July 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected July 2010 rulings of the Supreme Court of the Philippines on labor law and procedure:

Labor Law

Assumption of jurisdiction by Secretary of Labor; authority to decide on legality of dismissals arising from strike. The assumption of jurisdiction powers granted to the Labor Secretary under Article 263(g) is not limited to the grounds cited in the notice of strike or lockout that may have preceded the strike or lockout; nor is it limited to the incidents of the strike or lockout that in the meanwhile may have taken place.  As the term “assume jurisdiction” connotes, the intent of the law is to give the Labor Secretary full authority to resolve all matters within the dispute that gave rise to or which arose out of the strike or lockout, including cases over which the labor arbiter has exclusive jurisdiction.

In the present case, what the Labor Secretary refused to rule upon was the dismissal from employment of employees who violated the return to work order and participated in illegal acts during a strike. This was an issue that arose from the strike and was, in fact, submitted to the Labor Secretary, through the union’s motion for the issuance of an order for immediate reinstatement of the dismissed officers and the company’s opposition to the motion.  The dismissal issue was properly brought before the Labor Secretary and he was mistaken in ruling that the matter is legally within the exclusive jurisdiction of the labor arbiter to decide. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al. vs. Secretary of Department of Labor and Employment, et al./Triumph International (phils.), Inc. vs. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al., G.R. No. 167401, July 5, 2010.

Bargaining deadlock; award; findings of Secretary of Labor. Unless there is a clear showing of grave abuse of discretion, the Court cannot, and will not, interfere with the expertise of the Secretary of Labor. The award granted by the Labor Secretary in resolving the bargaining deadlock, drawn as they were from a close examination of the submissions of the parties, do not indicate any legal error, much less any grave abuse of discretion, and should not be disturbed. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al. vs. Secretary of Department of Labor and Employment, et al./Triumph International (phils.), Inc. vs. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al., G.R. No. 167401, July 5, 2010.

Dismissal of employees; just cause. Theft committed by an employee is a valid reason for his dismissal by the employer.  Although as a rule this Court leans over backwards to help workers and employees continue with their employment or to mitigate the penalties imposed on them, acts of dishonesty in the handling of company property, petitioner’s income in this case, are a different matter. Maribago Bluewater Beach Resort, Inc. vs. Nito Dual, G.R. No. 180660, July 20, 2010.

Dismissal of employees; requirements. The validity of an employee’s dismissal from service hinges on the satisfaction of the two substantive requirements for a lawful termination.  These are, first, whether the employee was accorded due process the basic components of which are the opportunity to be heard and to defend himself.  This is the procedural aspect.  And second, whether the dismissal is for any of the causes provided in the Labor Code of the Philippines.  This constitutes the substantive aspect. Erector Advertising Sign Group, Inc. and Arch Jimy C. Amoroto vs. Expedito Cloma, G.R. No. 167218, July 2, 2010.

Dismissal of employees; procedural due process. Furnishing the employee with a suspension order prior to his notice of termination does not satisfy the requirement of a first notice. It implies that the employer has already decided, for the reasons stated therein, to suspend the employee from work in the company, and the wording of the order in the present case gives no indication that the employee is being given an opportunity to submit his defense or explanation. Erector Advertising Sign Group, Inc. and Arch Jimy C. Amoroto vs. Expedito Cloma, G.R. No. 167218, July 2, 2010.

Dismissal of employees; procedural due process. In order to validly dismiss an employee, he must be accorded both substantive and procedural due process by the employer. Procedural due process requires that the employee be given a notice of the charge against him, an ample opportunity to be heard, and a notice of termination. Even if the aforesaid procedure is conducted after the filing of the illegal dismissal case, the legality of the dismissal, as to its procedural aspect, will be upheld provided that the employer is able to show that compliance with these requirements was not a mere afterthought. New Puerto Commercial and Richard Lim vs. Rodel Lopez and Felix Gavan, G.R. No. 169999, July 26, 2010.

Employee benefits; 13th month pay; definition of basic salary. The term “basic salary” of an employee for the purpose of computing the thirteenth-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the thirteenth-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees. Central Azucarera De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU, G.R. No. 188949, July 26, 2010

Employee benefits; 13th month pay; company policy or practice. The practice of petitioner in giving 13th-month pay based on the employees’ gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn. The petitioner cannot claim that the practice arose from an erroneous application of the law since no doubtful or difficult question of law is involved in this case. The guidelines set by the law are not difficult to decipher. Central Azucarera De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU, G.R. No. 188949, July 26, 2010

Employee benefits; death benefits. For the death of a seafarer to be compensable under the 1996 POEA Standard Employment Contract, the death must occur during the term of his contract of employment. In this case, the seaman died 2 years after he was repatriated to the Philippines due to medical reasons, hence the claimants are not entitled to receive death benefits under the contract. The decedent’s heirs claimed that the death should be compensable since the nature of his work as a seaman triggered the illnesses that eventually led to his death. However, the Court noted that though the immediate cause of the seaman’s death was pneumonia, the underlying cause of death was advanced HIV (AIDS). Since the claimants failed to prove that the decedent acquired HIV during his 2-month employment aboard the respondents’ vessel, their claim for death benefits was denied. Lydia Escarcha vs. Leonis Navigation Co., Inc., et al., G.R. No. 182740, July 5, 2010.

