November 2011 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected November 2011 rulings of the Supreme Court of the Philippines on labor law and procedure:

Award of attorney’s fees; concepts.  There are two commonly accepted concepts of attorney’s fees – the ordinary and extraordinary.  In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services the former renders; compensation is paid for the cost and/or results of legal services per agreement or as may be assessed.  In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered by the court to be paid by the losing party to the winning party.  This is payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the award shall accrue to the lawyer as additional or part of his compensation.  Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of attorney’s fees.  Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages.  Thus the SC concluded that the CA erred in ruling that a finding of the employer’s malice or bad faith in withholding wages must precede an award of attorney’s fees under Article 111 of the Labor Code.  To reiterate, a plain showing that the lawful wages were not paid without justification is sufficient.  Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union and Eduardo Borela, etc. vs. Manila Water Company, Inc., G.R. No. 174179. November 16, 2011.

Award of attorney’s fees; Article 111.  One of the issues of this case involved the effect of the Memorandum of Agreement provision that attorney’s fees shall be deducted from the amelioration allowance (AA) and CBA receivables.  In this regard, the CA held that the additional grant of 10% attorney’s fees by the NLRC violates Article 111 of the Labor Code, considering that the MOA between the parties already ensured the payment of 10% attorney’s fees deductible from the AA and CBA receivables of the Union’s members.  In the present case, the Union bound itself to pay 10% attorney’s fees to its counsel under the MOA and also gave up the attorney’s fees awarded to the Union’s members in favor of their counsel.  The award by the NLRC cannot be taken to mean an additional grant of attorney’s fees, in violation of the ten percent (10%) limit under Article 111 of the Labor Code since it rests on an entirely different legal obligation than the one contracted under the MOA.  Simply stated, the attorney’s fees contracted under the MOA do not refer to the amount of attorney’s fees awarded by the NLRC; the MOA provision on attorney’s fees does not have any bearing at all to the attorney’s fees awarded by the NLRC under Article 111 of the Labor Code.  Based on these considerations, it is clear that the CA erred in ruling that the LA’s award of attorney’s fees violated the maximum limit of ten percent (10%) fixed by Article 111 of the Labor Code.  Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union and Eduardo Borela, etc. vs. Manila Water Company, Inc., G.R. No. 174179. November 16, 2011.

Disability benefits; compensable.  In this case, respondent was diagnosed with Central Retinal Vein Occlusion of his left eye.  Central retinal vein occlusion causes painless vision loss which is usually sudden, but it can also occur gradually over a period of days to weeks.  This condition, despite numerous medical procedures undertaken, eventually led to a total loss of sight of respondent’s left eye.  Loss of one bodily function falls within the definition of disability which is essentially “loss or impairment of a physical or mental function resulting from injury or sickness.”  The disputable presumption that a particular injury or illness that results in disability, or in some cases death, is work-related stands in the absence of contrary evidence.  In the case at bench, the said presumption was not overturned by the petitioners.  Although, the employer is not the insurer of the health of his employees, he takes them as he finds them and assumes the risk of liability.  Consequently, the Court concurred with the finding of the lower courts that respondent’s disability is compensable.  Fil-star Maritime Corporation, et al. vs. Hanziel O. Resete, G.R. No. 192686. November 23, 2011.

Disability benefits; total disability.  A total disability does not require that the employee be completely disabled, or totally paralyzed.  What is necessary is that the injury must be such that the employee cannot pursue his or her usual work and earn from it.  On the other hand, a total disability is considered permanent if it lasts continuously for more than 120 days.  What is crucial is whether the employee who suffers from disability could still perform his work notwithstanding the disability he incurred.  Evidently, respondent was not able to return to his job as a seafarer after his left eye was declared legally blind.  Records showed that the petitioners did not give him a new overseas assignment after his disability.  This only proved that his disability effectively barred his chances to be deployed abroad as an officer of an ocean-going vessel.  Hence, the Supreme Court found it fitting that respondent be entitled to permanent total disability benefits considering that he would not be able to resume his position as a maritime officer, and the probability that he would be hired by other maritime employers would be close to impossible.  Fil-star Maritime Corporation, et al. vs. Hanziel O. Resete, G.R. No. 192686. November 23, 2011.

