that respondent’s employment shall be governed by the Civil Service Law and Regulations of Kuwait.Ruling:

Court denied the petition. According to RA 8042:The obligations covenanted in the recruitment agreement entered into by and between the local agent and its foreign principal are not coterminous with the term of such agreement so that if either or both of the parties decide to end the agreement, the responsibilities of such parties towards the contracted employees under the agreement do not at all end, but the same extends up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the said recruitment agreement. In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving the foreign law.

Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreignlaw is the same as ours. Thus, we apply Philippine labor laws in determining the issues presented before us.

Skippers United Pacific vs. Doza et al., [GR No. 175558, February 8, 2012]Facts:

Petitioner deployed De Gracia, Lata and Aprosta to work on board the vessel MV Wisdom Star. On December 3 1998, Skippers alleges that De Garcia smelling strongly of alcohol, went to the cabin of Gabriel Oleszek, MV Wisdom Stars’ Master. Skippers claims that he was rude and shouted noisily to the master. De Gracia left the master‘s cabin after a few minutes and was heard shouting very loudly somewhere down the corridors. The incident was evidenced by the Captain‘s Report sent on said date.

Furthermore, Skippers also claim that on January 22, 1999, Aprosta, De Gracia, Lata and Daza arrived in the master‘s cabin and demanded immediate repatriation because they were not satisfied with the ship. De Gracia, et al. threatened that they may become crazy any moment and demanded for all outstanding payments due to them. The incident is evidenced by a telex of Cosmo ship MV Wisdom to skippers but had conflicting dates. De Gracia claims that Skippers failed to remit their respective allotments, compelling them to vent their grievances with the Romanian Seafarers Union. On January 28, 1999, the Filipino seafarers were unceremoniously discharged and immediately repatriated. Upon arrival in the Philippines, they filed a complaint for illegal dismissal with the LA.

The LA dismissed the seafarers‘complaint as the seafarers‘demand for immediate repatriation due to the dissatisfaction with the ship is considered a voluntary pre-termination of employment. Such act was deemed akin to resignation recognized under Article 285 of the LC. The LA gave credence to the telex of the master‘s report that the seafarers indeed demanded immediate repatriation.

The NLRC agreed with the LA‘s decision. The CA however reversed the LA‘s and the NLRC‘s decision. The Court deemed the telex message as a self -serving document that

does not satisfy the requirement of substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify the conclusion that petitioners indeed voluntarily demanded their immediate repatriation.Issue:

Whether or not the seafarer‘s demand for immediate repatriation can be considered an act of voluntary resignation.Ruling:

For a worker's dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive due process. Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee of the employer's decision to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted. Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause under Articles282 to 284 of the Labor Code. In this case, there was no written notice furnished to De Gracia, et al., regarding the cause of their dismissal. Cosmo ship furnished a written notice (telex) to Skippers, the local manning agency, claiming that De Gracia, et al., were repatriated because the latter voluntarily pre-terminated their contracts. This telex was given credibility and weight by the Labor Arbiter and NLRC in deciding that there was pre-termination of the employment contract "akin to resignation" and no illegal dismissal. However, as correctly ruled by the CA, the telex message is "a biased and self-serving document that does not satisfy the requirement of substantial evidence." If, indeed, De Gracia, et al., voluntarily pre-terminated their contracts, then De Gracia, et al., should have submitted their written resignations. Article 285 of the Labor Code recognizes termination by the employee of the employment contract by "serving written notice on the employer at least one (1) month in advance." Given that provision, the law contemplates the requirement of a written notice of resignation. In the absence of a written resignation, it is safe to presume that the employer terminated the seafarers. In addition, the telex message relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22 January 1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998, De Gracia, et al., were not even employed yet by the foreign principal.

