March 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Labor law

Cancellation of union registration. Art. 234(c) of the Labor Code requires the mandatory minimum 20% membership of rank-and-file employees in the employees’ union. Twenty percent (20%) of 112 rank-and-file employees in Eagle Ridge would require a union membership of at least 22 employees (112 x 205 = 22.4).  When the EREU filed its application for registration on December 19, 2005, there were clearly 30 union members.  Thus, when the certificate of registration was granted, there is no dispute that the Union complied with the mandatory 20% membership requirement. Accordingly, the retraction of six union members who later severed and withdrew their union membership cannot cause the cancellation of the union’s registration.

Besides, it cannot be argued that the affidavits of retraction retroacted to the time of the application for union registration or even way back to the organizational meeting. Before their withdrawal, the six employees in question were bona fide union members. They never disputed affixing their signatures beside their handwritten names during the organizational meetings.  While they alleged that they did not know what they were signing, their affidavits of retraction were not re-affirmed during the hearings of the instant case rendering them of little, if any, evidentiary value. In any case, even with the withdrawal of six union members, the union would still be compliant with the mandatory membership requirement under Art. 234(c) since the remaining 24 union members constitute more than the 20% membership requirement of 22 employees.  Eagle Ridge Gold & Country Club vs. Court of Appeals, et al., G.R. No. 178989, March 18, 2010.

Cessation of operations; financial assistance.  Based on Article 283, in case of cessation of operations, the employer is only required to pay his employees a separation pay of one month pay or at least one-half month pay for every year of service, whichever is higher. That is all that the law requires.

In the case at bar, petitioner paid respondents the following: (a) separation pay computed at 150% of their gross monthly pay per year of service; and (b) cash equivalent of earned and accrued vacation and sick leaves. Clearly, petitioner had gone over and above the requirements of the law. Despite this, however, the Labor Arbiter ordered petitioner to pay respondents an additional amount, equivalent to one month’s salary, as a form of financial assistance.

The award of financial assistance is bereft of legal basis and serves to penalize petitioner who had complied with the requirements of the law. The Court also point out that petitioner may, as it has done, grant on a voluntary and ex gratia basis, any amount more than what is required by the law, but to insist that more financial assistance be given is certainly something that the Court cannot countenance. Moreover, any award of additional financial assistance to respondents would put them at an advantage and in a better position than the rest of their co-employees who similarly lost their employment because of petitioner’s decision to cease its operations. SolidBank Corporation vs. National Labor Relations Commission, et al., G.R. No. 165951, March 30, 2010.

Cost of living allowance. COLA is not in the nature of an allowance intended to reimburse expenses incurred by officials and employees of the government in the performance of their official functions.  It is not payment in consideration of the fulfillment of official duty.  As defined, cost of living refers to “the level of prices relating to a range of everyday items” or “the cost of purchasing those goods and services which are included in an accepted standard level of consumption.”  Based on this premise, COLA is a benefit intended to cover increases in the cost of living.  Thus, it is and should be integrated into the standardized salary rates.

In the present case, the Court is not persuaded that the continued grant of COLA to the uniformed personnel to the exclusion of other national government officials run afoul the equal protection clause of the Constitution.  The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification.  If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another.  The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class.

The Court found valid reasons to treat the uniformed personnel differently from other national government officials.  Being in charge of the actual defense of the State and the maintenance of internal peace and order, they are expected to be stationed virtually anywhere in the country.  They are likely to be assigned to a variety of low, moderate, and high-cost areas.  Since their basic pay does not vary based on location, the continued grant of COLA is intended to help them offset the effects of living in higher cost areas.  Victoria C. Gutierrez, et al. vs. Department of Budget and Management, et al./Estrellita C. Amponin, et al. vs. Commission on Audit, et al./Augusto R. Nieves, et al. vs. Department of Budget and Management, et al./Kapisanan ng mga Manggagawa sa Bureau of Agricultural Statistic (KMB), et al. vs. Department of Budget and Management, et al./National Housing Authority vs. Epifanio P. Recana, et al./ Insurance Commission Officers and Employees, et al. vs. Department of Budget and Management, et al./Fiber Industry Development Authority Employees Association (FIDAEA),et al. vs. Department of Budget and Management, et al./Bureau of Animal Industry Employees Association (BAIEA), et al. vs. Department of Budget and Management, et al./Re: Request of Sandiganbayan for authority to use their savings to pay their Cola Differential from July 1, 1989 to March 16, 1999, G.R. No. 153266/G.R. No. 159007/G.R. No. 159029/G.R. No. 170084/G.R. No. 172713/G.R. No. 173119/G.R. No. 176477/G.R. No. 177990/A.M. No. 06-4-02-SB. March 18, 2010.

