Author: Paulino Ungos III

Proper Recourse to Assail the Decisions or Orders of the Secretary of the Department of Labor and Employment

In Augustin International Center, Inc. v. Zacarias,¹ the Supreme Court reiterated that a petition for certiorari (under Rule 65 of the Rules of Court) should be filed to assail the decisions or orders of the Secretary of the Department of Labor and Employment. According to the Court, “[s]uch petition for certiorari must be seasonably filed with the Court of Appeals within 60 days from the notice of the order denying one’s motion for reconsideration.”

Side Note:

Distinguish remedy in connection with the Secretary’s exercise of assumption powers vis-à-vis remedy relating to Secretary’s decision as a voluntary arbitrator.

Extent of the Awards of Backwages and Separation Pay

The workers of the Continuous Galvanizing Line department of the Philippine Steel Coating Corp. asserted that the awards of backwages and separation pay should not have been limited to the closure of the said department, but should have included the closure of Philippine Steel Coating Corporation’s entire business.

The Supreme Court disagreed based on the principle that “an illegally dismissed employee’s entitlement to backwages and separation pay should be computed only up to the time that the said employee would have been expected to work with his/her employer had he/she not been illegally dismissed.” The Court said:

In any event, petitioner’s claim that the judgment award should include the period after the closure of the Continuous Galvanizing Line (CGL) department until the closure of respondent Philippine Steel Coating Corporation’s (PhilSteel) entire business, lacks merit.
It should be noted that petitioner never questioned the validity of the closure of PhilSteel’s CGL department. It only insists that the closure of the CGL department does not affect the computation of the period for the purpose of determining the retrenched employees’ monetary award because PhilSteel continued to operate until May 8, 2013.
Petitioner should be reminded that an illegally dismissed employee’s entitlement to backwages and separation pay should be computed only up to the time that the said employee would have been expected to work with his/her employer had he/she not been illegally dismissed. Given that the validity of the CGL department’s closure is not disputed, the ten (10) retrenched employees assigned to the CGL department could not have been presumed to continue working for PhilSteel despite the valid closure of PhilSteel’s CGL department. There is nothing in the petition to show that the retrenched employees’ employments were not dependent on the operation of the CGL department in order to justify their claim of entitlement to backwages and separation pay until PhilSteel’s total closure on May 8, 2013. On the contrary, the retrenched employees were specifically referred to as “workers of the CGL line,” thereby showing that their employment was contingent on the existence of the CGL department. As such, the backwages and separation pay were properly computed only until the closure of the CGL department, or until August 2, 2012.

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2019 January 07

Starting the Third Doctor Referral Process

Section 20 (A) (3) of the Amended Standard Terms and Conditions Governing the Overseas Employment of Filipino Seafarers On-Board Ocean-Going Ships,¹ provides that [i]f a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between the Employer and the seafarer. The third doctor’s decision shall be final and binding on both parties.

Who should initiate the third doctor referral process?

In Placio v. Bahia Shipping Service, Inc.,² the Supreme Court ruled that the seafarer should initiate such process. The Court said:

Petitioner “was bound to initiate the process of referring the findings to a third-party physician by informing his employer of the same, which is mandatory considering that the POEA-SEC is part and parcel of the employment contract between seafarers and their employers.”³ Due to petitioner’s failure to abide by the procedure, the Court of Appeals gave more weight to the findings of the company-designated physician and correctly dismissed the complaint.

Presenting Unsubstantiated Documents to Prove Unpaid Commissions

The employee claimed entitlement to Php802,372.28 in unpaid commissions. In support of this claim, she attached certain self-prepared, albeit “meticulously detailed,” documents to her pleading. Should this claim be granted?

In Siroy v. Rudolf Lietz, Inc.,¹ the Supreme Court denied the claim. According to the Court:

Siroy’s computation of unpaid commissions appears to be self-serving as the supporting documents she attached were all prepared by her. Inasmuch as her computation can easily be concocted or fabricated to suit her personal interest and purpose, Siroy’s bare claim that she is entitled to unpaid commissions by simply presenting unsubstantiated documents will not win her judicial approval.

Sale of Agricultural Land and Waiver of Retention Rights

Decision in Department of Agrarian Reform v. Carriedo, G.R. No. 176549, January 20, 2016.

On 26 June 1986, Romeo C. Carriedo bought approximately 70.4788 hectares of agricultural land covered by the following titles and tax declarations:

Transfer Certificate of Title No. 35055
Tax Declaration No. 48354
Transfer Certificate of Title No. 17681
Transfer Certificate of Title No. 56897
Transfer Certificate of Title No. 17680

The area sold to Romeo C. Carriedo included a part covered by Transfer Certificate of Title No. 17680 of which herein petitioner, Pablo Mendoza, was a tenant.

In June of 1990, Romeo C. Carriedo then sold these lands to the Peoples’ Livelihood Foundation, Inc. Except for that area covered by Transfer Certificate of Title No. 17680, the lands were subjected to the Voluntary Land Transfer/Direct Payment Scheme and were awarded to agrarian reform beneficiaries in 1997.

On 5 October 1999, the land covered by Transfer Certificate of Title No. 17680 was divided into five (5) sub-lots.

Three of these lots were then distributed to beneficiaries under Presidential Decree No. 27 and covered by Transfer Certificate of Title Nos. 44384, 44385, and 44386, issued on 10 September 1999.