International Management Services vs. Logarta [GR No. 163657, April 18, 2012]

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Facts:Recruitment agency, International Management Services (IMS), owned and operated by Marilyn C. Pascual, deployed respondent

Roel P.Logarta to work for Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection with general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco). Respondent was employed for a period of two (2) years, commencing on October 2, 1997, with a monthly salary of eight hundred US Dollars (US$800.00).On April 29, 1998, Saudi Aramco notified Petrocon that due to changes in the general engineering services work forecast for 1998, the man-hours that were formerly allotted to Petrocon is going to be reduced by 40% which constrained Petrocon to reduce its personnel. Thus, on June 1, 1998, Petrocon gave respondent a written notice informing the latter that due to the lack of project works related to his expertise, he is given a 30-day notice of termination, and that his last day of work with Petrocon will be on July 1, 1998. Petrocon also informed respondent that all due benefits in accordance with the terms and conditions of his employment contract will be paid to respondent, including his ticket back to the Philippines. Before his departure from Saudi Arabia, respondent received his final paycheck from Petrocon amounting SR7, 488.57.Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National Labor Relations Commission (NLRC), Cebu City, against petitioner as the recruitment agency which employed him for employment abroad. In filing the complaint, respondent sought to recover his unearned salaries covering the unexpired portion of his employment contract with Petrocon on the ground that he was illegally dismissed. The Labor Arbiter rendered judgment in favor of the respondent and ordered petitioner to pay the peso equivalent of US$5,600.00 based on the rate at the time of actual payment, as payment of his wages for the unexpired portion of his contract of employment. The NLRC on appealaffirmed the Labor Arbiter‘s decision but reduced the award to only US$4,800.00 or its peso equivalent at the time of payment. The CA likewise dismissed the petition and affirmed the NLRC decision.Issue:

Whether or not respondents dismissal through retrenchment illegal.Ruling:

No. Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down costs for operation particularly on salaries and wages. It is one of the economic grounds to dismiss employees and is resorted by an employer primarily to avoid or minimize business losses. Retrenchment programs are purely business decisions within the purview of a valid and reasonable exercise of management prerogative. It is one way of downsizing an employer's workforce and is often resorted to by the employer during periods of business recession, industrial depression, or seasonal fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program, or introduction of new methods or more efficient machinery or automation. It is a valid management prerogative, provided it is done in good faith and the employer faithfully complies with the substantive and procedural requirements laid down by law and jurisprudence. Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or overseas Filipino worker under Article 283 of the Labor Code. Thus, retrenchment is a valid exercise of management prerogative subject to the strict requirements set by jurisprudence, to wit:(1)That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;(2)That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;(3)That the employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2 month pay for every year of service, whichever is higher;(4)That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees' right to security of tenure; and(5)That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status,…efficiency, seniority, physical fitness, age, and financial hardship for certain workers.28Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that the first, fourth and fifth requirements were complied with by respondent's employer. However, the second and third requisites were absent when Petrocon terminated the services of respondent. As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its employees in good faith and the considerable reduction of work allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon to reduce the number of its personnel. As for the notice requirement, however, contrary to petitioner's contention, proper notice to the DOLE within 30 days prior to the intended date of retrenchment is necessary and must be complied with despite the fact that respondent is an overseas Filipino worker. In the present case, although respondent was duly notified of his termination by Petrocon 30 days before its effectivity, no allegation or proof was advanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated. Thus, this requirement of the law was not complied with. In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia, still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations. Also, respondent is entitled to the payment of his separation pay. However, this Court disagrees with the conclusion of the Labor Arbiter, the NLRC and the CA, that respondent should be paid his separation pay in accordance with the provision of Section 10 of R.A. No. 8042. A plain reading of the said provision clearly reveals that it applies only to an illegally dismissed overseas contract worker or a worker dismissed from overseas employment without just, valid or authorized cause. In the case at bar, notwithstanding the fact that respondent's termination from his employment was procedurally infirm, having not complied with the notice requirement, nevertheless the same remains to be for a just, valid and authorized cause,i.e., retrenchment as a valid exercise of management prerogative. To stress, despite the employer's failure to comply with the one-month notice to the DOLE prior to respondent’s termination, it is only a procedural infirmity which does not render the retrenchment illegal. In Agabon v. NLRC, this Court ruled that when the dismissal is for a just cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the employer should indemnify the employee for violation of his statutory rights. Consequently, it is Article 283 of the Labor Code and not Section 10 of R.A. No. 8042 that is controlling. Thus, respondent is entitled to payment of separation pay equivalent to one (1) month pay, or at least one-half (1/2) month pay for every year of service, whichever is higher. Considering that respondent was employed by Petrocon for a period of eight (8) months, he is entitled to receive one (1) month pay as separation pay. In addition, pursuant to current jurisprudence, for failure to fully comply with the statutory due process of sufficient notice, respondent is entitled to nominal damages in the amount P50,000.00.

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