Employees; government agency. The Armed Forces of the Philippines Commissary and Exchange Services (AFPCES) is a government agency performing proprietary functions. By clear implication of law, all AFPCES personnel should therefore be classified as government employees and any complaint for illegal dismissal involving such employees should be filed with the CSC and not the NLRC. Such fact cannot be negated by the failure of AFPCES to follow appropriate civil service rules in the hiring, appointment, discipline and dismissal of employees. Neither can it be denied by the fact that AFPCES chose to enroll its employees in the SSS instead of the GSIS. Such considerations cannot be used against the CSC to deprive it of its jurisdiction. Hence, the Labor Arbiter’s decision in the illegal dismissal case filed by AFPCES employees is a total nullity for having been rendered without jurisdiction. Magdalena Hidalgo, et al. vs. Republic of the Philippines, G.R. No. 179793, July 5, 2010.

Employer-employee relationship; evidence. Any doubt arising from the evaluation of evidence as between the employer and the employee must be resolved in favor of the latter. It is settled jurisprudence that the burden of proving payment of monetary claims rests on the employer. It was entirely within the company’s power to present personnel files, payrolls, remittances, and other similar documents which would have proven payment of respondent’s money claims as these documents should necessarily be in its possession; hence, failure to present such evidence must be taken against it. Dansart Security Force & Allied Services Company and Danilo A. Sarte vs. Ms. Jean O. Bagoy, G.R. No. 168495, July 2, 2010.

Government agencies; reorganization. A reorganization is valid provided it is done in good faith.  As a general rule, the test of good faith lies in whether the purpose of the reorganization is for economy or to make the bureaucracy more efficient. Removal from office as a result of reorganization must, thus, pass the test of good faith. A demotion in office is tantamount to removal if no cause is shown for it. Consequently, before a demotion may be effected pursuant to a reorganization, the observance of the rules on bona fide abolition of public office is essential. Virginia D. Bautista vs. Civil Service Commission and Dev’t. Bank of the Philippines, G.R. No. 185215, July 22, 2010.

Government agencies; reorganization; personal liability of local official. The RTC of Cadiz declared void a resolution that reorganized the city government and effectively purged the city government of Cadiz of all employees who opposed the mayor politically or disagreed with him in his policies. The RTC ordered the payment of moral damages to the workers, but it was not clear if the payment was to be made by the city government or by Mayor Valera, in his personal capacity. The Court held that Varela is personally liable to pay moral damages. Settled is the principle that a public official may be liable in his personal capacity for whatever damage he may have caused by his act done with malice and in bad faith or beyond the scope of his authority or jurisdiction. In the complaint, the employees stated that, “due to the illegal acts of the Defendant, Plaintiffs suffered mental torture and anguish, sleepless nights, wounded feelings, besmirched reputation and social humiliation.”  The State can never be the author of illegal acts. The complaint merely identified Varela as the mayor of Cadiz City.  It did not categorically state that Varela was being sued in his official capacity.  The identification and mention of Varela as the mayor of Cadiz City did not automatically transform the action into one against Varela in his official capacity.  The allegations in the complaint determine the nature of the cause of action. Eduardo Valera vs. Ma. Daisy Revalez, G.R. No. 171705, July 29, 2010.

Illegal dismissal; burden of proof; filing of complaint not sufficient to disprove abandonment. In illegal dismissal cases, the employer bears the burden of proving that the termination was for a valid or authorized cause. However, before the employer is asked to prove that the dismissal was legal, the employee must first establish by substantial evidence the fact of his dismissal from service.  Logically, if there is no dismissal, then there can be no question as to its legality or illegality.

Under normal circumstances, an employee’s act of filing an illegal dismissal complaint against his employer is inconsistent with abandonment. However, the courts should not use that one act to conclude that an employee was constructively dismissed when substantial evidence proves otherwise. In this case, substantial evidence proves that Pulgar was not constructively dismissed, and that he had abandoned his duties in order to avoid an investigation being conducted by his employer. Philippine Rural Reconstruction vs. Virgilio Pulgar, G.R. No. 169227. July 5, 2010.