Compensable illness.  Jurisprudence provides that to establish compensability of a non-occupational disease, reasonable proof of work-connection and not direct causal relation is required.  Probability, not the ultimate degree of certainty, is the test of proof in compensation proceedings.

In this case, the Court sustained the Labor Arbiter and the NLRC in granting total and permanent disability benefits in favor of Villamater, as it was sufficiently shown that his having contracted colon cancer was, at the very least, aggravated by his working conditions, taking into consideration his dietary provisions on board, his age, and his job as Chief Engineer, who was primarily in charge of the technical and mechanical operations of the vessels to ensure voyage safety.  Leonis Navigation Co., Inc. and World Marine Panama, S.A. vs. Catalino U. Villamater, et al., G.R. No. 179169, March 3, 2010.

Compensable illness; entitlement.  For disability to be compensable under Section 20 (B) of the 2000 POEA-SEC, two elements must concur: (1) the injury or illness must be work-related; and (2) the work-related injury or illness must have existed during the term of the seafarer’s employment contract. In other words, to be entitled to compensation and benefits under this provision, it is not sufficient to establish that the seafarer’s illness or injury has rendered him permanently or partially disabled; 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.

The 2000 POEA-SEC defines “work-related injury” as “injury(ies) resulting in disability or death arising out of and in the course of employment” and “work-related illness” as “any sickness resulting to disability or death as a result of an occupational disease listed under Section 32-A of this contract with the conditions set therein satisfied.”

Under Section 20 (B), paragraphs (2) and (3) of the 2000 POEA-SEC, it is the company-designated physician who is entrusted with the task of assessing the seaman’s disability.

While it is true that medical reports issued by the company-designated physicians do not bind the courts, the Court’s examination of Dr. Ong-Salvador’s Initial Medical Report have led it to agree with her findings.  Dr. Ong-Salvador was able to sufficiently explain her basis in concluding that the respondent’s illness was not work-related: she found the respondent not to have been exposed to any carcinogenic fumes, or to any viral infection in his workplace. Her findings were arrived at after the respondent was made to undergo a physical, neurological and laboratory examination, taking into consideration his past medical history, family history, and social history.  In addition, the respondent was evaluated by a specialist, a surgeon and an oncologist.  The series of tests and evaluations show that Dr. Ong-Salvador’s findings were not arrived at arbitrarily; neither were they biased in the company’s favor.

The respondent, on the other hand, did not adduce proof to show a reasonable connection between his work as an assistant housekeeping manager and his lymphoma. There was no showing how the demands and nature of his job vis-à-vis the ship’s working conditions increased the risk of contracting lymphoma. The non-work relatedness of the respondent’s illness is reinforced by the fact that under the Implementing Rules and Regulations of the Labor Code (ECC Rules), lymphoma is considered occupational only when contracted by operating room personnel due to exposure to anesthetics. The records do not show that the respondent’s work as an assistant housekeeping manager exposed him to anesthetics.

Accordingly, the Court held that the respondent is not entitled to total and permanent disability benefits on account of his failure to refute the company-designated physician’s findings that: (1) his illness was not work-related; and (2) he was fit to resume sea duties.  Magsaysay Maritime Corporation and/or Cruise Ships Catering Services International N.V. vs. National Labor Relations Commissions, et al., G.R. No. 186180, March 22, 2010.

Constructive dismissal.  In constructive dismissal cases, the employer has the burden of proving that its conduct and action or the transfer of an employee are for valid and legitimate grounds such as genuine business necessity.   Particularly, for a transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee.  Failure of the employer to overcome this burden of proof taints the employee’s transfer as a constructive dismissal.

In the present case, the employer failed to discharge this burden.  The combination of harsh actions taken by the bank rendered the employment condition of the employee hostile and unbearable for the following reasons: First, there is no showing of any urgency or genuine business necessity to transfer the employee to the Makati Head Office. The bank’s stated reason that the employee had to undergo branch head training because of his gross inefficiency was not supported by any proof that the employee had a record of gross inefficiency.  Second, the employee’s transfer from Dumaguete to Makati City is clearly unreasonable, inconvenient and oppressive, since the respondent and his family are residents of Dumaguete City.  Third, the employer failed to present any valid reason why it had to require the employee to go to the Makati Head Office to undergo branch head training when it could have just easily required the latter to undertake the same training in the VISMIN area.  Finally, there was nothing in the order of transfer indicating the position which the employee would occupy after his training; thus, the employee was effectively placed in a “floating” status.  The bank’s contention that the employee was assigned to a sensitive position in the DUHO Task Force is suspect when considered with the fact that he was made to undergo branch head training which is totally different from a position that entails reconciling book entries of all branches of the former.  Reconciling book entries is essentially an accounting task.