Dismissal; gross and habitual neglect of duties.  Gross negligence connotes want of care in the performance of one’s duties, while habitual neglect implies repeated failure to perform one’s duties for a period of time, depending on the circumstances.  In the case at bench, Padao was accused of having presented a fraudulently positive evaluation of the business, credit standing/rating and financial capability of Reynaldo and Luzvilla Baluma and eleven other loan applicants.  Some businesses were eventually found not to exist at all, while in other transactions, the financial status of the borrowers simply could not support the grant of loans in the approved amounts. Moreover, Padao over-appraised the collateral of spouses Gardito and Alma Ajero, and that of spouses Ihaba and Rolly Pango.  Padao’s repeated failure to discharge his duties as a credit investigator of the bank amounted to gross and habitual neglect of duties under Article 282 (b) of the Labor Code.  He not only failed to perform what he was employed to do, but also did so repetitively and habitually, causing millions of pesos in damage to PNB.  Thus, PNB acted within the bounds of the law by meting out the penalty of dismissal, which it deemed appropriate given the circumstances.  Philippine National Bank vs. Dan Padao, G.R. Nos. 180849 and 187143. November 16, 2011.

Dismissed employees; separation pay.  Padao is not entitled to financial assistance.  The rule regarding separation pay as a measure of social justice is that it shall be paid only in those instances where the employee is validly dismissed for causes other than serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, commission of a crime against the employer or his family, or those reflecting on his moral character.  In this case, Padao was guilty of gross and habitual neglect of duties. Philippine National Bank vs. Dan Padao, G.R. Nos. 180849 and 187143. November 16, 2011.

Employment of seafarers. 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.  While the seafarer and his employer are governed by their mutual agreement, the POEA rules and regulations require that the POEA Standard Employment Contract (POEA-SEC) be integrated in every seafarer’s contract.  In this case, considering that petitioner executed an overseas employment contract with respondent company in November 1999, the 1996 POEA-SEC should govern.  The 2000 POEA-SEC initially took effect on June 25, 2000.  Thereafter, the Court issued the Temporary Restraining Order (TRO) which was later lifted on June 5, 2002.  Thus, petitioner cannot simply rely on the disputable presumption provision mentioned in Section 20 (B)(4) of the 2000 POEA-SEC which states that: “Those illnesses not listed in Section 32 of this Contract are disputably presumed as work related.” Gilbert Quizora vs. Denholm Crew Management (Philippines), Inc., G.R. No. 185412. November 16, 2011.

Employment of seafarers; disability compensation.  Granting that the provisions of the 2000 POEA-SEC apply, the disputable presumption provision in Section 20 (B) does not allow petitioner to just sit down and wait for respondent company to present evidence to overcome the disputable presumption of work-relatedness of the illness.  Contrary to his position, the seafarer still has to substantiate his claim in order to be entitled to disability compensation. He has to prove that the illness he suffered was work-related and that it must have existed during the term of his employment contract.  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.  Unfortunately for petitioner, he failed to prove that his varicose veins arose out of his employment with respondent company.  Gilbert Quizora vs. Denholm Crew Management (Philippines), Inc., G.R. No. 185412. November 16, 2011.

Employee’s compensation; increased risk theory.  For a sickness or resulting disability or death to be compensable, the claimant must prove either (1) that the employee’s sickness was the result of an occupational disease listed under Annex “A” of the Amended Rules on Employees’ Compensation, or (2) that the risk of contracting the disease was increased by his working conditions.  Under the increased risk theory, there must be a reasonable proof that the employee’s working condition increased his risk of contracting the disease, or that there is a connection between his work and the cause of the disease.  In this case, since Besitan’s ailment, End Stage Renal Disease secondary to Chronic Glomerulonephritis is not among those listed under Annex “A,” of the Amended Rules on Employees’ Compensation, he needs to show by substantial evidence that his risk of contracting the disease was increased by his working condition.  Government Service Insurance System vs. Manuel P. Besitan, G.R. No. 178901. November 23, 2011.

Employees’s Compensation; proceedings; quantum of proof.  Direct and clear evidence, is not necessary to prove a compensable claim.  Strict rules of evidence do not apply as PD No. 626 only requires substantial evidence.  The SC found that Besitan has sufficiently proved that his working condition increased his risk of contracting Glomerulonephritis, which according to GSIS may be caused by bacterial, viral, and parasitic infection.  When Besitan entered the government service in 1976, he was given a clean bill of health.  In 2005, he was diagnosed with End Stage Renal Disease secondary to Chronic Glomerulonephritis. It would appear therefore that the nature of his work could have increased his risk of contracting the disease.  His frequent travels to remote areas in the country could have exposed him to certain bacterial, viral, and parasitic infection, which in turn could have caused his disease.  Delaying his urination during his long trips to the provinces could have also increased his risk of contracting the disease.  As a matter of fact, even the Bank Physician of Bangko Sentral ng Pilipinas, Dr. Gregorio Suarez II, agreed that Besitan’s working condition could have contributed to the weakening of his kidneys, which could have caused the disease.  This Medical Certificate is sufficient to prove that the working condition of Besitan increased his risk of contracting Glomerulonephritis.  In claims for compensation benefits, a doctor’s certification as to the nature of a claimant’s disability deserves full credence because no medical practitioner would issue certifications indiscriminately.  Government Service Insurance System vs. Manuel P. Besitan, G.R. No. 178901. November 23, 2011.