Illegal dismissal; misrepresentation of cause is an act of bad faith. The complainant, Rio Remo, was dismissed from service on the ground of retrenchment. However, the records show that Sentinel hired a replacement soon after Remo’s dismissal, proving that Sentinel’s financial distress was not as serious as it claimed, and that retrenchment was not the real reason for Remo’s dismissal. Sentinel concealed its true intention and committed misrepresentation when it claimed that Remo’s dismissal was due to serious financial losses. This act of misrepresentation is an act of active bad faith that fatally tainted Remo’s dismissal and rendered it illegal. Sentinel Integrated Services, Inc. vs. Rio Jose Remo, G.R. No. 188223, July 5, 2010.

Illegal dismissal; relief available to employee. An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges and to full backwages, inclusive of allowances, and to her other benefits or their monetary equivalent, computed from the time the compensation was withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible, separation pay equivalent to at least one month salary or one month salary for every year of service, whichever is higher, a fraction of at least six months being considered as one whole year, should be awarded to respondent. An award for moral and exemplary damages cannot be justified unless the employer had acted in bad faith. The award of moral and exemplary damages cannot be justified solely upon the premise that the employer dismissed his employee without authorized cause and due process. Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Labor-only contracting. 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. The parties cannot dictate, by a declaration in a contract, the character of the contractor’s business as a labor-only contractor or a legitimate job contractor, which should be determined by the criteria set by statute. Here, a closer look at AMPCO’s actual status and participation regarding the employment of the complainants clearly belie the contents of the written service contract. San Miguel Corporation vs. Vicente Semillan, et al., G.R. No. 164257, July 5, 2010.

Labor-only contracting; evidence. A Certificate of Registration as an Independent Contractor is not conclusive evidence of such status. In distinguishing between permissible job contracting and prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of the case are to be considered. San Miguel Corporation vs. Vicente Semillan, et al., G.R. No. 164257, July 5, 2010.

Liability of officers for illegal dismissal. Corporate officers are only solidarily liable with the corporation for the illegal termination of services of employees if they acted with malice or bad faith.  In Philippine American Life and General Insurance v. Gramaje, bad faith is defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purpose.  It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. The lack of authorized or just cause to terminate one’s employment and the failure to observe due process do not ipso facto mean that the corporate officer acted with malice or bad faith.  There must be independent proof of malice or bad faith which is lacking in the present case. Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Preventive suspension. Preventive suspension is justified where the employee’s continued employment poses a serious and imminent threat to the life or property of the employer or of the employee’s co-workers.  Without this kind of threat, preventive suspension is not proper. Jose P. Artificio vs. National Labor Relations Commission, RP Guardians Security Agency, Inc. Juan Victor K. Laurilla, Alberto Aguirre, and Antonio A. Andres, G.R. No. 172988, July 26, 2010

Public employees; demotion. There is demotion when an employee is appointed to a position that results in a diminution in duties, responsibilities, status or rank which may or may not involve a reduction in salary. Where an employee is appointed to a position with the same duties and responsibilities with a rank and salary higher than those he enjoyed in his previous position, there is no demotion and the appointment is valid. Virginia D. Bautista vs. Civil Service Commission and Devt. Bank of the Philippines, G.R. No. 185215, July 22, 2010.

Public employees; downgrading of employees. The summary reallocation of Go’s position to a lower degree resulting in the corresponding downgrading of his salary infringed the policy of non-diminution of pay which the Court recognized and applied in Philippine Ports Authority v. Commission on Audit, as well as in the subsequent sister cases involving benefits of government employees.  Running through the gamut of these cases is the holding that the affected government employees shall continue to receive benefits they were enjoying as incumbents upon the effectivity of RA 6758. Relevant to the critical issue at hand is Sec. 15 (b) of PD 985 which, as amended by Sec. 13 (a) of RA 6758, pertinently reads: Sec. 13. Pay Reduction — If an employee is moved from a higher to a lower class, he shall not suffer a reduction in salary: Provided, That such movement is not the result of a disciplinary action or voluntary demotion. Gonzalo S. Go, Jr. vs. CA and Office of the President, G.R. No. 172027. July 29, 2010

Redundancy; definition; requisites. Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands of the enterprise. A redundant position is one rendered superfluous by any number of factors, such as over hiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company, or phasing out of a service activity previously undertaken by the business. Under these conditions, the employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.

For a valid implementation of a redundancy program, the employer must comply with the following requisites: (1) written notice served on both the employees and the DOLE at least one month prior to the intended date of termination of employment; (2) payment of separation pay equivalent to at least one month pay for every year of service; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished. Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Retirement; retirement age. The retirement age is primarily determined by the existing agreement or employment contract.  Absent such an agreement, the retirement age under Article 287 of the Labor Code will apply. Amelia R. Obusan vs. Philippine National Bank, G.R. No. 181178, July 26, 2010.