The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt compelled to give up his position under the circumstances.  Based on the factual considerations in the present case, the Court held that the hostile and unreasonable working conditions of the bank justified the finding of the NLRC and the CA that the employee was constructively dismissed.  Philippine Veterans Bank vs. National Labor Relations Commission, et al., G.R. No. 188882, March 30, 2010.

Disability benefits; entitlement.  The seafarer, upon sign-off from his vessel, must report to the company-designated physician within three working days from arrival for diagnosis and treatment.  Applying Section 20(B), paragraph (3) of the 2000 Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels, petitioner is required to undergo post-employment medical examination by a company-designated physician within three working days from arrival, except when he is physically incapacitated to do so, in which case, a written notice to the agency within the same period would suffice.  In Maunlad Transport, Inc. v. Manigo, Jr., [G.R. No.161416, 13 June 2008, 554 SCRA 446, 459] this Court explicitly declared that it is mandatory for a claimant to be examined by a company-designated physician within three days from his repatriation.  The unexplained omission of this requirement will bar the filing of a claim for disability benefits.  Alex C. Cootauco vs. MMS Phil. Maritime Services, Inc. Ms. Mary C. Maquilan, and/or MMS Co. Ltd., G.R. No. 184722, March 15, 2010.

Dismissal; damages.  Moral and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy.  With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on the part of the latter, the Court found no support for the award of damages.

As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and peremptory barring of the employees from work, and from admission to the work place, after just a one-day verbal notice, and for no valid cause, bellows oppression and utter disregard of the right to due process of the concerned petitioners.  Hence, an award of moral damages is called for.  Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al., G.R. No. 160506, March 9, 2010.

Dismissal; fraud and serious misconduct. In this case, the Court found that Pastoril was as actively involved as Escoto and Omela in the sale of the Toyota Town Ace that resulted in a loss to the company.  All three participated in making the company believe that Aquino bought the Toyota Town Ace for P190,000.00 when in fact, Aquino paid P200,000.00 for the vehicle.  Thus, Pastoril acted in concert with Escoto and Omela in the transaction that defrauded their employer in the amount of P10,000.00.  Pastoril prepared and issued the deed of sale indicating that the vehicle was sold for P190,000.00, although she knew that the buyer was being charged P200,000.00 for the vehicle.  Escoto, Omela and Pastoril helped themselves to the price difference and tried to silence Rodriguez (who got wind of the anomaly) by giving him P1,000.00 and passing the P10,000.00 price difference off as the approved discount Aquino asked for.  The Court held that there was a conspiracy between and among the three employees, where every participant had made significant contributory acts.  White Diamond Trading Corporation and/or Jerry Uy vs. National Labor Relations Commission, et al., G.R. No. 186019. March 29, 2010.

Dismissal; just cause; loss of trust and confidence.  Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee concerned holds a position of responsibility or of trust and confidence.  As such, he must be invested with confidence on delicate matters, such as custody, handling or care and protection of the property and assets of the employer.  And, in order to constitute a just cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work for the employer.  In the instant case, the petitioners-employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem.  Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al., G.R. No. 160506, March 9, 2010.

Dismissal; just cause; misconduct.  Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere error of judgment.  The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant.  To be a just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the performance of the employee’s duties; and (c) must show that the employee has become unfit to continue working for the employer.  In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated some established rules or policies.  It is equally important and required that the act or conduct must have been performed with wrongful intent. In the instant case, petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any wrongful intent in doing so.  As such, the Court found them guilty of simple misconduct only, for assailing the integrity of Promm-Gem as a legitimate and independent promotion firm.  A misconduct which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an employee.  Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al., G.R. No. 160506, March 9, 2010.

Dismissal; just cause; union security clause.  In terminating the employment of an employee by enforcing the union security clause, the employer is required only to determine and prove that: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient evidence to support the decision of the union to expel the employee from the union.  These requisites constitute just cause for terminating an employee based on the union security provision of the CBA.

It is the third requisite that appears to be lacking in this case.  It is apparent from the identical termination letters that GMC terminated Casio, et al., by relying upon the resolutions of the union, which made no mention at all of the evidence supporting the decision of the union to expel Casio, et al. from the union.  GMC never alleged nor attempted to prove that the company actually looked into the evidence of the union for expelling Casio, et al. and made a determination on the sufficiency thereof.  Without such a determination, GMC cannot claim that it had terminated the employment of Casio, et al. for just cause. The failure of GMC to make a determination of the sufficiency of evidence supporting the decision of the union constitutes non-observance by GMC of procedural due process in the dismissal of employees.  General Milling Corporation vs. Ernesto Casio, et al. and Virgilio Pino, et al., G.R. No. 149552, March 10, 2010.

