September 2012 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are select September 2012 rulings of the Philippine Supreme Court on labor law and procedure:

Breach of contract; Contract substitution; Constructive dismissal; Illegal recruitment. The agency and its principal, Modern Metal, committed a prohibited practice and engaged in illegal recruitment when they altered or substituted the contracts approved by the Philippine Overseas Employment Administration (POEA). Article 34 (i) of the Labor Code provides: It shall be unlawful for any individual, entity, licensee, or holder of authority to substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Secretary of Labor. Meanwhile, Article 38 (i) of the Labor Code, as amended by R.A. 8042, defined “illegal recruitment” to include the substitution or alteration, to the prejudice of the worker, of employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the Department of Labor and Employment.

Furthermore, the agency and Modern Metal committed breach of contract by providing substandard working and living arrangements, when the contract provided free and suitable housing. The living quarters were cramped as they shared them with 27 other workers.  The lodging house was far from the jobsite, leaving them only three to four hours of sleep every workday because of the long hours of travel to and from their place of work, not to mention that there was no potable water in the lodging house which was located in an area where the air was polluted.  They complained with the agency about the hardships that they were suffering, but the agency failed to act on their reports.  Significantly, the agency failed to refute their claims.

Thus, with their original contracts substituted and their oppressive working and living conditions unmitigated or unresolved, the decision to resign is not surprising.  They were compelled by the dismal state of their employment to give up their jobs; effectively, they were constructively dismissed.  A constructive dismissal or discharge is “a quitting because continued employment is rendered impossible, unreasonable or unlikely, as, an offer involving a demotion in rank and a diminution in pay.”

Without doubt, continued employment with Modern Metal had become unreasonable.  A reasonable mind would not approve of a substituted contract that pays a diminished salary – from 1350 AED a month in the original contract to 1,000 AED to 1,200 AED in the appointment letters, a difference of 150 AED to 250 AED (not just 50 AED as the agency claimed) or an extended employment (from 2 to 3 years) at such inferior terms, or a “free and suitable” housing which is hours away from the job site, cramped and crowded, without potable water and exposed to air pollution.

We thus cannot accept the agency’s insistence that the respondents voluntarily resigned since they personally prepared their resignation letters in their own handwriting. Pert/CPM Manpower Exponent Co., Inc. vs. Amando A. Vinuya, et al. G.R. No. 197528. September 5, 2012.

Disability benefit. Deemed read and incorporated into the Contract of Employment between David and respondents are the provisions of the 2000 Philippine Overseas Employment Agency Standard Employment Contract (POEASEC). Sec. 20(B)(4) of the POEA-SEC clearly established a disputable presumption in favor of the compensability of an illness suffered by a seafarer during the term of his contract. Hence, unless contrary evidence is presented by the seafarer’s employer/s, this disputable presumption stands.

In this case, David not only relies on this disputable presumption of the compensability of his illness but David has provided more than a reasonable nexus between the nature of his job and the disease that manifested itself on the sixth month of his last contract with respondents.

It is not necessary that the nature of the employment be the sole and only reason for the illness suffered by the seafarer. It is sufficient that there is a reasonable linkage between the disease suffered by the employee and his work to lead a rational mind to conclude that his work may have contributed to the establishment or, at the very least, aggravation of any pre-existing condition he might have had.

David showed that part of his duties as a Third Officer of the crude tanker M/T Raphael involved “overseeing the loading, stowage, securing and unloading of cargoes.” As a necessary corollary, David was frequently exposed to the crude oil that M/T Raphael was carrying. The chemical components of crude oil include, among others, sulfur, vanadium and arsenic compounds. Hydrogen sulfide and carbon monoxide may also be encountered, while benzene is a naturally occurring chemical in crude oil. It has been regarded that these hazardous chemicals can possibly contribute to the formation of cancerous masses.

In this case, David was diagnosed with MFH (now known as undifferentiated pleomorphic sarcoma [UPS]), which is a class of soft tissue sarcoma or an illness that account for approximately 1% of the known malignant tumors. As stated by Dr. Peña of the MMC, who was consulted by the company-designated physician, the etiology of soft tissue sarcomas are multifactorial. However, some factors are associated with a higher risk. These factors include exposure to chemical carcinogens like some of the chemical components of crude oil. Jessie V. David, represented by his wife, Ma. Theresa S. David, and children, Katherine and Kristina David vs. OSG Shipmanagement Manila, Inc. and/or Michaelmar Shipping Services. G.R. No. 197205. September 26, 2012.