Retirement; retirement plan. Retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of 65 years are not per se repugnant to the constitutional guaranty of security of tenure. By its express language, the Labor Code permits employers and employees to fix the applicable retirement age at 60 years or below, provided that the employees’ retirement benefits under any CBA and other agreements shall not be less than those provided by law. Amelia R. Obusan vs. Philippine National Bank, G.R. No. 181178, July 26, 2010.

Retrenchment; definition; requisites. Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice to the employees.  It is resorted to during periods of business recession, industrial depression, seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant to a new production program, or automation. It is a management prerogative resorted to avoid or minimize business losses.

To effect a valid retrenchment, the following elements must be present: (1) the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious and real, or only if expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) the employer serves written notice both to the employee/s concerned and the DOLE at least one month before the intended date of retrenchment; (3) the employer pays the retrenched employee separation pay in an amount prescribed by law; (4) the employer exercises its prerogative to retrench in good faith; and (5) the employer uses fair and reasonable criteria in ascertaining who would be retrenched or retained.  Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010

Retrenchment; decrease in income is not business loss. A sharp drop in income from P1million to only P665,000.00 is not the kind of business losses contemplated by the Labor Code that would justify a valid retrenchment.  A mere decline in gross income cannot in any manner be considered as serious business losses. It should be substantial, sustained and real. Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Separation pay; as equitable relief. Having determined that the imposition of preventive suspension was proper and that the complainant was not illegally dismissed, the Court found no basis to grant backwages. However, given the attendant circumstances of the case — that complainant had been working with the company for a period of sixteen (16) years without any previous derogatory record – the Court held that the ends of social and compassionate justice would be served if the employee is given some equitable relief in the form of separation pay. Jose P. Artificio vs. National Labor Relations Commission, RP Guardians Security Agency, Inc. Juan victor K. Laurilla, Alberto Aguirre, and Antonio A. Andres, G.R. No. 172988, July 26, 2010


LABOR PROCEDURE

Jurisdiction; intra-union disputes. Section 226 of the Labor Code clearly provides that the BLR and the Regional Directors of DOLE have concurrent jurisdiction over inter-union and intra-union disputes.  Such disputes include the conduct or nullification of election of union and workers’ association officers. There is, thus, no doubt as to the BLR’s jurisdiction over the instant dispute involving member-unions of a federation arising from disagreement over the provisions of the federation’s constitution and by-laws. Atty. Allan S. Montaño vs. Atty Ernesto C. Verceles, G.R. No. 168583, July 26, 2010.

Labor tribunal; factual finding. As a rule, a petition for certiorari under Rule 65 is valid only when the question involved is an error of jurisdiction, or when there is grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the court or tribunals exercising quasi-judicial functions. Hence, courts exercising certiorari jurisdiction should refrain from reviewing factual assessments of the respondent court or agency. Occasionally, however, they are constrained to wade into factual matters when the evidence on record does not support those factual findings; or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on record. The CA rightfully reviewed the correctness of the labor tribunals’ factual findings not only because of the foregoing inadequacies, but also because the NLRC and the Labor Arbiter came up with conflicting findings. Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Money claims; effect of failure to include in prayer for relief. The rule is well-settled that points of law, theories, issues and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be considered by a reviewing court as they cannot be raised for the first time on appeal because this would be offensive to the basic rules of fair play, justice and due process. Though there is nothing on record which would show that the amount of P207,693 has been returned to PRRM, a perusal of the pleadings show that PRRM failed to include the return of such amount in its prayer for relief. Hence, the Labor Arbiter cannot act on the same. A prayer for a monetary award should have been raised at the earliest opportunity before the Labor Arbiter. Philippine Rural Reconstruction vs. Virgilio Pulgar, G.R. No. 169227. July 5, 2010.

NLRC Rules of Procedure; certificate of non-forum shopping. The filing of a certificate of non-forum shopping is mandatory in initiatory pleadings; non-compliance with the required certification is fatal. The filing of the same is not waived by the other party’s failure to immediately assert the defect, and neither is it cured by its belated submission on the ground that the party was not in any way guilty of actual forum shopping. In cases where the Court tolerated the deficiency, special circumstances or compelling reasons made the strict application unjustified. In this case, however, the petitioners offered no valid justification for their failure to comply with the Circular. Mandaue Galleon Trade, Inc., et al. vs. Bienvenido Isidto, et al., G.R. No. 181051, July 5, 2010.

Rule 45; when review of facts allowed. As a rule, a petition for review under Rule 45 of the Rules of Court must raise only questions of law.  However, the rule has exceptions such as when the findings of the Labor Arbiter, NLRC and Court of Appeals vary, as in this case. Maribago Bluewater Beach Resort, Inc. vs. Nito Dual, G.R. No. 180660, July 20, 2010.

(Leslie thanks Benjamin C. Yan for assisting in the preparation of this post.)

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