Dismissal pursuant to union security clause; separate notice and haring required.  GMC illegally dismissed Casio, et al. because not only did GMC fail to make a determination of the sufficiency of evidence to support the union’s decision to expel Casio, et al., it also failed to accord the expelled union members procedural due process, i.e., notice and hearing, prior to the termination of their employment.

GMC, by its own admission, did not conduct a separate and independent investigation to determine the sufficiency of the evidence supporting the union’s expulsion of Casio, et al.  It simply acceded to the union’s demand.  Consequently, GMC cannot insist that it has no liability for the payment of backwages and damages to Casio, et al., and that the liability for such payment should fall only upon the union officers and board members who expelled Casio, et al.  GMC completely missed the point that the expulsion of Casio, et al. by the union and the termination of employment of the same employees by GMC, although related, are two separate and distinct acts.  Despite a closed shop provision in the CBA, law and jurisprudence impose upon GMC the obligation to accord Casio, et al. substantive and procedural due process before complying with the union’s demand to dismiss the expelled union members from service.  The failure of GMC to carry out this obligation makes it liable for illegal dismissal of Casio, et al. General Milling Corporation vs. Ernesto Casio, et al. and Virgilio Pino, et al., G.R. No. 149552, March 10, 2010.

Employee benefit; bonus.  By definition, a “bonus” is a gratuity or act of liberality of the giver. It is something given in addition to what is ordinarily received by or strictly due the recipient. A bonus is 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.  A bonus 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.

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties. Given that the bonus in this case is integrated in the CBA, the same partakes the nature of a demandable obligation.  Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act of generosity on the part of the petitioner but a contractual obligation it has undertaken.

All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full protection.  Hence, absent any proof that the employer’s consent was vitiated by fraud, mistake or duress, it is presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of its commitments under the contract.  Lepanto Ceramics, Inc. vs. Lepanto Ceramics Employees Association, G.R. No. 180866, March 2, 2010.

Employee; monetary award.  The law and the rules are consistent in stating that the employment permit must be acquired prior to employment.  The Labor Code states: “Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of Labor.”  Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides: “No alien seeking employment, whether as a resident or non-resident, may enter the Philippines without first securing an employment permit from the Ministry.  If an alien enters the country under a non-working visa and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly approved employment permit.”

Galera worked in the Philippines without a proper work permit but now wants to claim employee’s benefits under Philippine labor laws.  She cannot come to this Court with unclean hands.  To grant Galera’s prayer is to sanction the violation of the Philippine labor laws requiring aliens to secure work permits before their employment.  WPP Marketing Communications, Inc. et al. vs. Jocelyn M. Galera/Jocelyn M. Galera Vs. WPP Marketing Communications, Inc. et al., G.R. No. 169207/G.R. No. 169239, March 25, 2010.

Employee vs. corporate officer.  Corporate officers are given such character either by the Corporation Code or by the corporation’s by-laws.  Under Section 25 of the Corporation Code, the corporate officers are the president, secretary, treasurer and such other officers as may be provided in the by-laws.  Other officers are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be necessary.

An examination of WPP’s by-laws resulted in a finding that Galera’s appointment as a corporate officer (Vice-President with the operational title of Managing Director of Mindshare) during a special meeting of WPP’s Board of Directors is an appointment to a non-existent corporate office.  WPP’s by-laws provided for only one Vice-President.  At the time of Galera’s appointment on 31 December 1999, WPP already had one Vice-President in the person of Webster.  Galera cannot be said to be a director of WPP also because all five directorship positions provided in the by-laws are already occupied.   Finally, WPP cannot rely on its Amended By-Laws to support its argument that Galera is a corporate officer.  The Amended By-Laws provided for more than one Vice-President and for two additional directors.  Even though WPP’s stockholders voted for the amendment on 31 May 2000, the SEC approved the amendments only on 16 February 2001.  Galera was dismissed on 14 December 2000.  WPP, Steedman, Webster, and Lansang did not present any evidence that Galera’s dismissal took effect with the action of WPP’s Board of Directors.

Additionally, the following provisions in her employment contract are convincing indicators that Galera was an employee and not a corporate officer: (1) it mandates where and how often she is to perform her work; (2) the wages she receives are completely controlled by WPP; (3) she is subject to the regular disciplinary procedures of WPP;  (4) section 14 thereof clearly states that she is a permanent employee — not a Vice-President or a member of the Board of Directors; (5) the intellectual property rights created or discovered by petitioner during her employment shall automatically belong to private respondent WPP [Under the Intellectual Property Code, this condition prevails if the creator of the work subject to the laws of patent or copyright is an employee of the one entitled to the patent or copyright]; and (6) the disciplinary procedure states that her right of redress is through Mindshare’s Chief Executive Officer for the Asia-Pacific. This last circumstance implies that she was not even under the disciplinary control of WPP’s Board of Directors, and therefore, she could not have been a WPP corporate officer as only the WPP Board of Directors could appoint and terminate its own corporate officer.  WPP Marketing Communications, Inc. et al. vs. Jocelyn M. Galera/Jocelyn M. Galera vs. WPP Marketing Communications, Inc. et al., G.R. No. 169207/G.R. No. 169239, March 25, 2010.

