May 2011 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Section 10, Republic Act No. 8042; unconstitutional.  Petitioner Yap was employed as an electrician for respondent’s vessel under a 12-month contract. He was found to be illegally terminated with nine months remaining on his contract term. The Court of Appeals (CA) awarded petitioner salaries for three months as provided under Section 10 of Republic Act No. 8042. On certiorari, the Supreme Court reversed the CA and declared that petitioner was entitled to his salaries for the full unexpired portion of his contract. The Court has previously declared in Serrano v. Gallant Maritime Services, Inc. (2009) that the clause “or for three months for every year of the unexpired term, whichever is less” provided in the 5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for being violative of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws. The subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage. Moreover, the subject clause does not state or imply any definitive governmental purpose; hence, the same violates not just petitioner’s right to equal protection, but also his right to substantive due process under Section 1, Article III of the Constitution.  Claudio S. Yap vs. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, May 30, 2011

Doctrine of Operative Fact; applied as a matter of equity and fair play. Petitioner Yap was employed on respondent’s vessel under a 12-month contract. Upon finding that he was illegally terminated, the Court of Appeals (CA) awarded petitioner salaries for three months as provided under Section 10 of Republic Act No. 8042 (RA 8042). While the case was pending in the Supreme Court, Section 10 of RA 8042 was declared unconstitutional. In deciding to award petitioner his salaries for the entire unexpired portion of his contract, the Supreme Court rejected the application of the operative fact doctrine.  As an exception to the general rule, the doctrine applies only as a matter of equity and fair play. It recognizes that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. This case should not be included in the aforementioned exception. After all, it was not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that principals/employers and recruitment/manning agencies may violate an OFW’s security of tenure which an employment contract embodies and actually profit from such violation based on an unconstitutional provision of law. Claudio S. Yap vs. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, May 30, 2011.

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April 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Labor Law

Dismissal; backwages. Article 279 of the Labor Code provides that “an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”

Thus, a number of cases holds that an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.  The two reliefs are separate and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted.  In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages computed from the time compensation was withheld up to the date of actual reinstatement.  Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative.  The payment of separation pay is in addition to the payment of backwages.

Since reinstatement is no longer feasible in the present case, the award of separation pay in lieu of reinstatement is in order.  Petitioner’s prayer for the award of backwages is meritorious, it, and the award of separation pay not being mutually exclusive. Ferdinand A. Pangilinan vs. Wellmade Manufacturing Corporation, G.R. No. 187005, April 7, 2010.

Dismissal; backwages. Reprimand being the appropriate imposable penalty for respondent’s actuations from the very beginning, the Court finds that respondent was unfairly denied from reporting for work and earning his keep, thus, entitling him to the payment of backwages.

The Court is not unmindful of our previous pronouncements in similar cases involving suspension or dismissal from service, wherein the penalty imposed was reduced, but the award of backwages was denied.

Given the circumstances of the case, however, where the proper penalty should only be a reprimand, the Court finds the aforementioned cases to be inapplicable herein. On this note, the Court deems it proper to distinguish between the penalties of dismissal or suspension and reprimand and their respective effects on the grant or award of backwages. When an employee is dismissed or suspended it is but logical that since he is barred from reporting to work the same negates his right to be paid backwages. He has no opportunity to work during the period he was dismissed or suspended and, therefore, he has no salary to expect. However, the same does not hold true for an employee who is reprimanded. A reprimand usually carries a warning that a repetition of the same or similar act will be dealt with more severely. Under normal circumstances, an employee who is reprimanded is never prevented from reporting to work. He continues to work despite the warning. Thus, in the case at bar, since respondent’s penalty should only be a reprimand, the Court deems it proper and equitable to affirm the Court of Appeals’ (CA’s) award of backwages.

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September 2009 Philippine Supreme Court Decisions on Labor Law

Here are selected September 2009 Philippine Supreme Court decisions on labor law:

Dismissal;  abandonment.  Abandonment is a form of neglect of duty, one of the just causes for an employer to terminate an employee. It is a hornbook precept that in illegal dismissal cases, the employer bears the burden of proof. For a valid termination of employment on the ground of abandonment, Lucinario must prove, by substantial evidence, the concurrence of petitioner’s failure to report for work for no valid reason and his categorical intention to discontinue employment.

Lucinario, however, failed to establish any overt act on the part of petitioner to show his intention to abandon employment. Petitioner, after being informed of his alleged shortages in collections and despite his relegation to that of company custodian, still reported for work. He later applied for a 4-day leave of absence. On his return, he discovered that his name was erased from the logbook, was refused entry into the company premises, and learned that his application for a 4-day leave was not approved. He thereupon exerted efforts to communicate with Lucinario on the status of his employment, but to no avail. These circumstances do not indicate abandonment.

That petitioner immediately filed the illegal dismissal complaint with prayer for reinstatement should dissipate any doubts that he wanted to return to work.

What thus surfaces is that petitioner was constructively dismissed. No actual dismissal might have occurred in the sense that petitioner was not served with a notice of termination, but there was constructive dismissal, petitioner having been placed in a position where continued employment was rendered impossible and unreasonable by the circumstances indicated above. Odilon L. Martinez vs. B&B Fish Broker and/or Norberto M. Lucinario, G.R. No. 179985, September 18, 2009.

Dismissal;  burden of proof.  While the employer bears the burden in illegal dismissal cases to prove that the termination was for valid or authorized cause, the employee must first establish by substantial evidence the fact of dismissal from service. This petitioner failed to discharge. He, in fact, failed to refute respondent’s claim that it sent him a Violation Memorandum, which was duly received by him on April 15, 2003, and a subsequent Memorandum via registered mail, requiring him to explain his habitual tardiness on the therein indicated dates but that he failed to comply therewith.