The remaining two (2) lots, consisting of approximately 5 hectares and which was also the land being occupied by Pablo Mendoza, were registered in the name of Romeo C. Carriedo and covered by Transfer Certificate of Title Nos. 344281 and 344282, respectively.

On 26 February 2002, Pablo Mendoza, Corazon Mendoza, and Orlando Gomez filed a Petition for Coverage of these two (2) lots under Comprehensive Agrarian Reform Law of 1988. They claimed that they had been in physical and material possession of the said land as tenants since 1956 and had made the land productive. They prayed that

an order be issued placing the land under Comprehensive Agrarian Reform Program; and
the Department of Agrarian Reform, the Provincial Agrarian Reform Officer, and the Municipal Agrarian Reform Officer be ordered to proceed with the acquisition and distribution of the land in their favor.

The Regional Director granted the petition in an Order dated 2 October 2002.

The Supreme Court, in Department of Agrarian Reform v. Carriedo, G.R. No. 176549, January 20, 2016, however, reversed the said order and declared that the land covered by Transfer Certificate of Title Nos. 344281 and 344282 was Romeo C. Carriedo’s retained area.

In said case, the Court ruled:

The right of retention is a constitutionally-guaranteed right¹, subject to certain qualifications specified by the legislature². It serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant by implementing the doctrine that social justice was not meant to perpetrate an injustice against the landowner.

Deparment of Agrarian Reform Administrative Order No. 02, Series of 2003³ clearly shows that the disposition of agricultural land is not an act constituting waiver of the right of retention.

The Court further found that Romeo C. Carriedo has not committed any of the acts found under Deparment of Agrarian Reform Administrative Order No. 02, Series of 2003.

1)

Romeo C. Carriedo was not shown to have expressly waived in writing his right of retention, as required under sub-section 6.3, Section 6 of Department of Agrarian Reform Administrative Order No. 02, Series of 2003.

2)

Romeo C. Carriedo was not said to have abandoned or declined to assert his right of retention, under subsection 6.7, Section 6 of Department of Agrarian Reform Administrative Order No. 02, Series of 2003.

According to the Court, prevailing rules⁴ give Romeo C. Carriedo any time before receipt of the notice of coverage to exercise his right of retention, or if under compulsory acquisition, within sixty (60) days from receipt of the notice of coverage. Since the validity of the notice of coverage was the very subject of the present case, the Court ruled that the period within which Romeo C. Carriedo should exercise his right of retention had yet to commence.

The Court added that even assuming that the period within which Romeo C. Carriedo could exercise his right of retention has commenced, he could not have been said to have neglected to assert his right of retention over the land, for he filed an application for retention which was even contested by Pablo Mendoza’s son, Fernando. Although Romeo C. Carriedo was shown to have subsequently withdrawn his application, his act of filing an application for retention had belied the allegation that he abandoned his right of retention or declined to assert it.

3)

Not even the sale made by the herein Romeo C. Carriedo of more than fifty (50) hectares in favor of the Peoples’ Livelihood Foundation, Inc. could have been considered as a waiver of his right of retention.

In this case, it was asserted that Romeo C. Carriedo has waived his right of retention by way of estoppel under another rule, i.e., Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 which states:

II. Statement of Policies
x x x
4. Where the transfer/sale involves more than the five (5) hectares retention area, the transfer is considered violative of Sec. 6 of R.A. No. 6657.
In case of multiple or series of transfers/sales, the first five (5) hectares sold/conveyed without DAR clearance and the corresponding titles issued by the Register of Deeds (ROD) in the name of the transferee shall, under the principle of estoppel, be considered valid and shall be treated as the transferor/s’ retained area but in no case shall the transferee exceed the five-hectare landholding ceiling pursuant to Sections 6, 70 and 73(a) of R.A. No. 6657. Insofar as the excess area is concerned, the same shall likewise be covered considering that the transferor has no right of disposition since CARP coverage has been vested as of 15 June 1988. Any landholding still registered in the name of the landowner after earlier dispositions totaling an aggregate of five (5) hectares can no longer be part of his retention area and therefore shall be covered under CARP. x x x (emphasis supplied)

It was argued that Romeo C. Carriedo should have lost his right of retention over the land because he had already sold or disposed, after the effectivity of the Comprehensive Agrarian Reform Law of 1988, more than fifty (50) hectares of land in favor of Peoples’ Livelihood Foundation, Inc.

The Court, however, found such assertions untenable. According to the Court, nowhere in the Comprehensive Agrarian Reform Law of 1988 was it indicated that a multiple or series of transfers/sales of land would result in the loss of retention rights. Neither did it provide that the multiple or series of transfers or sales would amount to the waiver of such right.

The Court mentioned the following relevant portions of the Comprehensive Agrarian Reform Law of 1988, as referred to in Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006:

Section 6. Retention Limits. — Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-size farm, such as the commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. x x x
x x x
Upon the effectivity of this Act, any sale, disposition, lease, management, contract or transfer of possession of private lands executed by the original landowner in violation of the Act shall be null and void: Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the Department of Agrarian Reform (DAR) within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares.