Illegal dismissal.  Under Republic Act No. 6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time their actual compensation was withheld from them up to the time of their actual reinstatement but if reinstatement is no longer possible, the backwages shall be computed from the time of their illegal termination up to the finality of the decision.

The employees in this case are entitled to backwages and separation pay, considering that reinstatement is no longer possible because the positions they previously occupied are no longer existing.  General Milling Corporation vs. Ernesto Casio, et al. and Virgilio Pino, et al., G.R. No. 149552, March 10, 2010.

Illegal dismissal.  WPP’s dismissal of Galera lacked both substantive and procedural due process.  Apart from Steedman’s letter dated 15 December 2000 to Galera, WPP failed to prove any just or authorized cause for Galera’s dismissal. The law also requires that the employer must furnish the worker sought to be dismissed with two written notices before termination of employment can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer’s decision to dismiss him.  Failure to comply with these requirements taints the dismissal with illegality.  WPP’s acts clearly show that Galera’s dismissal did not comply with the two-notice rule.  WPP Marketing Communications, Inc. et al. vs. Jocelyn M. Galera/Jocelyn M. Galera Vs. WPP Marketing Communications, Inc. et al., G.R. No. 169207/G.R. No. 169239, March 25, 2010.

Illegal dismissal; abandonment.  Petitioner was, for five times, notified in writing by respondent to resume teaching for the second semester of school year 2003-2004 following the service of her suspension during the first semester.  She was advised that a teaching load had already been prepared for her.  Respondent never replied to those notices.  Petitioner’s justification for her failure to respond to the notices was that her acceptance of the offer could be construed as a waiver of her claims. The Court held that petitioner’s justification is not a valid excuse.

Petitioner contends that her filing of a complaint for illegal dismissal was a manifestation of her desire to return to her job and negated any intention to sever the employer-employee relationship.  Petitioner forgets that her complaint for “illegal dismissal” which she filed on June 5, 2003 sprang, not from her dismissal on December 6, 2003 due to abandonment, but from her suspension during the first semester of school year 2003-2004.  While the filing of a complaint with a prayer for reinstatement negates an intention to sever the employer-employee relationship, the same contemplates an action taken subsequent to dismissal and not after an employee, by all indications, abandoned her job.  Evangeline C. Cobarrubias vs. Saint Louis University, Inc., G.R. No. 176717, March 17, 2010.

Illegal dismissal; monetary awards.  Clearly, the law intends the award of backwages and similar benefits to accumulate past the date of the Labor Arbiter’s decision until the dismissed employee is actually reinstated.  But if, as in this case, reinstatement is no longer possible, this Court has consistently ruled that backwages shall be computed from the time of illegal dismissal until the date the decision becomes final.

Separation pay, on the other hand, is equivalent to one month pay for every year of service, a fraction of six months to be considered as one whole year.  Here that would begin from January 31, 1994 when petitioner Belen began his service.  Technically the computation of his separation pay would end on the day he was dismissed on August 20, 1999 when he supposedly ceased to render service and his wages ended.  But, since Belen was entitled to collect backwages until the judgment for illegal dismissal in his favor became final, here on September 22, 2008, the computation of his separation pay should also end on that date.

Further, since the monetary awards remained unpaid even after it became final on September 22, 2008 because of issues raised respecting the correct computation of such awards, it is but fair that respondent Javellana be required to pay 12% interest per annum on those awards from September 22, 2008 until they are paid.  The 12% interest is proper because the Court treats monetary claims in labor cases the equivalent of a forbearance of credit.  It matters not that the amounts of the claims were still in question on September 22, 2008.  What is decisive is that the order to pay the monetary awards had long become final.  Daniel P. Javellana, Jr. vs. Albino Belen/Albino Belen Vs. Daniel P. Javellana, Jr. and Javellana Farms, Inc., G.R. No. 181913/G.R. No. 182158, March 5, 2010.

Labor only contracting.  Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature.  However, in order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting.  There is labor-only contracting when the contractor or sub-contractor 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.

In the instant case, the financial statements of Promm-Gem show that it has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990.  It also has long term assets worth P432,895.28 and current assets of P719,042.32.  Promm-Gem has also proven that it maintained its own warehouse and office space with a floor area of 870 square meters.  It also had under its name three registered vehicles, which were used for its promotional/merchandising business.  Promm-Gem also has other clients aside from P&G.  Under the circumstances, we find that Promm-Gem has substantial investment, which relates to the work to be performed. Under these circumstances, Promm-Gem cannot be considered a labor-only contractor.