Dismissal; Unfair labor practice; Liability of corporate officers; Moral and exemplary damages. The requisites for a valid dismissal are: (a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard and defend himself; and (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor Code, or for any of the authorized causes under Articles 283 and 284 of the same Code.  In the case before us, both elements are completely lacking.  Respondents were dismissed without any just or authorized cause and without being given the opportunity to be heard and defend themselves.  The law mandates that the burden of proving the validity of the termination of employment rests with the employer.  Failure to discharge this evidentiary burden would necessarily mean that the dismissal was not justified and, therefore, illegal.  Unsubstantiated suspicions, accusations, and conclusions of employers do not provide for legal justification for dismissing employees.  In case of doubt, such cases should be resolved in favor of labor, pursuant to the social justice policy of labor laws and the Constitution.

Anent the charge of unfair labor practice, Article 248 (a) of the Labor Code considers it an unfair labor practice when an employer interferes, restrains or coerces employees in the exercise of their right to self-organization or the right to form an association.  In order to show that the employer committed unfair labor practice under the Labor Code, substantial evidence is required to support the claim.  Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.  In the case at bar, respondents were indeed unceremoniously dismissed from work by reason of their intent to form and organize a union.

A corporation, being a juridical entity, may act only through its directors, officers and employees.  Obligations incurred by them, while acting as corporate agents, are not their personal liability but the direct accountability of the corporation they represent.  However, corporate officers may be deemed solidarily liable with the corporation for the termination of employees if they acted with malice or bad faith.  In the present case, the lower tribunals unanimously found that Percy and Harbutt, in their capacity as corporate officers of Burgos, acted maliciously in terminating the services of respondents without any valid ground and in order to suppress their right to self-organization. Section 31 of the Corporation Code makes a director personally liable for corporate debts if he willfully and knowingly votes for or assents to patently unlawful acts of the corporation.  It also makes a director personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the corporation.  Thus, Percy and Harbutt, having acted in bad faith in directing the affairs of Burgos, are jointly and severally liable with the latter for respondents’ dismissal.

The awards of moral and exemplary damages in favor of respondents are also in order.  Moral damages may be recovered where the dismissal of the employee was tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner contrary to morals, good customs or public policy, while exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner.  The grant of attorney’s fees is likewise proper.  Attorney’s fees may likewise be awarded to respondents who were illegally dismissed in bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts of petitioners.  The unjustified act of petitioners had obviously compelled respondents to institute an action primarily to protect their rights and interests which warrants the granting of the award. Park Hotel, et al. vs. Manolo Soriano, et al. G.R. No. 171118. September 10, 2012.

Employment termination; Substantive and procedural due process; Mass leave; Strike.  Petitioners were illegally dismissed as they were not afforded substantive and procedural due process. To justify the dismissal of an employee on the ground of serious misconduct, the employer must first establish that the employee is guilty of improper conduct, that the employee violated an existing and valid company rule or regulation, or that the employee is guilty of a wrongdoing. In the instant case, Biomedica failed to even present a copy of the rules and to prove that petitioners were made aware of such regulations. The accusation is for engaging in a mass leave tantamount to an illegal strike. The phrase “mass leave” may refer to a simultaneous availment of authorized leave benefits by a large number of employees in a company. Here, only 5 employees were absent on the same day. They did not go on strike, which is a temporary stoppage of work by the concerted action of employees as a result of any industrial or labor dispute. “Concerted” is defined as “mutually contrived or planned” or “performed in unison”. In the case at bar, the 5 petitioners went on leave for various reasons. They were in different places to attend to their personal needs or affairs.

The petitioners were charged with conducting an illegal strike, not a mass leave, without specifying the exact acts that the company considers as constituting an illegal strike or violative of company policies. Such allegation falls short of the requirement in King of Kings Transport, Inc. of “a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees.” A bare mention of an “illegal strike” will not suffice. Further, while Biomedica cites the provisions of the company policy which petitioners purportedly violated, it failed to quote said provisions in the notice so petitioners can be adequately informed of the nature of the charges against them and intelligently file their explanation and defenses to said accusations.

Moreover, the period of 24 hours allotted to petitioners to answer the notice was severely insufficient and in violation of the implementing rules of the Labor Code. Under the implementing rule of Art. 277, an employee should be given “reasonable opportunity” to file a response to the notice.

In addition, Biomedica did not set the charges against petitioners for hearing or conference. While petitioners did not submit any written explanation to the charges, it is incumbent for Biomedica to set the matter for hearing or conference to hear the defenses and receive evidence of the employees. More importantly, Biomedica is duty-bound to exert efforts, during said hearing or conference, to hammer out a settlement of its differences with petitioners. These prescriptions Biomedica failed to satisfy. Lastly, Biomedica again deviated from the dictated contents of a written notice of termination as laid down in Sec. 2, Book V, Rule XIII of the Implementing Rules that it should embody the facts and circumstances to support the grounds justifying the termination. Alex Q. Naranjo, et al. vs. Biomedica Health Care, Inc., et al. G.R. No. 193789. September 19, 2012.

Employee dismissal; Reinstatement. Following Article 279 of the Labor Code, an employee who is unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages computed from the time he was illegally dismissed. However, considering that respondent Dakila was terminated one (1) day prior to his compulsory retirement on May 2, 2007, his reinstatement is no longer feasible. Accordingly, the NLRC correctly held him entitled to the payment of his retirement benefits pursuant to the CBA. On the other hand, his backwages should be computed only for days prior to his compulsory retirement which in this case is only a day. Consequently, the award of reinstatement wages pending appeal must be deleted for lack of basis. The New Philippine Skylanders, Inc. and/or Jennifer M. Eñano-Bote vs. Francisco N. Dakila. G.R. No. 199547. September 24, 2012

Evidence; Constructive dismissal; Transfer; Substantial evidence. In labor cases, strict adherence with the technical rules is not required.  This liberal policy, however, should still conform to the rudiments of equitable principles of law.  For instance, belated submission of evidence may only be allowed if the delay is adequately justified and the evidence is clearly material to establish the party’s cause. Labor tribunals, such as the NLRC, are not precluded from receiving evidence submitted on appeal as technical rules are not binding in cases submitted before them.  However, any delay in the submission of evidence should be adequately explained and should adequately prove the allegations sought to be proven. In the present case, MORESCO II’s belated submission of evidence cannot be permitted. MORESCO II did not cite any reason why it had failed to file its position paper or present its cause before the Labor Arbiter despite sufficient notice and time given to do so.  Only after an adverse decision was rendered did it present its defense and rebut the evidence of Cagalawan by alleging that his transfer was made in response to the letter-request of the area manager of the Ginoog sub-office asking for additional personnel to meet its collection quota.  To our mind, however, the belated submission of the said letter-request without any valid explanation casts doubt on its credibility, especially so when the same is not a newly discovered evidence.

The rule is that it is within the ambit of the employer’s prerogative to transfer an employee for valid reasons and according to the requirement of its business, provided that the transfer does not result in demotion in rank or diminution of salary, benefits and other privileges.  This Court has always considered the management’s prerogative to transfer its employees in pursuit of its legitimate interests.  But this prerogative should be exercised without grave abuse of discretion and with due regard to the basic elements of justice and fair play, such that if there is a showing that the transfer was unnecessary or inconvenient and prejudicial to the employee, it cannot be upheld. Here, while we find that the transfer of Cagalawan neither entails any demotion in rank since he did not have tenurial security over the position of head of the disconnection crew, nor result to diminution in pay as this was not sufficiently proven by him, MORESCO II’s evidence is nevertheless not enough to show that said transfer was required by the exigency of the electric cooperative’s business interest.  Simply stated, the evidence sought to be admitted by MORESCO II is not substantial to prove that there was a genuine business urgency that necessitated the transfer.

When there is doubt between the evidence submitted by the employer and that submitted by the employee, the scales of justice must be tilted in favor of the employee.  This is consistent with the rule that an employer’s cause could only succeed on the strength of its own evidence and not on the weakness of the employee’s evidence.  Thus, MORESCO II cannot rely on the weakness of Ortiz’s certification in order to give more credit to its own evidence.  Self-serving and unsubstantiated declarations are not sufficient where the quantum of evidence required to establish a fact is substantial evidence, described as more than a mere scintilla.  The evidence must be real and substantial, and not merely apparent.  MORESCO II has miserably failed to discharge the onus of proving the validity of Cagalawan’s transfer. Misamis Oriental II Electric Service Cooperative (MORESCO II) vs. Virgilio M. Cagalawan. G.R. No. 175170. September 5, 2012.