Section 70. Disposition of Private Agricultural Lands. — The sale or disposition of agricultural lands retained by a landowner as a consequence of Section 6 hereof shall be valid as long as the total landholdings that shall be owned by the transferee thereof inclusive of the land to be acquired shall not exceed the landholding ceilings provided for in this Act.
Any sale or disposition of agricultural lands after the effectivity of this Act found to be contrary to the provisions hereof shall be null and void. x x x

Section 73. Prohibited Acts and Omissions. — The following are prohibited:
(a) The ownership or possession, for the purpose of circumventing the provisions of this Act, of agricultural lands in excess of the total retention limits or award ceilings by any person, natural or juridical, except those under collective ownership by farmer-beneficiaries; x x x

The Court ruled that Sections 6 and 70 are clear in stating that any sale and disposition of agricultural lands in violation of the Comprehensive Agrarian Reform Law of 1988 shall be null and void. The reasonable reading of these three provisions in relation to the constitutional right of retention reveals that the consequence of nullity pertains to the area/s which were sold, or owned by the transferee, in excess of the five (5)-hectare land ceiling. Thus, the Court ruled that the lands covered by Transfer Certificate of Title Nos. 344281 and 344282 fell within Romeo C. Carriedo’s retained area.

The Court stressed that item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 has attempted to defeat the above reading by providing that, under the principle of estoppel, the sale of the first five (5) hectares is valid. But, said rule has also hastened to add that the first five (5) hectares sold corresponded to the transferor/s’ retained area. Thus, since the sale of the first five (5) hectares was valid, therefore, the landowner had lost the five (5) hectares because it happened to be, at the same time, the retained area limit. In reality, Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 had operated as a forfeiture provision in the guise of estoppel. It punished the landowner who had sold agricultural land in excess of five (5) hectares. For the Court, forfeitures, however, partake of a criminal penalty.

The Court stated that in order for an administrative regulation to have the force of a penal law, (1) the violation of the administrative regulation must be made a crime by the delegating statute itself; and (2) the penalty for such violation must be provided by the statute itself.

The Court also found that Sections 6, 70 and 73 (a) of the Comprehensive Agrarian Reform Law of 1988 did not provide that a sale or disposition of land in excess of five (5) hectares results in a forfeiture of the five (5) hectare retention area. According to the Court, Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 imposed a penalty where none was provided by law.

The Court further stated that the repugnancy between the Comprehensive Agrarian Reform Law of 1988 and Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 was apparent by a simple comparison of their texts. The conflict undermined the statutorily-guaranteed right of the landowner to choose the land he shall retain, and Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006, in effect, amended the Comprehensive Agrarian Reform Law of 1988, which should not have happened.

Consistent with the principle that a statute prevails over an administrative order, the Court declared the invalidity of Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 for being ultra vires. Thus, Romeo C. Carriedo neither waived his right to retain the land, nor was placed under estoppel for his sale the land to the Peoples’ Livelihood Foundation, Inc.

Resolution of Petitioners’ Motion for Reconsideration in Department of Agrarian Reform v. Carriedo, G.R. No. 176549, October 10, 2018.

The Court gave due course to the motion filed by the Department of Agrarian Reform that sought the reconsideration of the Decision dated 20 January 2016.

The Court noted that the Department of Agrarian Reform is legally mandated to implement the Comprehensive Agrarian Reform Law of 1988. The said department possesses the special knowledge and acquired expertise on the implementation of the agrarian reform program. According to the Court, to pay no heed to the issues the said department has raised would ignore the basic precepts of due process. The Court accordingly revisited its Decision by taking into account the arguments and position of the department.

The Court reversed and set aside its Decision dated 20 January 2016, taking into consideration Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006, which provides:

II. STATEMENT OF POLICIES
x x x
4. Where the transfer/sale involves more than the five (5) hectare retention area, the transfer is considered violative of Sec. 6 of R.A. No. 6657.
In case of multiple or series of transfers/sales, the first five (5) hectares sold/conveyed without DAR clearance and the corresponding titles issued by the Register of Deeds (ROD) in the name of the transferee shall, under the principle of estoppel, be considered valid and shall be treated as the transferor/s’ retained area but in no case shall the transferee exceed the five-hectare landholding ceiling pursuant to Sections 6, 70 and 73 (a) of R.A. No. 6657. Insofar as the excess area is concerned, the same shall likewise be covered considering that the transferor has no right of disposition since CARP coverage has been vested as of 15 June 1988. Any landholding still registered in the name of the landowner after earlier dispositions totaling an aggregate of five (5) hectares can no longer be part of his retention area and therefore shall be covered under CARP.

In the present case, the Court acknowledged that the sale of the first (5) hectares of agricultural land to the Peoples’ Livelihood Foundation, Inc. made by Romeo C. Carriedo could be viewed as valid.

However, said sale should also be treated as the exercise of Romeo C. Carriedo’s retention rights, such that he would no longer be able to lawfully claim the subject landholding as his retained area.

Accordingly, the remaining landholding also can no longer be part of his retention area and therefore shall be covered under Comprehensive Agrarian Reform Program. As narrated above, the remaining land that pertained to Transfer Certificate of Title No. 17680 was divided into sub-lots, of which two (2) of the lots (the land covered by Transfer Certificate of Title Nos. 344281 and 344282) were thereafter registered in the name of Romeo C. Carriedo.

1)

Both the Constitution⁵ and Comprehensive Agrarian Reform Law of 1988⁶ underscore the underlying principle of the agrarian reform program, that is, to endeavor a more equitable and just distribution of agricultural lands taking into account, among others, equity considerations. The objective of Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is equitable — that in order to ensure the effective implementation of the law, previous sales of landholding (without Department of Agarian Reform clearance) should be treated as the exercise of retention rights of the landowner, as embodied in Item No. 4 of the said administrative order.