On the other hand, the Articles of Incorporation of SAPS show that it has a paid-in capital of only P31,250.00.  There is no other evidence to prove how much its working capital and assets are.  Furthermore, there is no showing of substantial investment in tools, equipment or other assets.

SAPS’ lack of substantial capital is highlighted by the records which show that its payroll for its merchandisers alone for one month would already total P44,561.00.  It had 6-month contracts with P&G.  Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and investment.  Its capital is not even sufficient for one month’s payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate revenues to sustain its operations independently.  Substantial capital refers to capitalization used in the performance or completion of the job, work or service contracted out.  In the present case, SAPS has failed to show substantial capital.

Furthermore, the employees in this case performed merchandising and promotion of the products of P&G, which are activities that the Court has considered directly related to the manufacturing business of P&G.  Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, we find that SAPS is engaged in “labor-only contracting”.  Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al., G.R. No. 160506, March 9, 2010.

Project employee.  The test for distinguishing a “project employee” from a “regular employee” is whether or not he has been assigned to carry out a “specific project or undertaking,” with the duration and scope of his engagement specified at the time his service is contracted.  Here, it is not disputed that petitioner company contracted respondent Trinidad’s service by specific projects with the duration of his work clearly set out in his employment contracts.  He remained a project employee regardless of the number of years and the various projects he worked for the company.

Generally, length of service provides a fair yardstick for determining when an employee initially hired on a temporary basis becomes a permanent one, entitled to the security and benefits of regularization.  But this standard will not be fair, if applied to the construction industry, simply because construction firms cannot guarantee work and funding for its payrolls beyond the life of each project.  And getting projects is not a matter of course.  Construction companies have no control over the decisions and resources of project proponents or owners.  There is no construction company that does not wish it has such control but the reality, understood by construction workers, is that work depended on decisions and developments over which construction companies have no say.

In this case, respondent Trinidad’s series of employments with petitioner company were co-terminous with its projects.  When its Boni Serrano-Katipunan Interchange Project was finished in December 2004, Trinidad’s employment ended with it.  He was not dismissed.  His employment contract simply ended with the project for which he had signed up.  His employment history belies the claim that he continuously worked for the company.  Intervals or gaps separated one contract from another.  William Construction Corp. and/or Teresita Uy and William Uy vs. Jorge R. Trinidad, G.R. No. 183250, March 12, 2010.

Reinstatement; reimbursement.  An employee cannot be compelled to reimburse the salaries and wages he received during the pendency of his appeal, notwithstanding the reversal by the NLRC of the LA’s order of reinstatement.  The pertinent law on the matter is not concerned with the wisdom or propriety of the LA’s order of reinstatement, for if it was, then it should have provided that the pendency of an appeal should stay its execution.  After all, a decision cannot be deemed irrefragable unless it attains finality. College of the Immaculate Concepcion vs. National Labor Relations Commission and Atty. Marius F. Carlos, Ph.D, G.R. No. 167563, March 22, 2010.

Representation and Transportation Allowance; entitlement. Statutory law, as implemented by administrative issuances and interpreted in decisions, has consistently treated RATA as distinct from salary.  Unlike salary, which is paid for services rendered, RATA belongs to a basket of allowances to defray expenses deemed unavoidable in the discharge of office.  Hence, RATA is paid only to certain officials who, by the nature of their offices, incur representation and transportation expenses.

At any rate, the denial of RATA must be grounded on relevant and specific provision of law.  By insisting that, as requisite for her receipt of RATA, respondent must discharge her office as Bacnotan’s treasurer while on reassignment at the La Union treasurer’s office, the DBM effectively punishes respondent for acceding to her reassignment. Surely, the law could not have intended to place local government officials like respondent in the difficult position of having to choose between disobeying a reassignment order or keeping an allowance.  Department of Budget and Management (DBM) vs. Olivia D. Leones, G.R. No. 169726, March 18, 2010.

Separation pay; termination for cause.  Separation pay is only warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 283 and 284 of the Labor Code, as well as in cases of illegal dismissal in which reinstatement is no longer feasible.  It is not allowed when an employee is dismissed for just cause, such as serious misconduct.

Jurisprudence has classified theft of company property as a serious misconduct and denied the award of separation pay to the erring employee.  In this case, the Court saw no reason why this same rule should not be similarly applied in the case of Capor.  She attempted to steal the property of her long-time employer.  For committing such misconduct, she is definitely not entitled to an award of separation pay.