Illegal dismissal; employer-employee relationship.  The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct.  In this case, the documentary evidence presented by respondent to prove that he was an employee of petitioner are as follows:  (a) a document denominated as “payroll” (dated July 31, 2001 to March 15, 2002) certified correct by petitioner, which showed that respondent received a monthly salary of P7,000.00 with the corresponding deductions due to absences incurred by respondent; and (2) copies of petty cash vouchers, showing the amounts he received and signed for in the payrolls.  These documents showed that petitioner hired respondent as an employee and he was paid monthly wages of P7,000.00.  Additionally, as to the existence of the power of control, it is not essential for the employer to actually supervise the performance of duties of the employee.  It is sufficient that the former has a right to wield the power.  In this case, petitioner even stated in his Position Paper that it was agreed that he would help and teach respondent how to use the studio equipment.  In such case, petitioner certainly had the power to check on the progress and work of respondent.  Cesar C. Lirio, doing business under the name and style of Celkor Ad Sonimix vs. Wilmer D. Genovia, G.R. No. 169757. November 23, 2011.

Illegal recruitment; elements.  The crime of illegal recruitment is committed when two elements concur, namely: (1) the offender has no valid license or authority required by law to enable one to lawfully engage in recruitment and placement of workers; and (2) he undertakes either any activity within the meaning of “recruitment and placement” defined under Article 13 (b), or any prohibited practices enumerated under Article 34 of the Labor Code.  First, the petitioner was found not to have been issued a license as proven by the certification from the DOLE-Dagupan District Office stating that petitioner has not been issued any license by the POEA and neither is it a holder of an authority to engage in recruitment and placement activities. Second, from the testimonies of the private respondents, it is apparent that petitioner was able to convince the private respondents to apply for work in Israel after parting with their money in exchange for the services she would render.  The said act of the petitioner, without a doubt, falls within the meaning of recruitment and placement as defined in Article 13 (b) of the Labor Code.  Finally, the Supreme Court noted that in illegal recruitment cases, the failure to present receipts for money that was paid in connection with the recruitment process will not affect the strength of the evidence presented by the prosecution as long as the payment can be proved through clear and convincing testimonies of credible witnesses.  Delia D. Romero vs. People of the Philippines, Romulo Padlan and Aruturo Siapno, G.R. No. 171644. November 23, 2011

Probationary employment; security of tenure.  It is settled that even if probationary employees do not enjoy permanent status, they are accorded the constitutional protection of security of tenure. This means they may only be terminated for a just cause or when they otherwise fail to qualify as regular employees in accordance with reasonable standards made known to them by the employer at the time of their engagement.  In this case, the justification given by the petitioners for Sy’s dismissal was her alleged failure to qualify by the company’s standard.  Other than the general allegation that said standards were made known to her at the time of her employment, however, no evidence, documentary or otherwise, was presented to substantiate the same.  Neither was there any performance evaluation presented to prove that indeed hers was unsatisfactory.  Hence, for failure of the petitioners to support their claim of unsatisfactory performance by Sy, the SC held that Sy’s employment was unjustly terminated to prevent her from acquiring a regular status in circumvention of the law on security of tenure.  Tamson’s Enterprises, Inc., et al. vs. Court of Appeals and Rosemarie L. Sy, G.R. No. 192881. November 16, 2011.

Probationary employment; termination.  Even on the assumption that Sy indeed failed to meet the standards set by the petitioner-employer and made known to the former at the time of her engagement, still, the termination was flawed for failure to give the required notice to Sy.  Section 2, Rule I, Book VI of the Implementing Rules provides that: “If the termination is brought about by the completion of a contract or phase thereof, or by failure of an employee to meet the standards of the employer in the case of probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable time from the effective date of termination.”  Tamson’s Enterprises, Inc., et al. vs. Court of Appeals and Rosemarie L. Sy, G.R. No. 192881. November 16, 2011.

Termination of employment; when company tolerated violation of company policy.  The CA was correct in stating that when the violation of company policy or breach of company rules and regulations is tolerated by management, it cannot serve as a basis for termination.  This principle, however, only applies when the breach or violation is one which neither amounts to nor involves fraud or illegal activities.  In such a case, one cannot evade liability or culpability based on obedience to the corporate chain of command.  In this case, Padao, in affixing his signature on the fraudulent reports, attested to the falsehoods contained therein. Moreover, by doing so, he repeatedly failed to perform his duties as a credit investigator.  Thus, the termination of his employment is justified.  Philippine National Bank vs. Dan Padao, G.R. Nos. 180849 and 187143. November 16, 2011.

(Leslie thanks Charmaine Rose K. Haw for assisting in the preparation of this post.)