2)

The equity in this policy of Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is apparent and easily discernible. With the sale of the lands, it was reasonably presumed that the landowner already received an amount (as purchase price) commensurate to the just compensation conformable with the constitutional and statutory requirement. At this point, equity dictates that he ought not to claim anymore, either in the guise of his retention area or otherwise, that which he already received in the previous sale of his land.

3)

Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is in consonance with the Stewardship Doctrine, under which private property is supposed to be held by the individual only as a trustee for the people in general, who are its real owners. As a mere steward, the individual must exercise his rights to the property not for his own exclusive and selfish benefit but for the good of the entire community or nation. Property use must not only be for the benefit of the owner but of society as well. The State, in the promotion of social justice, may regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and equitably diffuse property ownership and profits.

4)

The objective of land distribution to the landless farmers and farmworkers is carried out by Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006, as it provides for the consequences in situations where a landowner had sold portions of his/her land with an area more than the statutory limitation of five (5) hectares. In this scenario, such administrative order treats the sale of the first five hectares as the exercise of the landowner’s retention rights because, effectively, the landowner has already chosen, and in fact has already disposed of, and has been duly compensated for, the area he is entitled to retain under the law.

5)

Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006 is consistent with Section 70⁷ of the Comprehensive Agrarian Reform Law of 1988, as the former likewise treats the sale of the first five hectares (in case of multiple/series of transactions) as valid, such that the same already constitutes the retained area of the landowner. This legal consequence arising from the previous sale of land therefore eliminates the prejudice, in terms of equitable land distribution, that may befall the landless farmers and farmworkers.

6)

Finally, the sale of Romeo C. Carriedo’s landholdings was made in violation of the Comprehensive Agrarian Reform Law of 1988⁸, having been made without the clearance of the Department of Agrarian Reform. To rule that Romeo C. Carriedo was still entitled to retain the land covered by Transfer Certificate of Title Nos. 344281 and 344282 will, in effect, reward the violation, which the Court maintains will not allow. The Court stressed that the right of retention serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant, and by implementing the doctrine that social justice is not meant to perpetrate an injustice against the landowner.

In this case, however, the Court noted that Romeo C. Carriedo has claimed his right over the land covered by Transfer Certificate of Title Nos. 344281 and 344282, not because he was “deprived” of a portion of his land as a consequence of compulsory land coverage, but precisely because he already previously sold his landholdings, so that the remaining portion would still be his.

The Court accordingly stated that although the exercise by a landowner of his retention right is constitutionally guaranteed, the same should not be done without due regard to other considerations which may affect the implementation of the agrarian reform program. This is especially true when such exercise pays no heed to the intent of the law, or worse, when such exercise amounts to its circumvention.

The Court upheld the validity of Item No. 4, Statement of Policies, Department of Agrarian Reform Administrative Order No. 05, Series of 2006. As a corollary, Romeo C. Carriedo no longer possessed retention rights to the land covered by Transfer Certificate of Title Nos. 344281 and 344282.

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2018 October 10

Supervening Events Made It Impossible for Me to Reinstate My Employee

The Court noted Rogel’s illegal dismissal case (G.R. No. 196038), a case related to the present one, which awarded the reliefs of reinstatement and backwages to Rogel. The Court stated that the decision in such case became final and executory on March 30, 2012. Thereafter, during execution proceedings therein, Rogel was granted separation pay in lieu of reinstatement.

Furthermore, the Court found that Consolidated Distillers of the Far East, Inc. (Consolidated Distillers), or Rogel’s employer, no longer questioned the propriety of the awards of separation pay and backwages, as it only took issue with their computation. Specifically, the Court found that Consolidated Distillers argued that it should only be liable for separation pay and backwages until the year 2007 in view of the execution of the Asset Purchase Agreement and the termination of the subsequent Service Agreement it had with Emperador Distillers, Inc. (Emperador Distillers). For Consolidated Distillers, these were supervening events that caused the impossibility of Rogel’s reinstatement, as his position became inexistent as of 2007, consistent with the ruling of the Court in Olympia Housing, Inc. v. Lapastora¹

Should computation of separation pay and backwages be limited to the year 2007, as Consolidated Distillers had asserted?

The Court ruled in the negative.

The Court stated that Consolidated Distillers cannot find support in Olympia Housing because the ruling in that case was against its position.

The Court explained that in Olympia Housing, the employer therein was able to prove in a separate labor case that it had closed its business and followed all statutory requirements arising from the closure of its business. Given this, the Court in Olympia Housing ruled that the employer was liable for backwages and separation pay only until the date of the closure of the business of the employer, even if this was prior to the Office of the Labor Arbiter’s decision finding illegal dismissal.

However, the Court stressed that for Olympia Housing to apply, the employer must prove the closure of its business in full and complete compliance with all statutory requirements prior to the date of the finality of the award of backwages and separation pay. The statutory requirements referred to by the Court were:

notice to the Department of Labor and Employment;
notice to the employees; and
financial statements substantiating its claim that it was operating at a loss.

In the present case, Consolidated Distillers failed to show that it had closed its business in 2007 and that it had complied with all the statutory requirements for the closure.

The Court found that Consolidated Distillers only alleged the execution of the Asset Purchase Agreement and the termination of the Service Agreement with Emperador Distillers. For the Court, these never meant that Consolidated Distillers had closed its business. The Court even found no evidence that in 2007, Consolidated Distillers had notified the Department of Labor and Employment or its employees of the closure of its business and the reason for its closure. There was also no showing that Rogel was affected by this purported closure of Consolidated Distillers’ business.