Capor’s argument that despite the finding of theft, she should still be granted separation pay in light of her long years of service with the Company did not persuade the Court.  Indeed, length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee.  Length of service is not a bargaining chip that can simply be stacked against the employer.  After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service.  If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty.  Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer.  While we sympathize with Capor’s plight, being of retirement age and having served petitioners for 39 years, we cannot award any financial assistance in her favor because it is not only against the law but also a retrogressive public policy.  Reno Foods, Inc., and/or Vicente Khu vs. Nagkakaisang Lakas ng Manggagawa (NLM) – Katipunan on behalf of its member, Nenita Capor, G.R. No. 164016, March 15, 2010.

Termination of employment; conviction in criminal case.  Conviction in a criminal case is not necessary to find just cause for termination of employment.  Criminal cases require proof beyond reasonable doubt while labor disputes require only substantial evidence, which means such relevant evidence as a reasonable mind might accept as adequate to justify a conclusion.  The evidence in this case was reviewed by the appellate court and two labor tribunals endowed with expertise on the matter – the Labor Arbiter and the NLRC.  They all found substantial evidence to conclude that Capor had been validly dismissed for dishonesty or serious misconduct.  Reno Foods, Inc., and/or Vicente Khu vs. Nagkakaisang Lakas ng Manggagawa (NLM) – Katipunan on behalf of its member, Nenita Capor, G.R. No. 164016, March 15, 2010.

Labor Procedure

Court; findings of fact (labor).  A petition for review on certiorari under Rule 45 of the Rules of Court should include only questions of law — questions of fact are not reviewable.  A question of law exists when the doubt centers on what the law is on a certain set of facts, while a question of fact exists when the doubt centers on the truth or falsity of the alleged facts.  There is a question of law if the issue raised is capable of being resolved without need of reviewing the probative value of the evidence.  Once the issue invites a review of the evidence, the question is one of fact.

Whether YEU committed fraud and misrepresentation in failing to remove Pineda’s signature from the list of employees who supported YEU’s application for registration and whether YEU conducted an election of its officers are questions of fact.  They are not reviewable.

Factual findings of the Court of Appeals are binding on the Court.  Absent grave abuse of discretion, the Court will not disturb the Court of Appeals’ factual findings.  In Encarnacion v. Court of Appeals (G.R. No. 101292, 8 June 1993), the Court held that, “unless there is a clearly grave or whimsical abuse on its part, findings of fact of the appellate court will not be disturbed.  The Supreme Court will only exercise its power of review in known exceptions such as gross misappreciation of evidence or a total void of evidence.”  YTPI failed to show that the Court of Appeals gravely abused its discretion.  Yokohama Tire Philippines, Inc. vs. Yokohama Employees Union, G.R. No. 163532, March 12, 2010.

Court; questions of fact (labor). The petition essentially raises questions of fact.  While as a rule, factual findings of the CA are binding on the Court, the Court exercised its discretionary review authority to review the facts of this case in view of the conflict in the findings of facts of the labor arbiter, on the one hand, and the NLRC and the CA, on the other. White Diamond Trading Corporation and/or Jerry Uy vs. National LaborRelations Commission, et al., G.R. No. 186019. March 29, 2010.

Indispensable party.   Rule 3, Section 7 of the Rules of Court defines indispensable parties as those who are parties in interest without whom there can be no final determination of an action.  They are those parties who possess such an interest in the controversy that a final decree would necessarily affect their rights, so that the courts cannot proceed without their presence.  A party is indispensable if his interest in the subject matter of the suit and in the relief sought is inextricably intertwined with the other parties’ interest.

Unquestionably, Villamater’s widow stands as an indispensable party to this complaint for payment of permanent and total disability benefits, reimbursement of medical and hospitalization expenses, moral and exemplary damages, and attorney’s fees.  Leonis Navigation Co., Inc. and World Marine Panama, S.A. vs. Catalino U. Villamater, et al., G.R. No. 179169, March 3, 2010.

Jurisdiction; estoppel.  Petitioner is already estopped from belatedly raising the issue of lack of jurisdiction since it has actively participated in the proceedings before the LA and NLRC.  We have consistently held that while jurisdiction may be assailed at any stage, a party’s active participation in the proceedings before a court without jurisdiction will estop such party from assailing such lack of it.  It is an undesirable practice of a party participating in the proceedings and submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse.  Philippine Veterans Bank vs. National Labor Relations Commission, et al., G.R. No. 188882, March 30, 2010.

Jurisdiction; labor arbiter.  Petitioners clearly and consistently questioned the legality of RGMI’s adoption of the new salary scheme (i.e., piece-rate basis), asserting that such action, among others, violated the existing CBA.  Indeed, the controversy was not a simple case of illegal dismissal but a labor dispute involving the manner of ascertaining employees’ salaries, a matter which was governed by the existing CBA.