Retirement benefits. While it is true that based on prevailing jurisprudence, disallowed benefits received in good faith need not be refunded, the case before us may be distinguished from those cases with that ruling because the monies involved here are retirement benefits. Retirement benefits belong to a different class of benefits.  All the cases with that ruling involved benefits such as cash gifts, representation allowances, rice subsidies, uniform allowances, per diems, transportation allowances, and the like.  The foregoing allowances or fringe benefits are given in addition to one’s salary, either to reimburse him for expenses he might have incurred in relation to his work, or as a form of supplementary compensation.  On the other hand, retirement benefits are given to one who is separated from employment either voluntarily or compulsorily.  Such benefits, subject to certain requisites imposed by law and/or contract, are given to the employee on the assumption that he can no longer work.  They are also given as a form of reward for the services he had rendered.  The purpose is not to enrich him but to help him during his non-productive years.

Our Decision does not preclude the retirees from receiving retirement benefits provided by existing retirement laws.  What they are prohibited from getting are the additional benefits under the GSIS RFP, which we found to have emanated from a void and illegal board resolution.  To allow the payees to retain the disallowed benefits would amount to their unjust enrichment to the prejudice of the GSIS, whose avowed purpose is to maintain its actuarial solvency to finance the retirement, disability, and life insurance benefits of its members. Government Service Insurance System (GSIS), et al. vs. Commission on Audit (COA), et al. G.R. No. 162372. September 11, 2012.

Release/Quitclaim; Separation pay. The release/quitclaim affidavits are invalid for being against public policy for two reasons: (1) the terms of the settlement are unconscionable; the separation pay for termination due to reorganization/restructuring was deficient by Php400,000.00 for each employee; they were given only half of the amount they were legally entitled to; and (2) the absence of voluntariness when the employees signed the document, it was their dire circumstances and inability to support their families that finally drove them to accept the amount offered. Without jobs and with families to support, they dallied in executing the quitclaim instrument, but were eventually forced to sign given their circumstances. To be sure, a settlement under these terms is not and cannot be a reasonable one, given especially the respondent’s length of service – 25 years for Ybarola and 19 years for Rivera.  Radio Mindanao Network, Inc. and Eric S. Canoy vs. Domingo Z. Ybarola, et al. G.R. No. 198662. September 12, 2012.

Res judicata. “Res judicata means a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment.”   It denotes “that a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all latter suits on all points and matters determined in the former suit.  For res judicata, in its concept as a bar by former judgment to apply, the following must be present:

1.         The former judgment or order is final;

2.         It is rendered by a court having jurisdiction over the subject matter and the parties;

3.         It is a judgment or an order on the merits; and,

4.         There is between the first and the second identity of parties, identity of subject matter, and identity of cause of action.

The Decision of this Court in G.R. Nos. 159460 and 159461 became final and executory on May 20, 2011.  It is a decision based on the merits of the case and rendered by this Court in the exercise of its appellate jurisdiction after the parties invoked its jurisdiction.  There is also, between the two sets of consolidated cases, identity of the parties, subject matter and causes of action.  The parties in G.R. No. 159460 and 159461 are also impleaded as parties in these consolidated cases.  And while some of the parties herein are not included in G.R. Nos. 159460 and 159461, the same are only few.  In any event, it is well-settled that only substantial, and not absolute, identity of the parties is required for res judicata to lie.  “There is substantial identity of the parties when there is a community of interest between a party in the first case and a party in the second case albeit the latter was not impleaded in the first case.”

With regard to identity of cause of action, it has been held that there is identity of causes of action when the same evidence will sustain both actions or when the facts essential to the maintenance of the two actions are identical.  Here, the bone of contention in both sets of consolidated cases boils down to the nature and consequences of complainants’ April 3, 2000 mass action.  The antecedent facts that gave rise to all the cases were the same.  Necessarily, therefore, the same evidence would sustain all actions.  Such similarity in the evidence required to sustain all actions is also borne out by the identity of the issues involved in all these cases.  While the parties have presented a plethora of arguments which we earlier discussed at length, the same nonetheless boil down to the same crucial issues formulated in G.R. Nos. 159460 and 159461.