The Court thus ruled that Consolidated Distillers was liable for backwages and separation pay until the finality of its decision.

It applied its Decision in Bani Rural Bank, Inc. v. De Guzman,² since separation pay, in lieu of reinstatement, was awarded after the finality of the decision declaring illegal dismissal and during the execution proceedings because the employees therein manifested that they no longer wanted to be reinstated. The Supreme Court held therein that when there is a supervening event that renders reinstatement impossible, backwages is computed from the time of dismissal until the finality of the decision ordering separation pay. The Court explained that when there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or subsequently ordered in light of a supervening event making the award of reinstatement no longer possible), the employment relationship is terminated only upon the finality of the decision ordering the separation pay. The finality of the decision cuts-off the employment relationship and represents the final settlement of the rights and obligations of the parties against each other.

In the present case, the Court found that the award of separation pay in lieu of reinstatement, was made subsequent to the finality of the decision in Rogel’s illegal dismissal case (G.R. No. 196038). The Court thus ruled that Consolidated Distillers could not evade its liability to Rogel for backwages and separation pay computed until the finality of the Court’s Decision which affirmed the order granting separation pay.

Dismissal of Employees for Minor Offenses

Laura was hired to join ProHealth’s audit team in 2007. She was later promoted to Finance Officer.

On November 26, 2007, Laura’s superior ordered her to give three thousand pesos from the training funds to Prohealth’s District Business Manager, to serve as cash advance.

On November 27, 2007, Prohealth issued a show cause memorandum for Laura’s failure to release the cash advance. Laura was also relieved of her duties and reassigned to the Office of the Personnel and Administration Manager.

In her explanation, Laura alleged that when the District Business Manager saw that she was busy receiving cash sales from another District Business Manager, he told her that he would just return the next day to collect his cash advance. When he told her that the cash advance was for car repairs, Laura told him to get the cash from his revolving fund, which she would reimburse after the repairs were done. Prohealth was dissatisfied with her explanation and transferred her to another office.

On December 3, 2007, Laura was invited to a fact-finding investigation, which was held on December 10, 2007, where Laura was again asked to explain her actions.

On December 17, 2007, she was handed a notice of termination effective December 31, 2007 for disobeying an order of her superior.

Laura filed a complaint for illegal dismissal against Prohealth.

The Office of the Labor Arbiter declared the illegality of Laura’s dismissal from employment. This ruling was affirmed by the National Labor Relations Commission. However, the Court of Appeals reversed and set aside the decision of the Commission and ruled the validity of Laura’s dismissal from employment. The Court of Appeals viewed Laura failure to comply with her superior’s order, an instance of arrogance and hostility, that, in turn, warranted her dismissal.

When the case reached the Supreme Court, Laura insisted that she was illegally dismissed from employment. According to Laura, she believed in good faith that the District Business Manager would just claim his cash advance the day after he tried to claim it and that there was nothing in her actions that would prove that she intended to disobey or defy respondent Prohealth’s order.

Was the dismissal of Laura valid?

The Supreme Court declared that Laura was illegally dismissed from employment.

The Court stated that under the Labor Code of the Philippines an employer may terminate the services of an employee who commits willful disobedience of the lawful orders of the employer. The Court explained that for disobedience to be considered as just cause for termination, two (2) requisites must concur:

the employee’s assailed conduct must have been wilful or intentional; and
the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he [or she] had been engaged to discharge.

For disobedience to be willful, the Court added, it must be characterized by a wrongful and perverse mental attitude rendering the employee’s act inconsistent with proper subordination. The conduct complained of must also constitute harmful behavior against the business interest or person of his [or her] employer. Thus, it is implied in every case of willful disobedience that the erring employee obtains undue advantage detrimental to the business interest of the employer.

In the present case, the Court found that Laura, as Finance Officer, was instructed by her superior to give a cash advance of three thousand pesos to the District Branch Manager on November 26, 2007. For the Court, such instruction or order was reasonable, lawful, made known to Laura, and pertained to her duties.

The Court then tried to determine whether Laura intentionally and willfully violated such order as to amount to insubordination.

The Court ruled in the negative.

The Court found that when the District Business Manager went to collect the money from Laura, he was told to return the next day as she was still busy. When Laura found out that the money was to be used for a car tune-up, she suggested to the District Business Manager to just get the money from his mobilization fund and that she just would reimburse it after.

Diverging from the ruling of the Court of Appeals, the Supreme Court ruled that no ill will existed between the District Business Manager and Laura. According to the Supreme Court, Laura’s failure to immediately give the money to the District Business Manager was not the result of a perverse mental attitude but was merely because she was busy at the time. Neither did she profit from her failure to immediately give the cash advance for the car tune-up nor did respondents suffer financial damage by her failure to comply. For the Court, the severe penalty of dismissal was not commensurate to her infraction. Laura was illegally dismissed from employment.

Substantial Compliance with Appeal Bond Requirements

The situation in this case was that the Office of the Labor Arbiter found that the employer had illegally dismissed three of its employees. This decision of the Office of the Labor Arbiter was affirmed by the National Labor Relations Commission. All parties then filed a Petition for Certiorari before the Court of Appeals.

