June 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Labor Law

Acceptance of Benefits, render moot claim under other policies.  As in the case of Capili v. National Labor Relations Commission [273 SCRA 576], a claim for benefit under the company’s retirement plan becomes moot when the employee accepts retirement benefits on the basis of Article 287 of the Labor Code.  By Yuson’s acceptance of her retirement benefits through a compromise agreement entered into with her employer, she is deemed to have opted to retire under Article 287. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369, June 16, 2010.

Approval for company’s early retirement program; management prerogative.  Approval of applications for the early retirement program (“ERP”) is within the employer’s management prerogatives.  The exercise of management prerogative is valid as long as it is not done in a malicious, harsh, oppressive, vindictive, or wanton manner. In the present case, the Court sees no bad faith on the part of the employer.  The 21 August 2001 memorandum clearly states that petitioner, on its discretion, was offering ERP to its employees.  The memorandum also states that the reason for the ERP was to prevent further losses.  Petitioner did not abuse its discretion when it excluded respondent in the ERP because the latter is already about to retire.  To allow respondent to avail of the ERP would have been contrary to the purpose of the program. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369, June 16, 2010.

Constructive dismissal; definition; transfer as management prerogative. Constructive dismissal is defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely, or when there is a demotion in rank or a diminution of pay. It exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.

Here, there was no diminution of petitioner’s salary and other benefits.  There was no evidence that she was harassed or discriminated upon, or that respondents made it difficult for her to continue with her other duties.  Absent any evidence of bad faith, it is within the exercise of respondents’ management prerogative to transfer some of petitioner’s duties, if, in their judgment, this would be more beneficial to the corporation.  Estrella Velasco vs. Transit Automotive Supply, Inc. and Antonio de Dios, G.R. No. 171327, June 18, 2010.

Constructive dismissal; off-detailing; resignation; notice requirement. The company evidently placed petitioner on floating status after being relieved of her position.  But, as the Court has repeatedly ruled, such act of “off-detailing” does not amount to a dismissal so long as the floating status does not continue beyond a reasonable time.  In this case, the employee’s floating status ran up to more than six months as of August 16, 2002. For this reason, the company may be considered to have constructively dismissed the employee from work as of that date. Hence, petitioner’s purported resignation on October 15, 2002 could not have been legally possible.

The company claims that it gave petitioner notices on August 23, 2002 and September 2, 2002, asking her to explain her failure to report for work and informing her that the company would treat such failure as lack of interest in her continued employment.  But these notices cannot possibly take the place of the notices required by law as they came more than six months after the company placed her on floating status, at which time, the employee is already deemed to have been constructively dismissed her from work.  Elsa S. Mali-on v. Equitable General Services Inc., G.R. No. 185269, June 29, 2010.

Death benefits; entitlement. In order to avail of death benefits, the death of the employee should occur during the term of the employment contract.  For emphasis, we reiterate that the death of a seaman during the term of employment contract makes the employer liable to his heirs for death benefits, but if the seaman dies after his contract of employment has expired, his beneficiaries are not entitled to the death benefits. Southeastern Shipping, Southeastern Shipping Group, Ltd. vs. Federico U. Navarra, Jr., G.R. No. 167678, June 22, 2010.

Death benefits; post-medical examination; inadvertence of employer.  In the cases of Philippines., Inc. v. Joaquin [437 SCRA 608] and Rivera v. Wallem Maritime Services, Inc.[474 SCRA 714], the Supreme Court stressed the importance of a post-employment medical examination or its equivalent for the award of death benefits to seafarers and/or their representatives in compliance with POEA Memorandum Circular No. 055-96 and Department Order No. 33, Series of 1996, which provide that the seafarer must report to his employer for a post-employment medical examination within three working days from the date of arrival, otherwise, benefits under the POEA standard employment contract would be nullified.  However, in the present case, the absence of a post-employment medical examination cannot be used to defeat respondent’s claim since the failure to subject the seafarer to this requirement was not due to the seafarer’s fault but to the inadvertence or deliberate refusal of petitioners. Interorient Maritime Enterprises, Inc. et al. v. Leonora S. Remo, G.R. No. 181112, June 29, 2010.

Dismissal; breach of trust; lack of loss not a defense. The acts of the employee revealed a mind that was willing to disregard bank rules and regulations when other branch officers concurred. Her defense that the bank suffered no loss is of no moment. The focal point is that she betrayed the trust of the bank. Hence, the bank rightfully terminated the services of the employee for willful breach of the trust that it reposed in her.   Luzviminda A. Ang vs. Philippine National Bank, G.R. No. 178762, June 16, 2010.

Dismissal; burden of proof. In termination cases, the burden of proof rests upon the employer to show that the dismissal of the employee is for just cause and failure to do so would mean that the dismissal is not justified. This is in consonance with the guarantee of security of tenure in the Constitution, and elaborated in the Labor Code. A dismissed employee is not required to prove his innocence to the charges leveled against him by his employer. The determination of the existence and sufficiency of a just cause must be exercised with fairness and in good faith and after observing due process. Lima Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs. Marlyn Cuavas, G.R. No. 169523, June 16, 2010.

Dismissal; exercised with compassion and understanding; doubts resolved in favor of employee. While an employer has its own interest to protect, and pursuant thereto, it may terminate a managerial employee for a just cause, such prerogative to dismiss or lay off an employee must be exercised without abuse of discretion. Its implementation should be tempered with compassion and understanding. The employer should bear in mind that, in the exercise of the said prerogative, what is at stake is not only the employee’s position, but his very livelihood, his very breadbasket. Indeed, the consistent rule is that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for justifiable cause. Thus, when the breach of trust or loss of confidence alleged is not borne by clearly established facts, as in this case, such dismissal on the cited grounds cannot be allowed. Lima Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs. Marlyn Cuavas, G.R. No. 169523, June 16, 2010.

Dismissal; gross neglect of duty; duty to family is no defense. Dr. Estampa’s defense is not acceptable.  A person’s duty to his family is not incompatible with his job-related commitment to come to the rescue of victims of disasters.  Disasters do not strike every day.  Besides, knowing that his job as senior medical health officer entailed the commitment to make a measure of personal sacrifice, he had the choice to resign from it when he realized that he did not have the will and the heart to respond.  Dr. Edilberto Estampa, Jr. vs. Government of Davao, G.R. No. 190681, June 21, 2010.

Dismissal; loss of confidence not entitled to separation pay. It is significant to stress that for there to be a valid dismissal based on loss of trust and confidence, the breach of trust must be willful, meaning it must be done intentionally, knowingly, and purposely, without justifiable excuse.  The basic premise for dismissal on the ground of loss of confidence is that the employee concerned holds a position of trust and confidence.  It is the breach of this trust that results in the employer’s loss of confidence in the employee.

In the case of Aromin v. NLRC [553 SCRA 273], the assistant vice-president of BPI was validly dismissed for loss of trust and confidence. The Court disallowed the payment of separation pay on the ground that he was found guilty of willful betrayal of trust, a serious offense akin to dishonesty. Bank of the Philippine Islands and BPI Family Bank vs. Hon. National Labor Relations Commission (1st Division) and Ma. Rosario N. Arambulo, G.R. No. 179801. June 18, 2010.

Dismissal; loss of trust and confidence; managerial employees. Loss of trust and confidence, as a just cause for termination of employment, is premised on the fact that an employee concerned holds a position where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. This includes managerial personnel entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. The betrayal of this trust is the essence of the offense for which an employee is penalized.

It must be noted, however, that in a plethora of cases, the Supreme Court has distinguished the treatment of managerial employees from that of rank-and-file personnel, insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal, requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be sufficient. But as regards a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded of his position. Lima Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs. Marlyn Cuavas, G.R. No. 169523, June 16, 2010.

Dismissal; mere negligence or carelessness not sufficient ground for loss of confidence. Respondent’s negligence or carelessness in her duties, however, are not justifiable grounds for petitioners’ loss of trust and confidence in her, especially in the absence of any malicious intent or fraud on respondent’s part. Loss of trust and confidence stems from a breach of trust founded on a dishonest, deceitful or fraudulent act.  In the case at bar, respondent did not commit any act which was dishonest or deceitful. She did not use her authority as the Finance and Administration Manager to misappropriate company property nor did she abuse the trust reposed in her by petitioners with respect to her responsibility to implement company rules. The most that can be attributed to respondent is that she was remiss in the performance of her duties. This, though, does not constitute dishonest or deceitful conduct which would justify the conclusion of loss of trust and confidence.  Lima Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs. Marlyn Cuavas, G.R. No. 169523, June 16, 2010.

Dismissal for just cause, separation pay allowed in exceptional cases. While as a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 282 of the Labor Code is not entitled to separation pay, the Court has allowed in numerous cases the grant of separation pay or some other financial assistance to an employee dismissed for just causes on the basis of equity.