It should be recalled that in G.R. No. 153799, the complainants assailed the Resolutions dated January 14, 2002 and February 20, 2002 of the CA’s Fourth Division granting Metrobank’s request for injunctive reliefs.  They claimed that the reinstatement aspect of the Labor Arbiter’s Decision is immediately executory.  Hence, they are entitled to backwages from the time the Labor Arbiter promulgated his Decision until it was reversed by the NLRC.

As discussed above, however, the November 15, 2010 Decision of this Court in G.R. Nos. 159460 and 159461 already adjudicated the respective rights and liabilities of the parties.  Said Decision pronouncing the monetary awards to which the parties herein are entitled became final and executory on May 20, 2011.  Under the rule on immutability of judgment, this Court cannot alter or modify said Decision.  It is a well-established rule that once a judgment has become final and executory, it is no longer susceptible to any modification. Solidbank Union, et al. vs. Metropolitan Bank and Trust Company/Metropolitan Bank and Trust Company vs. Solidbank Union, et al./Solidbank Corporation, etc., et al. vs. Solidbank Union, et al./Solidbank Union, et al. vs. Metropolitan Bank and Trust Company. G.R. No. 153799/G.R. No. 157169/G.R. No. 157327/G.R. No. 157506. September 17, 2012.

Reinstatement; Strained relations. A determination of the applicability of the doctrine of strained relations is essentially a factual question and, thus, not a proper subject in this petition.  This rule, however, admits of exceptions.  In cases where the factual findings of the LA and the NLRC are conflicting, the Court, in the exercise if equity jurisdiction, may review and re-evaluate the factual issues and look into the records of the case and re-examine the questioned findings.

As the records bear out, the LA found that patent animosity existed between ACMC and Bides considering the confrontation that took place between the latter and Matthew.  The confrontation coupled with Bides’ refusal to be reinstated led to the LA’s finding of “strained relations” necessitating an award of separation pay in lieu of reinstatement.  The NLRC, on the other hand, deleted the said award for lack of factual basis.  The CA reinstated the LA’s finding of “strained relations” and explained that too much enmity had developed between ACMC and Bides that necessarily barred the latter’s reinstatement.

The Court is well aware that reinstatement is the rule and, for the exception of “strained relations” to apply, it should be proved that it is likely that, if reinstated, an atmosphere of antipathy and antagonism would be generated as to adversely affect the efficiency and productivity of the employee concerned.

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable.  On one hand, such payment liberates the employee from what could be a highly oppressive work environment.  On the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.  Moreover, the doctrine of strained relations has been made applicable to cases where the employee decides not to be reinstated and demands for separation pay.

In the present case, Bides has consistently maintained, from the proceedings in the LA up to the CA, his refusal to be reinstated due to his fear of reprisal which he could experience as a consequence of his return.  By doing so, Bides unequivocally foreclosed reinstatement as a relief.

Apo Chemical Manufacturing and Michael Cheng vs. Ronaldo A. Bides. G.R. No. 186002. September 19, 2012.

Seafarers disability benefits; Attorney’s fees. In determining the disability benefits due a seafarer the POEA Standard Employment Contract (SEC), specifically its schedule of benefits, medical findings, Article 192 (c)(1) of the Labor Code, and Rule X, Section 2 of its implementing rules and regulations must be considered. The initial treatment period of 120 days may be extended up to a maximum of 240 days under the conditions prescribed by law.

Under Article 2298 of the Civil Code, attorney’s fees can be recovered “[w]hen the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.”  This Court sees no reason why damages or attorney’s fees should be awarded to Penales.  It is obvious that he did not give the petitioners’ company-designated physician ample time to assess and evaluate his condition, or to treat him properly for that matter.  The petitioners had a valid reason for refusing to pay his claims, especially when they were complying with the terms of the POEA SEC with regard to his allowances and treatment. Pacific Ocean Manning Inc., et al. vs. Benjamin D. Penales. G.R. No. 162809. September 5, 2012.

(Leslie thanks Ma. Luisa D. Manalaysay for assisting in the preparation of this post.)