A portion of the Decision of the Court of Appeals related to its finding that the employer substantially complied with the requirement of an appeal bond despite it not appearing in the records of the surety company since the employer believed in good faith that the bond it secured was genuine.

However, the employees argued that the Court of Appeals should have dismissed the Petition for Certiorari outright since the employer failed to post a genuine appeal bond before the National Labor Relations Commission. The petitioner-employees alleged that when the Sheriff of the Commission attempted to enforce the judgment award against the appeal bond, said Sheriff was informed that the appeal bond procured by the employer did not appear in the records of the bonding company. The petitioners-employees also claimed that the employer was notified by the National Labor Relations Commission that its appeal bond was not genuine, showing that the employer did exhibit good faith.

On the other hand, the employer countered that procedural rules should liberally be applied to their case since it acted in good faith in posting their appeal bond. The employer further asserts that the issue should have already been considered moot since the employees were able to garnish and collect the amounts allegedly due to them.

Did the employer perfect its appeal upon discovery of its forged appeal bond?

Yes, because the Supreme Court found that the employer had substantially complied with the requirements on the posting of an appeal bond.

The Court reiterated the principles that an appeal is not a matter of right. Courts and tribunals have the discretion whether to give due course to an appeal or to dismiss it outright. The perfection of an appeal is, thus, jurisdictional. Non-compliance with the manner in which to file an appeal renders the judgment final and executory. In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to the monetary award.

The Court further stated that the ruled of the National Labor Relations Commission require that the appeal bond filed be genuine. An appeal bond determined by the National Labor Relations Commission to be irregular or not genuine shall cause the immediate dismissal of the appeal. The Court also stated that while the procedural rules strictly require the employer to submit a genuine bond, an appeal could still be perfected if there was substantial compliance with the requirement.

In this instance, the Court found that the National Labor Relations Commission certified that the employer was able to file a security deposit in the amount of more than 6.5 million pesos showing that the premium for the appeal bond was duly paid and that there was willingness to post it. The Court also noted that the employees likewise attached documents proving that Alpha Insurance was a legitimate and accredited bonding company.

The Court stressed that despite the employees’ failure to collect on the appeal bond, the employees never denied that they were eventually able to garnish the amount from the employer’s bank deposits. For the Court, such situation fulfilled the purpose of the bond, which was, to guarantee the payment of valid and legal claims against the employer.

The Court accordingly considered the employer to have substantially complied with the requirements on the posting of an appeal bond.

Employment Status the Day Before the Occurrence of the Strike or Lockout

The employer here found a need to improve its selling and distribution system if it wanted to remain viable and competitive in the business. Thus, it decided to implement a new cost-effective and simplified scheme of selling and distributing its products, that, in turn, led to a separation of twenty seven (27) rank-and-file, regular employees and union members on the ground of redundancy.

The employer claimed that prior to the termination of employment, it had made a careful study of how to be more cost effective in operations and competitive in the business. It recognized in the process that its multi-layered selling and distribution system had to be simplified. Thus, it determined that the phasing out of said system was necessary which, however, resulted in the termination of employment of certain employees as their positions have become redundant.

On May 29, 2009, the employer issued notices of termination to twenty seven (27) rank-and-file, regular employees and members of the union on the ground of redundancy due to the ceding out of its selling and distribution systems to the Market Execution Partners. The termination of their employment was made effective on June 30, 2009, but the union members were no longer required to report for work as they were put on leave of absence with pay until the effectivity date of termination. The union members were also granted individual separation packages, which many of them accepted, but under protest.

The union asserted that the new selling and distribution system adopted and implemented by the employer would result in the diminution of the union membership amounting to union busting and to a violation of the Collective Bargaining Agreement provision against contracting out of services or outsourcing of regular positions. Thus, they filed a Notice of Strike with the National Conciliation and Mediation Board on June 3, 2009 on the ground of unfair labor practice, among others. On June 11, 2009, the union conducted a strike vote where a majority decided on conducting a strike.

On June 23, 2009, the Secretary of the Department of Labor and Employment assumed jurisdiction over the labor dispute by certifying for compulsory arbitration to the National Labor Relations Commission the issues raised in the notice of strike. The Secretary also enjoined the parties from committing any act that may further exacerbate the situation.

At this point, the union asserted that the employer should have enjoined the termination of employment which took effect on July 1, 2009. On the other hand, the employer contended that termination of employment was a certainty, from the time it issued the notices of termination and that the status quo prior to the issuance of the assumption order included the impending termination of the employment of the 27 employees.

On March 16, 2010, the National Labor Relations Commission ruled that the employer implemented a valid redundancy program and that it did not commit unfair labor practice. The Commission further found no violation in the dismissal of the employees from employment because their respective notices of dismissal were received prior to the assumption order of the Secretary of the Department of Labor and Employment. The Commission found that the employer did not commit an act that exacerbated the dispute.

The Court of Appeals affirmed the Decision of the National Labor Relations Commission.

The Supreme Court, in turn, affirmed the validity of the employer’s redundancy program.

One issue that reached the Supreme Court was whether the employer’s implementation of the redundancy program was an unfair labor practice.

The other issue resolved by the Court was whether the employer should have enjoined the effectivity of the termination of the employment of the 27 affected union members when the Secretary of the Department of Labor and Employment assumed jurisdiction over their labor dispute.

The Court reiterated prevailing jurisprudence in that unfair labor practice refers to acts that violate the workers’ right to organize. The Court stated that there should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers’ right to self-organization. Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize. To prove the existence of unfair labor practice, substantial evidence has to be presented.