With regard to the question of jurisdiction over the subject matter, Article 217(c) of the Labor Code requires labor arbiters to refer cases involving the implementation of CBAs to the grievance machinery provided therein and to voluntary arbitration.  Moreover, Article 260 of the Labor Code clarifies that such disputes must be referred first to the grievance machinery and, if unresolved within seven days, they shall automatically be referred to voluntary arbitration. Under this provision, voluntary arbitrators have original and exclusive jurisdiction over matters which have not been resolved by the grievance machinery.

Pursuant to Articles 217 in relation to Articles 260 and 261 of the Labor Code, the labor arbiter should have referred the matter to the grievance machinery provided in the CBA. Miguela Santuyo, et al. vs. Remerco Garments Manufacturing, Inc. and/or Victoria Reyes, G.R. No. 174420, March 22, 2010.

Jurisdiction; labor case.  Article 217 of the Labor Code provides that the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide cases involving termination disputes.  The NLRC shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.  Galera being an employee, the Labor Arbiter and the NLRC have jurisdiction over the present case.  WPP Marketing Communications, Inc. et al. vs. Jocelyn M. Galera/Jocelyn M. Galera vs. WPP Marketing Communications, Inc. et al.,  G.R. No. 169207/G.R. No. 169239, March 25, 2010.

Jurisdiction; NLRC.  The Labor Arbiter and the NLRC do not have jurisdiction over LRTA.  Petitioners themselves admitted in their complaint that LRTA “is a government agency organized and existing pursuant to an original charter (Executive Order No. 603),” and that they are employees of METRO.

Light Rail Transit Authority v. Venus, Jr. (G.R. Nos. 163782 & 163881, March 24, 2006), which has a similar factual backdrop, holds that LRTA, being a government-owned or controlled corporation created by an original charter, is beyond the reach of the Department of Labor and Employment which has jurisdiction over workers in the private sector, “Employees of petitioner METRO cannot be considered as employees of petitioner LRTA. The employees hired by METRO are covered by the Labor Code and are under the jurisdiction of the Department of Labor and Employment, whereas the employees of petitioner LRTA, a government-owned and controlled corporation with original charter, are covered by civil service rules. Herein private respondent workers cannot have the best of two worlds, e.g., be considered government employees of petitioner LRTA, yet allowed to strike as private employees under our labor laws.”

In fine, the Labor Arbiter’s decision against LRTA was rendered without jurisdiction, hence, it is void. Thus, it was improper for the appellate court to order the remand of the case to the NLRC, and for it (NLRC) to give due course to LRTA’s appeal.  Emmanuel S. Hugo, et al. vs. Light Rail Transit Authority, G.R. No. 181866, March 18, 2010.

NLRC; final decision.  Petitioners received the June 15, 2004 resolution of the NLRC, denying their motion for reconsideration, on June 16, 2004.  They filed their petition for certiorari before the CA on August 9, 2004, or 54 calendar days from the date of notice of the June 15, 2004 resolution. By reason of the finality of the June 15, 2004 NLRC resolution, the Labor Arbiter issued on July 29, 2004 a Writ of Execution. Petitioners never moved for a reconsideration of this Order regarding the voluntariness of their payment to Sonia, as well as the dismissal with prejudice and the concomitant termination of the case.

However, petitioners argued that the finality of the case did not render the petition for certiorari before the CA moot and academic.  On this point, we agree with petitioners.

In the landmark case of St. Martin Funeral Home v. NLRC (G.R. No. 130866, September 16, 1998), we ruled that judicial review of decisions of the NLRC is sought via a petition for certiorari under Rule 65 of the Rules of Court, and the petition should be filed before the CA, following the strict observance of the hierarchy of courts.  Under Rule 65, Section 4, petitioners are allowed sixty (60) days from notice of the assailed order or resolution within which to file the petition.

Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed despite the pendency of a petition for certiorari, unless it is restrained by the proper court.  Leonis Navigation Co., Inc. and World Marine Panama, S.A. vs. Catalino U. Villamater, et al., G.R. No. 179169, March 3, 2010.

POEA; factual findings.  As a general rule, factual findings of administrative and quasi-judicial agencies specializing in their respective fields, especially when affirmed by the CA, must be accorded high respect, if not finality.  However, we are not bound to adhere to the general rule if we find that the factual findings do not conform to the evidence on record or are not supported by substantial evidence, as in the instant case.

The self-serving and unsubstantiated allegations of respondent cannot defeat the concrete evidence submitted by petitioner. We note that respondent did not deny the due execution of the withdrawal form as well as the genuineness of his signature and thumb mark affixed therein.  On the contrary, he admitted signing the same. When he voluntarily signed the document, respondent is bound by the terms stipulated therein.  LNS International Manpower Services vs. Armando Padua, Jr., G.R. No. 179792, March 5, 2010.

(Leslie thanks Joyce Melcar Tan for assisting in the preparation of this post.)