In the leading case of Philippine Long Distance Telephone Co. v. NLRC [164 SCRA 671] the Court stated that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.  In granting separation pay to respondent, the NLRC and Court of Appeals both adhered to this jurisprudential precept and cleared respondent of bad faith. Bank of the Philippine Islands and BPI Family Bank vs. Hon. National Labor Relations Commission (1st Division) and Ma. Rosario N. Arambulo, G.R. No. 179801, June 18, 2010.

Employee benefit; total disability construed. It has been held that disability is intimately related to one’s earning capacity. It should be understood less on its medical significance but more on the loss of earning capacity. Total disability does not mean absolute helplessness. In disability compensation, it is not the injury, which is compensated, but rather the incapacity to work resulting in the impairment of one’s earning capacity.  Thus, 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. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Employer-Employee Relationship; agents of insurance companies; exception to the Insular case; Our ruling in the first Insular case [Insular Insurance v. NLRC, 179 SCRA 459] case did not foreclose the possibility of an insurance agent becoming an employee of an insurance company; if evidence exists showing that the company promulgated rules or regulations that effectively controlled or restricted an insurance agent’s choice of methods or the methods themselves in selling insurance, an employer-employee relationship would be present. The existence of an employer-employee relationship is thus determined on a case-to-case basis depending on the evidence on record. Gregorio V. Tongko v. The Manufacturers Life Insurance Co. (Phils) and Renato A. Vergel De Dios, G.R. No. 167622, June 29, 2010.

Nature of employer; privatization; entitlement to benefits. Although the transformation of the PNB from a government-owned corporation to a private one did not result in a break in its life as juridical person, the same idea of continuity cannot be said of its employees.  Section 27 of Presidential Proclamation 50 provided for the automatic termination of employer-employee relationship upon privatization of a government-owned and controlled corporation.  Further, such privatization cannot deprive the government employees involved of their accrued benefits or compensation.

As for possible benefits accruing after privatization, the same should be deemed governed by the Labor Code since the PNB that rehired the employee has become a private corporation. Under the Omnibus Rules Implementing the Labor Code, Book VI, Rule I, Section 7, the employee’s separation from work for a just cause does not entitle her to termination pay.  Luzviminda A. Ang vs. Philippine National Bank, G.R. No. 178762, June 16, 2010.

Nature of employer; privatization no defense; continuity of offense. The offense for which petitioner was removed took place when the government still owned PNB and she was then a government employee.  But while PNB began as a government corporation, it did not mean that its corporate being ceased and was subsequently reestablished when it was privatized.  It remained the same corporate entity before, during, and after the change over with no break in its life as a corporation.  Consequently, the offenses that were committed against the bank before its privatization continued to be offenses against the bank after the privatization.  Luzviminda A. Ang vs. Philippine National Bank, G.R. No. 178762, June 16, 2010.

Prescription of labor claims; overseas contract workers. The employment of seafarers, including claims for death benefits, is governed by the contracts they sign every time they are hired or rehired; and as long as the stipulations therein are not contrary to law, morals, public order or public policy, they have the force of law between the parties.

In Cadalin v. POEA’s Administrator [238 SCRA 721, 764] we held that Article 291 of the Labor Code covers all money claims from employer-employee relationship.  “It is not limited to money claims recoverable under the Labor Code, but applies also to claims of overseas contract workers”.

Article 291 of the Labor Code is the law governing prescription of money claims of seafarers, a class of overseas contract workers. This law prevails over Section 28 of the Standard Employment Contract for Seafarers, which provides for claims to be brought only within one year from the date of the seafarer’s return to the point of hire.  Thus, for the guidance of all, Section 28 of the Standard Employment Contract for Seafarers, insofar as it limits the prescriptive period for the filing of money claims by seafarers, is hereby declared null and void. The applicable provision is Article 291 of the Labor Code, it being more favorable to the seafarers and more in accord with the State’s declared policy to afford full protection to labor, which provides for a three-year prescriptive period. Southeastern Shipping, Southeastern Shipping Group, Ltd. vs. Federico U. Navarra, Jr., G.R. No. 167678, June 22, 2010.

Quitclaims; general rule; requirements for validity; instances when it was annulled.  As a rule, quitclaims, waivers, or releases are looked upon with disfavor and are largely ineffective to bar claims for the measure of a worker’s legal rights. To be valid, a Deed of Release, Waiver and/or Quitclaim must meet the following requirements: (1) that there was no fraud or deceit on the part of any of the parties; (2) that the consideration for the quitclaim is credible and reasonable; and (3) that the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law.

Courts have stepped in to annul questionable transactions, especially where there is clear proof that a waiver, for instance, was obtained from an unsuspecting or a gullible person; or where the agreement or settlement was unconscionable on its face. A quitclaim is ineffective in barring recovery of the full measure of a worker’s rights, and the acceptance of benefits therefrom does not amount to estoppel. Moreover, a quitclaim in which the consideration is scandalously low and inequitable cannot be an obstacle to the pursuit of a worker’s legitimate claim. Interorient Maritime Enterprises, Inc. et al. v. Leonora S. Remo, G.R. No. 181112, June 29, 2010.

Retirement benefits; does not include allowances. Executive Order No. 756 temporary measure; statutory construction.  Section 6 of Executive Order No. 756 (“E.O. 756”), which provides for the computation of retirement proceeds including allowances, does not provide for a permanent retirement plan, as against the prohibition of Section 28, Subsection (b) of Commonwealth Act No. 186 (“C.A. 186”), as amended.  The E.O. 756 should be read adjunct to its mandate of reorganizing the Philippine International Trading Corporation.  The increased benefit under E.O. 756 was clearly meant as an incentive for employees who retire, resign or are separated from service during or as a consequence of the reorganization.  As a temporary measure, it cannot be interpreted as an exception to the general prohibition against separate or supplementary insurance and/or retirement or pension plans under C.A. 186, as amended.

In reconciling E.O. 756 with C.A.186, as amended, uppermost in the mind of the Court is the fact that the best method of interpretation is that which makes laws consistent with other laws which are to be harmonized rather than having one considered repealed in favor of the other. Philippine International Trading Corporation vs. Commission on Audit, G.R. No. 183517, June 22, 2010.

Resignation; burden of proof. The rule in termination cases is that the employer bears the burden of proving that he dismissed his employee for a just cause. And, when the employer claims that the employee resigned from work, the burden is on the employer to prove that he did so willingly. Whether that is the case would largely depend on the circumstances surrounding such alleged resignation. Those circumstances must be consistent with the employee’s intent to give up work. Elsa S. Mali-on v. Equitable General Services Inc., G.R. No. 185269, June 29, 2010.

Solidary liability of employers; proof of bad faith. Based on MAM Realty Development Corporation v. NLRC [244 SCRA 797], for corporate officers to be held solidarily liable in labor disputes there must be evidence of bad faith or malice.  Querubin L. Alba and Rizalinda D. De Guzman vs. Robert L. Yupangco, G.R. No. 188233, June 29, 2010.

Labor Procedure

Judgment; amendment of final order; solidary liability. The Labor Arbiter cannot modify a final and executory judgment, even if the modification is meant to correct erroneous conclusions of fact and law, whether it be made by the court that rendered it or by the highest court in the land. The only recognized exceptions are the corrections of clerical errors or the making of so-called nunc pro tunc entries which cause no prejudice to any party and in cases where the judgment is void.  Said exceptions do not apply in the present case. Querubin L. Alba and Rizalinda D. De Guzman vs. Robert L. Yupangco, G.R. No. 188233, June 29, 2010.

Judgment; law of the case; definition and application. “Law of the case” has been defined as the opinion delivered on a former appeal—it is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal.  OSCI’s application of the law of the case principle to the instant case, as regards the remand of the case to the Labor Arbiter for clarificatory hearings, is misplaced.  The only matter settled in the July 30, 1999 NLRC Decision, which can be regarded as law of the case, was the undisputed fact that Bastol was suffering from a heart ailment.  As it is, the issue on the degree of disability of Bastol’s heart ailment and his entitlement to disability indemnity, as viewed by the NLRC through said decision, has yet to be resolved.  For this reason, the NLRC remanded the case to Labor Arbiter Mayor, Jr. “for conduct of further appropriate proceedings and to terminate the same with dispatch. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Judgment; res judicata; nature and applicability.  The nature of res judicata, as now embodied in Sec. 47, Rule 39 of the Rules of Court, has two concepts, which are (i) bar by former judgment and (ii) conclusiveness of judgment.  These concepts of the doctrine of res judicata are applicable to second actions involving substantially the same parties, the same subject matter, and cause or causes of action. In the instant case, there is no second action to speak of. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Procedure; certificate of non-forum shopping; pro-forma complaints. For the expeditious and inexpensive filing of complaints by employees, the Regional Arbitration Branch (“RAB”) of the NLRC provides pro-forma complaint forms.  This is to facilitate the exercise and protection of employees’ rights by the convenient assertion of their claims against employers untrammeled by procedural rules and complexities.  To comply with the certification against forum shopping requirement, a simple question embodied in the Complaint form answerable by “yes” or “no” suffices.  Employee-complainants are not even required to have a counsel before they can file their complaint.  An officer of the RAB, duly authorized to administer oaths, is readily available to facilitate the execution of the required subscription or jurat of the complaint. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Procedure; conduct of hearings; discretionary; exemptions.  Although, the NLRC, while having appellate jurisdiction over decisions and resolutions of the Labor Arbiter, may not dictate to the latter how to conduct the labor case before it.  Sec. 9 of Rule V of the then prevailing NLRC Rules of Procedure, issued on December 10, 1999, provided for the nature of proceedings before the Labor Arbiter as non-litigious in nature. Hence, the Labor Arbiter is given full discretion to determine, motu proprio, on whether to conduct hearings or not.

Consequently, a hearing cannot be demanded by either party as a matter of right.  The parties are required to file their corresponding position papers and all the documentary evidence and affidavits to prove their cause of action and defenses.  The rationale behind this is to avoid delay and curtail the pernicious practice of withholding of evidence.

The Court, however, has recognized specific instances of the impracticality for the Labor Arbiter to follow the position paper method of disposing cases; thus, formal or clarificatory hearings must be had in cases of termination of employment: such as,  (i) when claims are not properly ventilated for lack of proper determination whether complainant employee was a rank-and-file or a managerial employee, (ii) that the Labor Arbiter cannot rely solely on the parties’ bare allegations when the affidavits submitted presented conflicting factual issues, and (iii) considering the dearth of evidence presented by complainants the Labor Arbiter should have set the case for hearing. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Procedure; verification by counsel sufficient. The counsel’s verification in a Position Paper substantially complies with the rule on verification.  The second paragraph of Sec. 4, Rule 7 of the Rules of Court provides:  “A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records.”  On the other hand, the actual verification of counsel states:  “That I am the counsel of record for the complainant in the above-entitled case; that I caused the preparation of the foregoing Position Paper; that I have read and understood the contents thereof; and that I confirm that all the allegations therein contained are true and correct based on recorded evidence.” Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Procedure; late filing of position paper, and filing of prohibited pleading.  The relaxation of rules of technical procedure in the hearing of labor disputes shall not be applicable in case counsel fails to file a position paper before the Labor Arbiter not just once but twice.  His situation was compounded when he filed a motion to recall order of dismissal, a prohibited pleading, albeit gratuitously glossed over by the Labor Arbiter, which treated it as an appeal; and when he belatedly paid the appeal fee.

Moreover, not having learned his lesson, petitioner’s counsel filed a motion for reconsideration of the NLRC dismissal of his appeal, which is also prohibited, instead of interposing an appeal before the Court of Appeals. Said motion for reconsideration not having tolled the running of the reglementary period for the filing of a petition for certiorari under Rule 65, petitioner’s petition before the appellate court was filed out of time – three months late. Luis M. Rivera vs. Parents-Teachers Community Association and Easter Yase, G.R. No. 181532, June 29, 2010.

Procedure; late submission of documentary evidence allowed. The nature of the proceedings before the Labor Arbiter is not only non-litigious and summary, but the Labor Arbiter is also given great leeway to resolve the case; thus, he may “avail himself of all reasonable means to ascertain the facts of the controversy.” The belated submission of additional documentary evidence by respondent after the case was already submitted for decision did not make the proceedings before the Labor Arbiter improper.  The basic reason is that technical rules of procedure are not binding in labor cases. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Procedure; quantum of evidence on appeal; substantial evidence.  In administrative proceedings, the quantum of proof required is substantial evidence, which is more than a mere scintilla of evidence, but such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The Court of Appeals may review the factual findings of the NLRC and reverse its ruling if it finds that the decision of the NLRC lacks substantial basis. Estrella Velasco vs. Transit Automotive Supply, Inc. and Antonio de Dios, G.R. No. 171327, June 18, 2010.

(Leslie thanks Earl Charles N. Villarin for assisting in the preparation of this post.)