In the present case, the Court found that the union failed to substantiate its charge of unfair labor practice against the employer. According to the Court, the consequent termination of employment due to redundancy is not per se an act of unfair labor practice amounting to union busting. For while the number of union membership was diminished due to the termination of the employment of union members, it cannot safely be said that the employer acted in bad faith in terminating their services because the termination was not without a valid reason. There was no showing that the redundancy program was motivated by ill will, bad faith or malice, or that it was conceived for the purpose of interfering with the employees’ right to self-organize.

The findings of the National Labor Relations Commission and the Court of Appeals on said issue were affirmed.

However, the Court found that the employer violated the return-to-work order in that the status quo was not maintained after the Secretary of the Department of Labor and Employment had assumed jurisdiction over the dispute on June 23, 2009.

In this regard, the Court relied on Article 278 [Formerly 263] (g) of the Labor Code of the Philippnines, which provides the conditions for, and the effects of, the assumption of jurisdiction by the Secretary of the Departent of Labor and Employment over a dispute.

The Court explained that the powers given to the Secretary of the Department of Labor and Employment under Article 278 [Formerly 263] (g) is an exercise of police power with the aim of promoting public good. In fact, the scope of the powers is limited to an industry indispensable to the national interest as determined by the Secretary of the Department of Labor and Employment. Industries that are indispensable to the national interest are those essential industries such as the generation or distribution of energy, or those undertaken by banks, hospitals, and export-oriented industries. And following Article 263 (g), the effects of the assumption of jurisdiction are the following:

the enjoining of an impending strike or lockout or its lifting, and

an order for the workers to return to work immediately and for the employer to readmit all workers under the same terms and conditions prevailing before the strike or lockout, or the return-to-work order.

The Court added that when the Secretary of the Department of Labor and Employment exercises these powers, he is granted “great breadth of discretion” in order to find a solution to a labor dispute. The most obvious of these powers is the automatic enjoining of an impending strike or lockout or the lifting thereof if one has already taken place. Assumption of jurisdiction over a labor dispute, or as in this case the certification of the same to the National Labor Relations Commission for compulsory arbitration, always co-exists with an order for workers to return to work immediately and for employers to readmit all workers under the same terms and conditions prevailing before the strike or lockout.

The Court then highlighted the significance of the return-to-work order, which is interlocutory, and is merely meant to maintain the status quo while the main issue is being threshed out in the proper forum. The Court stressed that the status quo is simply the status of the employment of the employees the day before the occurrence of the strike or lockout.

According to the Court, from the date the Secretary of the Department of Labor and Employment assumes jurisdiction over a dispute until its resolution, the parties have the obligation to maintain the status quo while the main issue is being threshed out in the proper forum — which could be with Secretary of the Department of Labor and Employment or with the National Labor Relations Commission. This is to avoid any disruption to the economy and to the industry of the employer — as this is the potential effect of a strike or lockout in an industry indispensable to the national interest — while the Secretary of the Department of Labor and Employment or the National Labor Relations Commission is resolving the dispute.

In the present case, the Court found that since the union voted for the conduct of a strike on June 11, 2009, when the Secretary of the Department of Labor and Employment issued the return-to-work order dated June 23, 2009, this meant that the status quo was the employment status of the employees on June 10, 2009. This status quo should have been maintained until the National Labor Relations Commission resolved the dispute in its Resolution dated March 16, 2010. For the Court, the said Resolution then took the place of the return-to-work order of the Secretary of the Department of Labor and Employment and the employer no longer had the duty to maintain the status quo after March 16, 2010.

The Court accordingly awarded to the employees backwages and other benefits from July 1, 2009 until March 16, 2010, with a recomputation of their separation pay taking into consideration the termination of their employment beginning March 16, 2010.

No Danger to the Safety of the Crew or Vessel

Rogelio was engaged by his employer, Free Bulkers, through its agent Evic, as Chief Mate on board the M/V Free Lady for a period of six (6) months with a basic monthly salary of US$1,088.00.

On August 28, 2010, Rogelio boarded the vessel. However, on September 24, 2010, Rogelio was repatriated to the Philippines without completing the contracted employment period.

On September 28, 2010, Rogelio filed an illegal dismissal complaint against his employer. According to Rogelio, the ship captain developed a hostile attitude towards him. Specifically, Rogelio narrated that on September 7, 2010, he took a sip from the small flask of whisky given to him by one of the stevedores he dealt with and went to bed; but the ship captain had him awakened and ordered him to make a report on some damages in the railings of the ship caused by the stevedores. When he submitted the report to the ship captain, the latter allegedly smelled a faint odor of whisky and asked him if he had been drinking, to which Rogelio truthfully replied that he drank a little whisky and was willing to take an alcohol test. The ship captain shrugged off his offer to take an alcohol test, but still made a logbook entry dated September 7, 2010, recommending Rogelio’s immediate replacement.

The employer contended that Rogelio was dismissed for just cause. On the basis of a Crew Behavior Report dated September 8, 2010 prepared by the ship captain, Rogelio was claimed to have violated company policies, instructions, and stipulations of the employment contract:
1) by being grossly negligent since he failed to observe the safety precautions during the mooring and unmooring operations;
2) by displaying arrogance towards his co-employees on board; and
3) by having been found intoxicated.