Constructive dismissal contemplates, among other things, quitting because continued employment is rendered impossible, unreasonable or unlikely, or a demotion in rank or a diminution of pay. It clearly exists when an act of clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee, leaving him with no option but to forego his continued employment. Not any of these circumstances exists to call for a ruling that petitioner was constructively dismissed.  Romero Montederamos vs. Tri-Union International Corporation, G.R. No. 1767000, September 4, 2009.

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August 2009 Philippine Supreme Court Decisions on Commercial Law, Tax Law and Labor Law

Here are selected August 2009 Philippine Supreme Court decisions on commercial law, tax law and labor law:

Commercial Law

Insurance; insurable interest. Insurable interest is one of the most basic and essential requirements in an insurance contract. In general, an insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance. Section 10 of the Insurance Code indeed provides that every person has an insurable interest in his own life. Section 19 of the same code also states that an interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.  Violeta R. Lalican vs. The Insular Life Assurance Company Limited, as represented by the President Vicente R. AvilonG.R. No. 183526, August 25, 2009.

Insurance; reinstatement. To reinstate a policy means to restore the same to premium-paying status after it has been permitted to lapse. Both the Policy Contract and the Application for Reinstatement provide for specific conditions for the reinstatement of a lapsed policy. In the instant case, Eulogio’s death rendered impossible full compliance with the conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death, managed to file his Application for Reinstatement and deposit the amount for payment of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could only be considered reinstated after the Application for Reinstatement had been processed and approved by Insular Life during Eulogio’s lifetime and good health.

Eulogio’s death, just hours after filing his Application for Reinstatement and depositing his payment for overdue premiums and interests with Malaluan, does not constitute a special circumstance that can persuade this Court to already consider Policy No. 9011992 reinstated. Said circumstance cannot override the clear and express provisions of the Policy Contract and Application for Reinstatement, and operate to remove the prerogative of Insular Life thereunder to approve or disapprove the Application for Reinstatement. Even though the Court commiserates with Violeta, as the tragic and fateful turn of events leaves her practically empty-handed, the Court cannot arbitrarily burden Insular Life with the payment of proceeds on a lapsed insurance policy. Justice and fairness must equally apply to all parties to a case. Courts are not permitted to make contracts for the parties. The function and duty of the courts consist simply in enforcing and carrying out the contracts actually made.  Violeta R. Lalican vs. The Insular Life Assurance Company Limited, as represented by the President Vicente R. AvilonG.R. No. 183526, August 25, 2009.

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April 2009 Decisions on Commercial, Labor and Tax Laws

Here are selected April 2009 decisions of the Supreme Court on commercial, labor and tax laws:

Commercial Law

BOT;  public bidding. In a situation where there is no other competitive bid submitted for the BOT project, that project would be awarded to the original proponent thereof.  However, when there are competitive bids submitted, the original proponent must be able to match the most advantageous or lowest bid; only when it is able to do so will the original proponent enjoy the preferential right to the award of the project over the other bidder.  These are the general circumstances covered by Section 4-A of Republic Act No. 6957, as amended. In the instant case, AEDC may be the original proponent of the NAIA IPT III Project; however, the Pre-Qualification Bids and Awards Committee (PBAC) also found the People’s Air Cargo & Warehousing Co., Inc. Consortium (Paircargo), the predecessor of PIATCO, to be a qualified bidder for the project.  Upon consideration of the bid of Paircargo/PIATCO, the PBAC found the same to be far more advantageous than the original offer of AEDC.  It is already an established fact in Agan that AEDC failed to match the more advantageous proposal submitted by PIATCO by the time the 30-day working period expired on 28 November 1996; and since it did not exercise its right to match the most advantageous proposal within the prescribed period, it cannot assert its right to be awarded the project. Asia’s Emerging Dragon Corp. vs. DOTC, et al./Republic of the Philippines etc. et al. vs. Hon. CA, et al., G.R. No. 169914/G.R. No. 174166,  April 7, 2009.

Dividends. Dividends are payable to the stockholders of record as of the date of the declaration of dividends or holders of record on a certain future date, as the case may be, unless the parties have agreed otherwise. A transfer of shares which is not recorded in the books of the corporation is valid only as between the parties; hence, the transferor has the right to dividends as against the corporation without notice of transfer but it serves as trustee of the real owner of the dividends, subject to the contract between the transferor and transferee as to who is entitled to receive the dividends. Imelda O. Cojuangco, Prime Holdings, Inc., and the Estate of Ramon U. Cojuangco vs. Sandiganbayan, Republic of the Philippines and the Sheriff of Sandiganbayan, G.R. No. 183278, April 24, 2009.

Holdover. As a general rule, officers and directors of a corporation hold over after the expiration of their terms until such time as their successors are elected or appointed. Sec. 23 of the Corporation Code contains a provision to this effect. The holdover doctrine has, to be sure, a purpose which is at once legal as it is practical. It accords validity to what would otherwise be deemed as dubious corporate acts and gives continuity to a corporate enterprise in its relation to outsiders.

Authorities are almost unanimous that one who continues with the discharge of the functions of an office after the expiration of his or her legal term––no successor having, in the meantime, been appointed or chosen––is commonly regarded as a de factoofficer, even where no provision is made by law for his holding over and there is nothing to indicate the contrary. By fiction of law, the acts of such de facto officer are considered valid and effective. Dr. Hans Christian M. Señeres vs. Commission on Elections and Melquiades A. Robles, G.R. No. 178678, April 16, 2009.

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