According to the employer, it feared for the safety of the vessel and determined that the crew may be at risk with Rogelio’s continued presence. Thus, it was constrained to ask that Rogelio be relieved, invoking Section 33 of the POEA Standard Employment Contract (POEA-SEC).

Was Rogelio validly dismissed from employment?

The Court ruled in the negative. It declared that Rogelio was illegally dismissed from employment.

The Court reiterated established principles in that in labor cases, the employer has the burden of proving that the dismissal of an employee was for a just or authorized cause, and failure to show this would necessarily mean that the dismissal was unjustified and, therefore, illegal. Furthermore, not only must the dismissal be for a cause provided by law, it should also comply with the rudimentary requirements of due process, that is, the opportunity to be heard and to defend one’s self. Hence, for dismissal to be valid, the employer must show through substantial evidence that (1) the dismissal was for a just or authorized cause; and (2) the dismissed employee was afforded due process of law.

In the present case, the Court found that the employer failed to establish the existence of a just cause in the dismissal of Rogelio from employment.

It noted that the Crew Behavior Report, from which Rogelio’s dismissal from employment was based, alleged Rogelio’s inefficiency, incompetence and gross negligence in the performance of his duties.

However, the Court considered the said report sorely inadequate in meeting the required quantum of proof to discharge the employer’s burden.

The Court discussed that incompetence or inefficiency, as a ground for dismissal, means the failure to attain work goals or work quotas, either by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory results. Neglect of duty, on the other hand, must be both gross and habitual. Gross negligence implies a lack of or failure to exercise slight care or diligence, or the total absence of care in the performance of duties, not inadvertently but willfully and intentionally, with conscious indifference insofar as other persons may be affected. Habitual neglect involves repeated failure to perform duties for a certain period of time, depending upon the circumstances, and not mere failure to perform duties in a single or isolated instance.

Here, the Court found that the statements contained in the Crew Behavior Report were uncorroborated and self-serving because no other evidence was presented to support the statements of the ship captain. The Court added that while the report was signed by four (4) crew members, the statements contained therein were based on acts witnessed only by the ship captain.

Specifically, the Court noted the claim of the ship captain that a crew was injured when Rogelio failed to observe safety precautions in the mooring and unmooring operations and that an agent informed him that Rogelio was hard to deal with because of intoxication. However, the Court found no affidavits of either the injured seaman or the concerned agent to corroborate the ship captain’s statements. For the Court, no basis constrained it to conclude that there was truth to the ship captain’s accusations.

The Court found that the employer failed to show that Rogelio willfully or deliberately caused the alleged accident during the mooring operations or that Rogelio repeatedly committed mistakes or repeatedly failed to perform his duties. The Court stated that the single unverified incident on Rogelio’s supposed negligence was insufficient to warrant a finding of just cause for termination.

With regard to the charge of intoxication, the Court applied Section 33 (6) of the POEA-SEC which provides that drunkenness must be committed while on duty to merit dismissal from employment.

In the present case, the Court found that Rogelio was admittedly off duty when he was allegedly caught by the master drinking on board. The Court ruled that the penalty of dismissal from employment was unwarranted.

The Court continued that the lack of just or valid cause of Rogelio’s dismissal was further exacerbated by the employer’s failure to afford Rogelio procedural due process. The Court stressed the two-notice rule in Section 17 of the POEA-SEC in that an erring seaman should be given a written notice of the charge against him and afforded an opportunity to explain or defend himself. Should sanctions be imposed, then a written notice of penalty and the reasons for it shall be furnished the erring seafarer. It is only in the exceptional case of clear and existing danger to the safety of the crew or vessel that the required notices are dispensed with; nonetheless, a complete report should be sent to the manning agency, supported by substantial evidence of the findings.

In the present case, the Court found no evidence showing that Rogelio was given a written notice of the charges against him, or that he was given an opportunity to explain or defend himself. Neither was there proof that Rogelio was furnished with a written notice of the penalty imposed against him and the reasons for its imposition. Although the Court noted the employer’s claim that the required notices were dispensed with because of a clear and existing danger to the safety of the crew or vessel, no evidence was presented to prove such was the situation when Rogelio’s employment was terminated.

With the illegality of Rogelio’s dismissal, the employer was held liable to pay Rogelio’s salaries for the unexpired portion of his employment contract under Section 10 of Republic Act No. 8042, as amended by Republic Act No. 10022.

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Paulino Ungos III

Proper Recourse to Assail the Decisions or Orders of the Secretary of the Department of Labor and Employment

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Further Reading:

Extent of the Awards of Backwages and Separation Pay

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Presenting Unsubstantiated Documents to Prove Unpaid Commissions

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Supervening Events Made It Impossible for Me to Reinstate My Employee

Should computation of separation pay and backwages be limited to the year 2007, as Consolidated Distillers had asserted?

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Dismissal of Employees for Minor Offenses

Was the dismissal of Laura valid?

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Substantial Compliance with Appeal Bond Requirements

Did the employer perfect its appeal upon discovery of its forged appeal bond?

Further reading:

Employment Status the Day Before the Occurrence of the Strike or Lockout

One issue that reached the Supreme Court was whether the employer’s implementation of the redundancy program was an unfair labor practice.

The other issue resolved by the Court was whether the employer should have enjoined the effectivity of the termination of the employment of the 27 affected union members when the Secretary of the Department of Labor and Employment assumed jurisdiction over their labor dispute.

Further reading: