Category: Labor Law

Based on Two Supreme Court Decisions, the Contractor Is Legitimate
Rico alleged that on October 2, 2002, PPI Holdings, Inc. (PPI), the sole franchisee of Pizza Hut in the Philippines, hired him as a messenger for its human resources department, and later on, for its accounting department.
Rico stated that his employment was transferred to a manpower agency, a certain Human Resources, Inc., and subsequently, to Consolidated Buildings Maintenance, Inc. (CBMI), now Atalian Global Services.
Rico also stated that despite such transfer, nothing changed with his employment in that he continued to be PPI’s messenger in its accounting department until CBMI sent him, along with other coworkers, a letter dated August 1, 2016 informing him of the termination of his services with PPI.
Rico thus filed an illegal dismissal case with money claims against PPI, CBMI, and their owners, arguing that he was a regular employee of PPI for having worked with it for 14 years, and that there was no just cause for his dismissal.
PPI denied having an employer-employee relationship with Rico. It posited that Rico was merely assigned to it by CBMI, a legitimate contractor that had rendered janitorial, sanitation, warehousing services, and allied services to PPI until the termination of their latest Contract of Services Agreement on September 1, 2016. Invoking the service agreement with CBMI, PPI averred that it was CBMI which relayed the company rules, regulations, and working terms and conditions upon Rico’s engagement, and which paid Rico’s salary, Social Security System, Pag-IBIG, and PhilHealth contributions.
For its part, CBMI acknowledged Rico as its employee assigned to PPI. It asserted that it is a legitimate contractor engaged in the business of providing janitorial, kitchen, elevator maintenance, and allied services to various entities, including PPI. However, while it recognized Rico’s employment, CBMI denied having terminated his services. Instead, it alleged that Rico, along with his other co-employees, was merely placed on floating status when it decided to terminate its latest service contract with PPI effective September 1, 2016 due to certain financial disagreements. Hence, for CBMI, Rico’s complaint should be dismissed for being prematurely filed.
The Office of the Labor Arbiter considered CBMI as a legitimate contractor based on the following documents:
- CBMI Securities and Exchange Commission (SEC) Registration;
- CBMI Company Profile;
- Contracts of Services entered into with PPI for several years;
- CBMI Certificates of Registration with the Department of Labor and Employment under such Department’s Orders numbered 18-A, Series of 2011 and 18-02, Series of 2002; and
- Audited Financial Statement filed with the SEC showing substantial capital or investment.
The Office of the Labor Arbiter further found that, as stipulated in the service agreements, CBMI carried out its work/service independently from its principal in accordance with its own means, method, and manner.
Nonetheless, the Office of the Labor Arbiter ruled that Rico was PPI’s regular employee as it found no evidence of the existence of an employer-employee relationship between CBMI and Rico. Such Office found that Rico’s 14 years of service with PPI, performing tasks which are usually necessary or desirable to PPI’s main business as messenger, proved that Rico was PPI’s employee. Since PPI failed to present any just or authorized cause in terminating his employment, the Office of the Labor Arbiter directed PPI to reinstate Rico and held PPI and CBMI solidarily liable for payment of his backwages.
PPI filed a partial appeal from the Office of the Labor Arbiter’s Decision, insisting that Rico was not its employee but that of CBMI, which is a legitimate contractor as found by said Office.
The National Labor Relations Commission ruled that CBMI is a labor-only contractor. The Commission found that, despite proof of substantial capitalization, there was no showing that CBMI carried on an independent business or undertook the performance of its service contracts according to its own manner and method, free from PPI’s control and supervision. The Commission added that the contracts of services between PPI and CBMI clearly showed that CBMI undertook to merely supply manpower. The Commission further added that CBMI’s registration with the DOLE as an independent contractor was not conclusive of such status.
Further, the Commission agreed with the Office of the Labor Arbiter’s ruling that Rico was PPI’s regular employee. The Commission found that Rico’s job as a messenger was necessary and vital to PPI’s business as the only franchisee of Pizza Hut, which requires food and kitchen services, sanitation, delivery, warehousing, commissary, and related services for its various restaurants. The Commission also took note of Rico’s 14 years of uninterrupted service with PPI.
Finally, the Commission upheld the Office of the Labor Arbiter’s finding that PPI failed to adduce evidence that Rico’s dismissal was for a just or authorized cause, and that procedural due process was observed in his dismissal from employment.
When the case reached the Court of Appeals, such Court declared CBMI as a legitimate contractor, based solely on two cases decided by the Supreme Court concerning PPI and CBMI, specifically, Consolidated Building Maintenance, Inc. v. Asprec, Jr.¹ and Philippine Pizza, Inc. v. Cayetano.² On that premise, the Court of Appeals concluded that Rico was CBMI’s direct employer. Nevertheless, the Court of Appeals sustained the labor tribunals’ uniform ruling that Rico was illegally dismissed from employment.
Rico filed a petition for review on certiorari to assail the ruling of the Court of Appeals.
Did PPI and CBMI engage in labor-only contracting?
The Supreme Court ruled that PPI and CBMI engaged in labor-only contracting.
The Court began by stating that outsourcing of services is not totally prohibited in the Philippines. It pointed out that Articles 106 to 109 of the Labor Code of the Philippines, Department of Labor and Employment Orders numbered 18-02, Series of 2002 and 18-A, Series of 2011, or the implementing rules in force at the time of Rico’s employment, provided the legal basis for service contracting and delineated the situations when it is not permitted. Considering such laws and rules, the Court stated that the following must be considered in determining whether CBMI was a legitimate contractor or engaged in labor-only contracting:
- registration with the proper government agencies;
- existence of substantial capital or investment;
- service agreement that ensures compliance with all the rights and benefits under labor laws;
- nature of the activities performed by the employees, i.e., if they are usually necessary or desirable to the operation of the principal’s company or directly related to the main business of the principal within a definite predetermined period; and
- the exercise of the right to control the performance of the employees’ work.³
In the present case, the Supreme Court found the certificates of registration, financial statements, and service agreements insufficient in supporting PPI and CBMI’s claim of legitimate contracting. The Court mentioned the following reasons:
- A certificate of registration as an independent contractor is not conclusive evidence of such status, as such registration merely prevents the legal presumption of being a labor-only contractor from arising;⁴
- It is settled that, despite proof of substantial capital, a contractor is still considered engaged in labor-only contracting whenever it is established that the principal actually controls the manner of the employee’s work;⁵ and
- The true nature of the relationship between the principal, contractor, and employee cannot be dictated by mere expedience of a unilateral declaration in a contract;⁶
The Supreme Court added that the totality of attendant circumstances led to a finding that PPI and CBMI engaged in labor-only contracting.
First, there was no evidence that CBMI carried on an independent business or undertook the performance of its service contracts according to its own manner and method, free from the control and supervision of PPI. While the various service agreements between PPI and CBMI contained the latter’s undertaking for the employees’ qualification and training, hiring and payroll, as well as their supervision, discipline, suspension or termination, said clauses were still but empty words that hardly helped PPI’s case, in absence of concrete proof that CBMI indeed carried on an independent business.
Second, there was also no evidence that CBMI hired Rico. In fact, there was no contract of employment showing that Rico was an employee of CBMI, nor were there records submitted in evidence to show such relationship.
Third, the fact that PPI exercised the right of control over Rico’s work was clear and unmistakable. As messenger, Rico had been performing his tasks at PPI’s premises for about fourteen (14) years. All those times, all the tools and equipment which he used in the performance of his work were owned by PPI and the latter’s managers and supervisors controlled his work inside the company premises.
Fourth, the various contract of services executed between PPI and CBMI, which spanned for several years from 1999 to 2012, showed that CBMI undertook to supply manpower only.
And fifth, Rico’s job as messenger was necessary and vital to PPI’s business as the Philippine franchisee of Pizza Hut which requires waitering, food and kitchen services, sanitation, delivery, warehousing, commissary and related services for its various restaurants. Otherwise, Rico would not have been repeatedly and continuously hired by PPI for fourteen (14) years. The Court stressed that such repeated and continuing need for the performance of the job is sufficient evidence of the necessity, if not indispensability, of the activity to the business.
The Supreme Court added that the Court of Appeals gravely erred in declaring CBMI as a legitimate contractor solely on the basis of the pronouncements in Consolidated Building Maintenance, Inc. v. Asprec, Jr.⁷ and Philippine Pizza, Inc. v. Cayetano.⁸
The Supreme Court emphasized that the principle of stare decisis cannot be applied in determining whether one is engaged in permissible contracting or otherwise, since such characterization should be based on the distinct features of the relationship between the parties, and the totality of the facts and attendant circumstances of each case, then measured against the terms of and criteria set by the statute.⁹ Specifically, the Court mentioned while those two cases also involved PPI and CBMI, the nature of work and treatment of employment of the employees in those cases may be different from Rico’s. Hence, the Court found it necessary to independently determine Rico’s case, which was aptly undertaken by the Commission in this case.
The Supreme Court further pointed out that the Court of Appeals merely made inference from previous cases without reference to the evidence on hand in concluding that CBMI was a legitimate contractor, and as such was Rico’s direct employer. The Supreme Court reiterated that the totality of the facts and the surrounding circumstances of the case must be considered in distinguishing prohibited contracting from permissible contracting.¹⁰
With the finding that CBMI was a labor-only contractor, such company was considered as a mere agent of PPI, which, in turn, was deemed to be Rico’s employer. Consequently, PPI and CBMI were held solidarily liable for payment of Rico’s awards.
This is because of the established principle that in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.¹¹
Further reading:
- Conjusta v. PPI Holdings, Inc., G.R. No. 252720, August 22, 2022.
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2022 August 22
But the President’s Approval of the Grant of CBA Benefits Was Presumed Under Article 4
On March 20, 2012, the Clark Development Corporation, the operating arm of the Bases Conversion Development Authority, tasked to manage the Clark Special Economic Zone, executed a renegotiated collective bargaining agreement with its supervisory employees’ union.
The collective bargaining agreement contained economic terms in favor of the supervisory employees, specifically the grant of additional annual union leave, bereavement leave, salary increases, uniform allowance, monthly Personal Economic Relief Allowance and a signing bonus. Said agreement also granted free use of guesthouses, use of a service vehicle, as well as the reproduction and distribution of the agreement to all members of the supervisory employees’ union.
However, the Governance Commission for Government-Owned and -Controlled Corporations (Governance Commission) opined that the collective bargaining agreement violated Section 9 of Executive Order No. 7, which was signed by the Philippine President on September 8, 2010. Section 9 imposed a moratorium on increases in the salaries, allowances, incentives and other benefits in Government-Owned and -Controlled Corporations unless specifically authorized by the Philippine President.
The Governance Commission stated that the Philippine President has not given Clark Development Corporation the authority to renegotiate the collective bargaining agreement with the supervisory employees’ union and to grant the union members increases or additional benefits.
Furthermore, the Bases Conversion Development Authority recommended that Clark Development Corporation defer or renegotiate its collective bargaining agreement with the supervisory employees’ union should it fail to prove the financial sustainability of the economic terms of such agreement.
On August 1, 2012, the supervisory employees’ union filed before the National Conciliation and Mediation Board a complaint against Clark Development Corporation for its failure to implement the collective bargaining agreement.
On November 5, 2012, the Accredited Voluntary Arbitrator ruled in favor of the supervisory employees’ union and upheld the economic terms or grant of benefits in the collective bargaining agreement. According to the Accredited Voluntary Arbitrator, Section 10 of Executive Order No. 7, Series of 2010, suspended the grant of allowances, bonuses, incentives, and other perks to members of the boards of directors/trustees of Government-Owned and -Controlled Corporations, but only until December 31, 2010. The Accredited Voluntary Arbitrator also held that the approval of the Philippine President in the grant of additional benefits was presumed under the rule on liberal construction in favor of labor under Article 4 of the Labor Code of the Philippines.
Aggrieved, Clark Development Corporation elevated the case to the Court of Appeals through a petition for review.
On April 8, 2013, the Court of Appeals affirmed the Accredited Voluntary Arbitrator’s findings. The Court of Appeals explained that Executive Order No. 7, Series of 2010, does not apply to Clark Development Corporation, as well as to the supervisory employees’ union. The Court of Appeals added that the Philippine President’s approval of the grant of additional benefits was presumed in line with the principle that all doubts should be resolved in favor of labor.
Clark Development Corporation filed its petition for review on certiorari before the Supreme Court and asserted that the Court of Appeals and the Accredited Voluntary Arbitrator erred in allowing the grant of additional benefits to the supervisory employees’ union.
Clark Development Corporation asserted the following:
- The economic terms of the collective bargaining agreement were invalid and cannot be enforced because these were renegotiated without the approval of the Philippine President.
- The GOCC Governance Act of 2011 gave the Philippine President the authority to fix the Government-Owned and -Controlled Corporations’ compensation framework.
- Corollarily, approval of additional benefits by the Philippine President cannot be presumed.
By contrast, the supervisory employees’ union contended that:
- The collective bargaining agreement was the law between the parties and must be respected.
- The collective bargaining agreement was renegotiated consistent with the employees’ rights to organization and collective bargaining.
- Executive Order No. 7, Series of 2010, was not applicable to Government-Owned and -Controlled Corporations without original charter.
- The GOCC Governance Act of 2011 recognized the vested rights of government employees to their salaries.
In the meantime, the Governance Commission moved to intervene in the proceedings and argued that:
- The collective bargaining agreement contravened Executive Order No. 7, Series of 2010, and the GOCC Governance Act of 2011.
- The moratorium on the grant of additional benefits remained effective pending the promulgation and approval of the compensation and position classification system for Government-Owned and -Controlled Corporations.
- In any event, there were no factual and legal bases to presume the consent of the Philippine President on the collective bargaining agreement’s economic provisions.
Were the additional benefits granted to the supervisory employees under the collective bargaining agreement valid?
The Supreme Court ruled in the negative.
The Supreme Court began with the settled rule that the right of government employees to self-organization is not as extensive as in the right of private employees. It then mentioned that the right of government employees to collective bargaining and negotiation is subject to limitations, in that only the terms and conditions of government employment not fixed by law can be negotiated.
The Supreme Court pointed out that in order to control the grant of excessive salaries, allowances, incentives, and other benefits, Executive Order No. 7, Series of 2010, particularly Section 9, has imposed a moratorium on the grant of additional salaries and allowances to employees and officers of Government-Owned and -Controlled Corporations until specifically authorized by the Philippine President.
The Supreme Court stressed that the clause “until specifically authorized by the Philippine President” is not in the nature of an exception. Rather, the clause provides for the situation where the Philippine President, deems it proper to lift the moratorium. According to the Supreme Court, the use of the preposition “until” before the phrase “specifically authorized by the Philippine President” denotes that the moratorium continues up to a particular time, i.e., when the President authorizes anew the grant of the prohibited increases.
On this score, the Supreme Court took judicial notice that the Philippine President has not lifted the moratorium. The Court thus ruled that the economic terms of the collective bargaining agreement executed by the Clark Development Corporation with its supervisory employees’ union on March 20, 2012 were void for violating the law.
The Supreme Court noted the reliance of the Accredited Voluntary Arbitrator and the Court of Appeals upon Section 10 of Executive Order No. 7, Series of 2010. The Supreme Court, however, pointed out that Section 10 is inapplicable to the supervisory employees’ union of Clark Development Corporation, as the said section pertains to members of the Board of Directors/Trustees of Government-Owned and -Controlled Corporations.
The Supreme Court then declared as erroneous the exclusion by the Court of Appeals of Clark Development Corporation from the coverage of Executive Order No. 7, Series of 2010. This was because nothing in the law makes any express distinction between Government-Owned and -Controlled Corporations with original charter, and those incorporated under the Corporation Code. For the Supreme Court, Executive Order No. 7, Series of 2010, applies to all Government-Owned and -Controlled Corporations regardless of the manner of creation.
The Supreme Court added that although the GOCC Governance Act of 2011 authorizes the Governance Commission to develop a compensation and position classification system applicable to all officers and employees of Government-Owned and -Controlled Corporations, such system is subject to approval of the Philippine President.
In the present case, the Supreme Court found that the Governance Commission did not give its favorable recommendation on the renegotiation of additional benefits by Clark Development Corporation and the supervisory employees’ union. The Supreme Court noted that the Governance Commission even opined that the collective bargaining agreement violated Section 9 of Executive Order No. 7, Series of 2010.
The Supreme Court then highlighted that on March 22, 2016, the Philippine President issued Executive Order No. 203, Series of 2016, which disallowed the Governing Boards of all covered Government-Owned and -Controlled Corporations, whether Chartered or Non-chartered, to negotiate with their officers and employees the economic terms of their collective bargaining agreements.
For the Supreme Court, such provision supports the finding that the moratorium under Executive Order No. 7, Series of 2010, has remained effective pending the promulgation and approval of the compensation framework for all the Government-Owned and -Controlled Corporations. The Court found no factual and legal bases for the Court of Appeals and the Accredited Voluntary Arbitrator to presume that the Philippine President approved the renegotiated economic provisions of the collective bargaining agreement between Clark Development Corporation and its supervisory employees’ union.
The Supreme Court emphasized that the construction in favor of labor only applies when there are doubts in the interpretation and implementation of the provisions of the Labor Code of the Philippines and its implementing rules and regulations. The Supreme Court stated that the language of Section 9 of Executive Order No. 7, Series of 2010, on the moratorium on increases in rates of salaries and other benefits is unambiguous. Consequently, the Supreme Court emphasized that the law must be interpreted following its plain and obvious meaning and applied according to its express terms. For the Supreme Court, the law requires the Philippine President’s consent as to additional benefits effectively lifting the moratorium, and any presumption of such approval is unwarranted.
The Supreme Court concluded that Clark Development Corporation had valid reason not to implement the increases in salaries and benefits as provided in the renegotiated collective bargaining agreement. This is because the law has fixed the terms and conditions of government employment, and any contract that violates the law is void and cannot be a source of rights and obligations.
Further reading:
- Clark Development Corp. v. Association of CDC Supervisory Personnel Union, G.R. No. 207853, March 30, 2022.
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2022 March 30
A Liberal Interpretation of the Rules Is Primarily Granted for the Employee’s Favor
Sometime in 2012, several stockholders of the employer bank complained about the discrepancies in the amounts of the purchase price of stock subscriptions appearing in the original receipts as against the duplicate copies issued by the said bank. The anomaly involved several millions of pesos collected from stockholders of the employer bank which, if not corrected, will certainly tarnish the image and integrity of the latter.
Acting on this anomaly, the employer bank conducted an investigation and confirmed the irregularities. It discovered that in the original receipts given to the stockholders, the stated price of shares ranged from Php250.00 to Php275.00, but in the duplicate copies retained by the employer bank, only Php100.00 was indicated. It also found that the original receipts were signed by the then president of the employer bank, while the duplicate copies were signed either by its then treasury head or branch manager.
Thus, to comply with regulations mandating the prompt report of anomalies to the Bangko Sentral ng Pilipinas (BSP), the Board of Directors of the employer bank approved a Report on Crimes and Losses and directed Ariel — its Compliance Officer — to certify the same. However, Ariel refused to certify the report, reasoning that no independent investigation was conducted, and that he cannot completely validate the same for lack of material data and evidence. Ariel further remarked that he was being pressured to certify the report.
Thereafter, Ariel claimed that instead of furnishing him the hard copies of the reports and relevant attachments to enable him to verify and certify the same, the employer bank issued him two show cause orders and put him on preventive suspension for neglect of duty. Meanwhile, the employer bank contended that several administrative hearings were scheduled to hear the side of Ariel, which he ignored.
On March 25, 2013, Ariel filed a complaint against the employer bank for illegal suspension and money claims. This complaint was subsequently amended to include illegal dismissal, in view of the eventual termination of his employment.
The employer bank did not file a position paper during the proceedings before the Office of the Labor Arbiter.
The Office of the Labor Arbiter then ruled that the dismissal of Ariel was without a valid cause and that he was denied due process for having been summarily dismissed.
The National Labor Relations Commission reversed the ruling of the Office of the Labor Arbiter. It adopted a liberal interpretation of procedural rules, relaxed the same and held that substantial justice must prevail over technicalities. Thus, it allowed the employer bank to submit countervailing evidence even on appeal. On the substantial issue, the National Labor Relations Commission found that Ariel was not illegally dismissed, since the employer bank was able to discharge the burden of proving that it had a just cause to terminate Ariel’s employment.
The Court of Appeals affirmed the Decision of the National Labor Relations Commission. The said Court found no grave abuse of discretion on the part of the National Labor Relations Commission in relaxing its procedural rules. For the Court of Appeals, the failure of the employer bank to file a Position Paper and submit evidence was justified and satisfactorily explained, since it was neither given summons, nor notified of the scheduled preliminary conference and further hearings after Ariel filed his amended complaint. On the substantive issue, the Court of Appeals ruled that Ariel was validly dismissed for a just and valid cause.
Ariel elevated his case to the Supreme Court to assail the decision of the Court of Appeals.
Ariel asserted that the Court of Appeals abused its discretion amounting to lack or excess of jurisdiction:
- in upholding the National Labor Relation Commission’s liberal application of the procedural rules in favor of the employer bank; and
- in ruling that he was validly dismissed from employment.
Was the liberal application of the procedural rules in favor of the employer bank warranted?
Apart from its finding that Ariel was illegally dismissed from employment, the Supreme Court ruled that the the National Labor Relations Commission and the Court of Appeals erred in allowing the employer bank to present evidence on appeal.
The Supreme Court reiterated established principles from jurisprudence and experts by stating that due process is a malleable concept anchored on fairness and equity. At its core is simply the reasonable opportunity for every party to be heard. What is required is not actual hearing but a real opportunity to be heard. Thus, one who refuses to appear at a hearing is not thereby denied due process if a decision is reached without waiting for him. Likewise, the requirement of due process can be satisfied by subsequent due hearing.
In the present case, the Supreme Court ruled that the employer bank had been accorded ample opportunity to present its side during the proceedings before the Office of the Labor Arbiter based on the following findings:
- The employer bank unjustifiably missed at least two hearing dates: that on June 4, 2013, and that on June 19, 2013. With regard to the hearing on June 19, 2013, the Supreme Court stated that the employer bank missed the hearing despite having been directed to attend by the Office of the Labor Arbiter;
- The employer bank, at this point, had already obtained a copy of the amended complaint which would have enabled it to intelligently respond. According to the Court, the issuance of the summons would have been a mere superfluity;
- The employer bank’s absences were unexplained; and
- If the employer bank truly held sacred its right to due process, it should have wasted no time nor missed no opportunity to assert such right as early as during the initial stages of the proceedings. It should have at least pleaded for the Office of the Labor Arbiter to reopen the proceedings and admit its position paper, if there ever was one. At the very least, the employer bank was well-aware that a complaint was filed against it and failed to be proactive in the proceedings. The Court sensed employer bank’s cavalier attitude and remarked that it reeked of negligence and disrespect to duly instituted authorities and rules of procedures, which it could never tolerate.
While commending the National Labor Relations Commission and the Court of Appeals in upholding substantial justice, the Supreme Court reminded them such principle must always be balanced with respect and honest efforts to comply with procedural rules.
The Court stated that it cannot always be about substantial justice, especially to the point of disrespect and utter disregard to procedural rules. Imperative justice requires correct observance of indispensable technicalities precisely designed to ensure its proper dispensation. It cannot be overemphasized that procedural rules have their own wholesome rationale in the orderly administration of justice. Justice has to be administered according to the Rules in order to obviate arbitrariness, caprice, or whimsicality. It must never be forgotten that, generally, the application of the rules must be upheld, and the suspension or even mere relaxation of its application, is the exception.
In this regard, the Court emphasized the policy that although in labor cases, strict adherence to the technical rules of procedure is not required, this liberal policy should still be subject to rules of reason and fairplay. The liberality of procedural rules is qualified by two requirements:
- a party should adequately explain any delay in the submission of evidence; and
- a party should sufficiently prove the allegations sought to be proven.
The reason for these requirements, said the Court, is that the liberal application of the rules before quasi-judicial agencies cannot be used to perpetuate injustice and hamper the just resolution of the case. Neither is the rule on liberal construction a license to disregard the rules of procedure.
In the present case, the Court highlighted the fact the employer bank failed to adequately explain and justify their non-participation in the proceedings before the Office of the Labor Arbiter.
For the Court, the application of a more liberal policy was unwarranted, contrary to the rulings of the National Labor Relations Commission and the Court of Appeals.
At any rate, the Court maintained that the employer bank in the present case is not entitled to be accorded a liberal interpretation of the rules; the same being primarily granted for the employee’s favor, and not the employer.
The Court explained that the principles embodied by all prevailing labor rules, legislations, and regulations are derived from the Constitution, which intensely protects the working individual and deeply promotes social justice.¹ The measures embedded in our legal system which accord specific protection to labor stems from the reality that normally, the laborer stands on unequal footing as opposed to an employer. Indeed, the labor force is a special class that is constitutionally protected because of the inequality between capital and labor. In fact, labor proceedings are so informally and, as much as possible, amicably conducted and without a real need for counsel, perhaps in recognition of the sad fact that a common employee does not or have extremely limited means to secure legal services nor the mettle to endure the extremely antagonizing and adversarial atmosphere of a formal legal battle. Thus, in the common scenario of an unaided worker, who does not possess the necessary knowledge to protect his rights, pitted against his employer in a labor proceeding, the former cannot be expected to be perfectly compliant at all times with every single twist and turn of legal technicality. The same, however, cannot be said for the latter, who more often than not, has the capacity to hire the services of a counsel. As an additional aid therefore, a liberal interpretation of the technical rules of procedure may be allowed if only to further bridge the gap between an employee and an employer.
The Court clarified that it is not saying that the rules may never be relaxed in favor of the employer, and that every labor dispute will be automatically decided in favor of labor. In certain cases, of course, a liberal approach to the rules may be had even if it favors the employer. Such allowance, however, must be measured against standards stricter than that imposed against the worker, and only in compelling and justified cases where the employer will definitely suffer injustice should such liberal interpretation be disallowed. The Supreme Court stated that such was not the situation of the employer bank in the present case.
Further reading:
- Reyes v. Rural Bank of San Rafael (Bulacan), Inc., G.R. No. 230597, March 23, 2022.
2022 March 23
Jurisdiction of the Labor Arbiter and the POEA
Mike and Ryan alleged that on May 11, 2011, they were hired by The W Construction through its agent, U R Employed International Corporation, as construction workers in Malaysia. They entered into a two-year employment contract with a monthly salary of 800 Malaysian Ringgit.
Mike and Ryan narrated that upon their arrival in Malaysia, the broker who fetched them from the airport took their passports. They were made to live in a place with unsafe living conditions. Also, they worked beyond regular hours without pay. Later, they discovered that they only had tourist visas, and that the employer was hiding them from the authorities because they did not have work permits.
Mike and Ryan claimed that they reported their living and working conditions to their broker, but their grievances were unheeded.
Mike and Ryan stated that they were left without any other recourse, which was why on August 14, 2011, Ryan sent an e-mail to the editorial of a Philippine newspaper company, narrating their experience and seeking assistance.
Mike and Ryan continued that in the last week of August 2011, the employer’s human relations officer questioned them about the e-mail sent to the Philippine newspaper company. On September 13, 2011, a supervisor informed them about the termination of their employment. The employer told them that they were processed for repatriation and would be sent home on September 15, 2011. However, they were only repatriated sometime in November 2011. In the meantime, the employer cut off their food supply.
On December 5, 2011, Mike and Ryan filed a complaint for illegal dismissal and money claims against their employer.
Initially, the complaint was dismissed without prejudice because both parties failed to submit their respective position papers. On March 26, 2012, the complaint was reinstated upon a Motion to Revive filed by Mike and Ryan.
The employer denied the allegations of Mike and Ryan. The employer countered that Mike voluntarily resigned from his job, while Ryan was dismissed from employment on the ground of grave misconduct when he sent a derogatory email to a Philippine newspaper company. The employer further submitted a summary of pay slips to prove that Mike and Ryan were properly paid their salary and benefits.
The Office of the Labor Arbiter found that Mike and Ryan were constructively dismissed due to the unbearable and unfavorable working conditions set by the employer. They were awarded reimbursement of placement fees, backwages until the end of their employment contracts, damages, and attorney’s fees. Ryan’s claims for overtime pay and illegal deductions were denied for being unsubstantiated. Mike’s claim of illegal deduction was given credence by the Office of the Labor Arbiter.
The National Labor Relations Commission denied the employer’s appeal and affirmed the ruling of the Office of the Labor Arbiter.
The employer sought recourse before the Court of Appeals, ascribing grave abuse of discretion on the part of the National Labor Relations Commission.
Record revealed that before Mike and Ryan filed their complaint with the Office of the Labor Arbiter, they also filed a complaint with the Philippine Overseas Employment Administration against the employer and its agent for violation of the 2002 POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers. The complaint alleged the same set of facts in the complaint before the Office of the Labor Arbiter and were supported by the same affidavits. The complaint filed before the Philippine Overseas Employment Administration was dismissed for failure of Mike and Ryan to substantiate their allegations and attend the scheduled hearings. Mike and Ryan appealed the dismissal to the Department of Labor and Employment, which issued an order dismissing their appeal.
Regarding the petition assailing the ruling of the National Labor Relations Commission, the Court of Appeals dismissed the same since it found substantial evidence to prove that respondents were illegally dismissed.
The employer then elevated its case to the Supreme Court. It pointed out that the other complaint filed by Mike and Ryan before the Philippine Overseas Employment Administration had been dismissed. The employer thus posited that it was erroneous for the Court of Appeals to not consider the orders issued by the Philippine Overseas Employment Administration and the Department of Labor and Employment, when Mike and Ryan alleged the same facts in their complaint filed before the Office of the Labor Arbiter.
Was the Court of Appeals correct in dismissing the employer’s petition?
The Supreme Court ruled in the affirmative because no basis supported the argument that the Office of the Labor Arbiter should have considered the orders issued by the Philippine Overseas Employment Administration and the Department of Labor and Employment in the adjudication of the complaint filed by Mike and Ryan before the Office of the Labor Arbiter.
The first reason discussed by the Supreme Court was that the Philippine Overseas Employment Administration could not have prevented the Office of the Labor Arbiter from ruling on the complaint of Mike and Ryan. Stated otherwise, the Doctrine of Primary Jurisdiction did not apply.
The Supreme Court discussed that the Doctrine of Primary Jurisdiction, also known as the Doctrine of Prior Resort, is the power and authority vested by the Constitution or by statute upon an administrative body to act upon a matter by virtue of its specific competence. The Doctrine of Primary Jurisdiction prevents the court from arrogating unto itself the authority to resolve a controversy which falls under the jurisdiction of a tribunal possessed with special competence.
The Supreme Court further discussed that Primary Jurisdiction does not necessarily denote Exclusive Jurisdiction. Primary Jurisdiction applies where a claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of the issues to the administrative body for its review.
In the present case, the Supreme Court found that while Mike and Ryan alleged the same set of facts and submitted the same affidavits before the Office of the Labor Arbiter and the Philippine Overseas Employment Administration, the complaints raised different causes of action. Specifically, the complaint filed before the Office of the Labor Arbiter involved the issue of illegal dismissal and various money claims, while the Philippine Overseas Employment Administration complaint involved administrative disciplinary liability for violation of the 2002 POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers. For the Supreme Court, the Doctrine of Primary Jurisdiction could not have applied.
The second reason discussed by the Supreme Court was that in some instances, an administrative body is granted primary jurisdiction, concurrent with another government agency or the regular court.
However, the Supreme Court found that a review of the respective jurisdictions of the Philippine Overseas Employment Administration and the Office of the Labor Arbiter reveals that these administrative bodies do not have concurrent jurisdiction.
The Supreme Court mentioned that Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022, provides that the Office of the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide the claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary, and other forms of damage. On the other hand, Section 6, Part A, Rule X of the Implementing Rules and Regulations of Republic Act No. 10022 provides that the Philippine Overseas Employment Administration exercises administrative jurisdiction arising out of violations of rules and regulations and administrative disciplinary jurisdiction over employers, principals, contracting partners, and overseas Filipino workers.
For the Supreme Court, the jurisdiction of these administrative bodies does not in any way intersect as to warrant the application of the doctrine of primary jurisdiction. Accordingly, said the Supreme Court, the appreciation by the Philippine Overseas Employment Administration and Office of the Labor Arbiter of the complaints should be limited to matters falling within their respective jurisdictions, and only insofar as relevant to the resolution of the controversies presented before them.
The third reason discussed by the Supreme Court was that the finality of the Order issued by the Department of Labor and Employment had no effect on the resolution of the present petition. For the Supreme Court, the Doctrine of Immutability of Judgments does not apply to this case.
Under the Doctrine of Immutability of Judgments, all the issues between the parties are deemed resolved and laid to rest once a judgment becomes final. No other action can be taken on the decision except to order its execution. The decision becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of the land.
In the present case, the Supreme Court found that the Order of the Department of Labor and Employment, which had become final, settled the issue of whether the employer and its agent violated the 2002 POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers. It did not involve the issue of the illegal dismissal and money claims lodged by Mike and Ryan with the Office of the Labor Arbiter. To reiterate, the Supreme Court found that the finality of the Order issued by the Department of Labor and Employment had no effect on the resolution of the present petition.
Further reading:
- U R Employed International Corp. v. Pinmiliw, G.R. No. 225263, March 16, 2022.
2022 March 16
He Is Not Our Employee
Gerome alleged that he was hired by JTA Packing Corporation (JTA) on December 26, 2014 as an all-around driver.
He narrated that on September 5, 2016, an officer of JTA maltreated him, prevented him from leaving the company premises, and threatened his life. Gerome no longer reported to work.
Believing that his continued employment became impossible, unbearable, and unlikely, Gerome filed a complaint for illegal dismissal against his employer on January 30, 2017.
JTA contended that Gerome was not its employee, as established by the following documents which never included Gerome’s name:
- copies of its alpha list of employees as filed with the Bureau of Internal Revenue (BIR) for the years 2014-2016;
- payroll monthly reports and 13th month pay it paid for the years 2015-2016;
- reports on Social Security System (SSS) contributions of its employees remitted for the years 2015-2016;
- PhilHealth remittance reports on contributions of its employees in 2016; and
- Pag-IBIG fund membership and registration/remittance forms indicating the names of its employees and their contributions for the period of 2015-2016.
On June 28, 2017, the Office of the Labor Arbiter rendered a Decision which declared the existence of an employer-employee relationship between Gerome and JTA. It then ruled that Gerome was constructively dismissed because his continued employment with JTA was rendered impossible due to fear after the September 5, 2016 incident of maltreatment and detention.
On appeal, the National Labor Relations Commission reversed and set aside the Decision of the Office of the Labor Arbiter. It dismissed the complaint for lack of employer-employee relationship between Gerome and JTA.
One reason was that the pay slips submitted by Gerome failed to reveal who issued the same. The Commission also discovered discrepancies on the dates of their issue in that the pay slips dated back as early as March 2014 contrary to Gerome’s claim that he was hired in December of the same year.
The other reason was that JTA’s documentary evidence showed that Gerome was not among its employees.
The Court of Appeals affirmed the ruling of the National Labor Relations Commission, in view of Gerome’s failure to substantiate his claim that he is an employee of JTA.
Gerome elevated his case to the Supreme Court.
Was Gerome an employee of JTA?
The Supreme Court ruled in the negative.
The Court reiterated the settled rule that allegations in the complaint must be duly proven by competent evidence and that the burden of proof is on the party making the allegation. In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. In this regard, the “four-fold test” determines the existence of an employer-employee relationship, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the employee’s conduct.
In the present case, the Court stressed that since it was Gerome who was claiming to be an employee of JTA, he had the burden of proving the existence of an employer-employee relationship. The Court found that Gerome failed to discharge this burden.
Gerome did not present any employment contract or company identification card to prove Gerome’s employment with JTA. According to the Court, in a business establishment, an identification card is usually provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it.
The pay slips presented by Gerome bore no indication that the amount he allegedly received came from JTA. The Court pointed out that the pay slips submitted by Gerome even showed that he had been receiving compensation as early as February 2014, when he had claimed that he was hired by JTA months later, or on December 26, 2014. The Court said that this wide gap between February 2014 and December 2014 was not a trivial inconsistency.
Furthermore, there were no deductions from Gerome’s supposed salary such as withholding tax, SSS, PhilHealth or Pag-IBIG Fund contributions which were usual deductions from employees’ salaries.
On the other hand, the following voluminous documentary evidence submitted by JTA, which were duly signed by its authorized representative and stamp received by the concerned government agencies, indubitably showed that Gerome was not among its employees:
- the alpha list of employees submitted to the Bureau of Internal Revenue for the years during which Gerome claims to have been employed by JTA;
- the payroll monthly reports; and
- the remittances made by JTA of its employees’ monthly contributions to the SSS, PhilHealth and Pag-IBIG Fund.
As to the power of control, the Court acknowledged that the purported driver’s itineraries presented by Gerome prescribed the manner by which his work as a driver is to be carried out. However, the Court found that the said driver’s itineraries were not signed by JTA’s authorized personnel and contained discrepancies on JTA’s name and address. For the Court, the driver’s itineraries were insufficient to establish the element of control.
The Court accordingly denied Gerome’s petition for lack of merit.
Further reading:
- Ginta-Ason v. J.T.A. Packaging Corp., G.R. No. 244206, March 16, 2022.
2022 March 16
Regardless of the Cause of Repatriation
Reynaldo entered into a three-month employment contract to work as an oiler with Maritime Management Services (Maritime Management), through its agent, Southeast Asia Shipping Corp. (SEASCORP). Before deployment, he underwent his pre-employment medical examination and was certified to be fit for sea duty. On January 30, 2010, Reynaldo boarded the M/V BP Pioneer.
Reynaldo narrated that on March 29, 2010, he was carrying spare parts needed for his repair of the ship’s generators when the ship swayed due to big waves. This caused him to bend and nearly fall to his knees.
Reynaldo claimed that he soon felt excruciating pain in his scrotal/inguinal area, including pain and numbness in his left leg to his foot. Despite this, he continued to carry the parts and repaired the generator until he was relieved by another oiler. After his duty, Reynaldo went to his cabin and took a pain reliever. He then went to the ship’s clinic to have himself checked by the doctor on board. In the Report of Illness by the ship’s doctor, the latter diagnosed Reynaldo to have epididymorchitis and advised him to rest until further observation since it may just be due to tiredness. The doctor also ruled out hernia and trauma.
On May 19, 2010, Reynaldo visited the ship’s doctor and informed the latter that he still feels pain during prolonged standing or while walking, with numbness of his lower extremity. However, the doctor concluded that this was normal considering his age and just advised to take pain relievers.
Upon the expiration of his contract on May 25, 2010, Reynaldo disembarked the vessel at the port of Takoradi, Ghana and was repatriated back to the Philippines. Believing that the pain in his scrotal/inguinal area was normal and, as the doctor had advised, Reynaldo took a complete rest for about a month.
Eventually, SEASCORP called him for possible deployment. He was sent to Merita Diagnostic Clinic (Merita), the company-accredited clinic, for his pre-employment medical examination.
During his examination, Reynaldo informed the doctor about the injury sustained while on board the M/V BP Pioneer. Thus, the doctor asked him to get an x-ray of his scrotal/inguinal area and lumbar spine.
On July 30, 2010, Reynaldo also underwent Magnetic Resonance Imaging (MRI) of the Lumbo-Sacral Spine. It was found that Reynaldo had spondylolisthesis, among others.
On August 26, 2010, Reynaldo consulted two doctors who advised him to have surgery for his spondylolisthesis. Reynaldo found the procedure costly.
Reynaldo approached SEASCORP to request for financial assistance. However, his request was denied.
Reynaldo thus filed a complaint against his employer before the National Labor Relations Commission and claimed for permanent total disability benefits, moral and exemplary damages, and attorney’s fees.
The Office of the Labor Arbiter found that Reynaldo suffered an injury while performing his duties as an oiler. Being a work-related injury, it held that it must be compensable.
On the other hand, the said Office found that the mandatory three-day reporting requirement for a post-employment examination under the Philippine Overseas Employment Administration Standard Employment Contract (POEA SEC) did not apply in the case of Reynaldo because he was repatriated not because of a medical condition but due to the expiration of his contract.
The Office of the Labor Arbiter thus ruled in favor of Reynaldo and required the employer to pay Reynaldo his permanent total disability compensation plus attorney’s fees.
The National Labor Relations Commission reversed and set aside the Decision of the Office of the Labor Arbiter and dismissed Reynaldo’s complaint for lack of merit.
According to the Commission, the injury suffered by Reynaldo that was reflected on record was the discomfort on his scrotal and inguinal area. His assertion that he suffered an injury while on board and felt pain on his left leg to his foot was unsupported by evidence.
The Commission added that a seafarer who claims to be medically infirm must be examined by the company-designated physician within three days from repatriation. The failure of Reynaldo to report within the mandatory period without justifiable cause resulted in the forfeiture of his right to claim compensation and disability benefits under the POEA-SEC.
The Court of Appeals denied Reynaldo’s petition in view of his failure to comply with the mandatory reporting requirement under the POEA-SEC. Such failure resulted in the forfeiture of his right to claim compensation and benefits.
Reynaldo elevated his case to the Supreme Court.
Was Reynaldo entitled to permanent total disability benefits?
The Supreme Court ruled in the negative.
The Court reiterated settled jurisprudence that in order to claim compensability under the POEA-SEC, it is required that the seafarer must have:
- suffered a work-related illness or injury during the term of his contract; and
- submitted himself to a mandatory post-employment medical examination within three (3) working days upon his arrival.
The purpose of the three-day mandatory reporting requirement is to enable the company-designated physician to ascertain if the seafarer’s injury or illness is work-related. After that period, there would be difficulty in ascertaining the real cause of the illness. To ignore the rule would set a precedent with negative repercussions because it would open the floodgates to a limitless number of seafarers claiming disability benefits. It would certainly be unfair to the employer who would have difficulty determining the cause of a claimant’s illness considering the passage of time. In such a case, the employers would have no protection against unrelated disability claims.
In the present case, the Court found that Reynaldo was repatriated due to the expiration of his contract. The Court stated that regardless of the cause of his repatriation, he was required to submit himself to a post-employment medical examination by the company-designated physician within three working days upon his return in order to ascertain if he was really suffering from a work-related injury or illness. Reynaldo may only be excused from such requirement if he was physically incapacitated to do so. The Court stressed that this was not Reynaldo’s situation.
The Court equally found that Reynaldo complained of pain in the scrotal/inguinal area while on board which is why the initial diagnosis by the ship doctor was epididymorchitis.
On the other hand, the Court noted that aside from his bare assertion, Reynaldo proffered no evidence establishing that he felt pain or numbness on his lower extremities while on board or that the ship doctor concluded that he contracted spondylolisthesis. According to the Court, it was only in July 2010, or after his repatriation, that the said findings were made by a doctor, which was well-beyond the three-day mandatory reporting period.
The Court stated that while it commiserated with Reynaldo’s plight, non-compliance with the requirements set forth in the POEA-SEC had rendered it difficult to ascertain if his injury or illness was work-related.
The Court accordingly denied Reynaldo’s claim for permanent total disability benefits.
Further reading:
- Cabatan v. Southeast Asia Shipping Corp., G.R. No. 219495, February 28, 2022.
2022 February 28
But the OFW Directly Communicated with the Principal and without the Knowledge of Its Agent
SRL International Manpower Agency (SRL) posted a job opening for its principal, Akkila Co. Ltd. UAE/Al Salmeen Trading Est. (Akkila), for a certain project in Qatar.
Pedro sent an application to Akkila, through SRL. In July 2010, SRL received word from Akkila that the latter was interested in hiring Pedro as Project Manager. Afterwards, SRL forwarded Pedro’s documents to Akkila for the processing of his employment visa.
Akkila soon furnished Pedro an “Offer of Employment” for a two (2) year engagement without the approval of the Philippine Overseas Employment Administration (POEA). Akkila and Pedro directly contacted each other and the latter was able to depart for the United Arab Emirates (UAE) on October 14, 2010 using a visit visa instead of an employment visa.
On March 24, 2011, Akkila asked Pedro to return to the Philippines with an instruction to apply for deployment anew under an employment visa and with the condition that he should return 10 days after its processing.
In April 2011, Pedro returned to the Philippines and started processing his next deployment under new “Contract of Employment,” with the assistance of SRL
Pedro underwent a medical examination with SRL’s accredited clinic, Seamed Medical Clinic (Seamed), to assess his fitness for work. However, Seamed found that Pedro had Uncontrolled Diabetes Mellitus Type II and declared him unfit for work. This finding was reflected in a Medical Certificate dated May 10, 2011.
SRL disclosed such finding to Akkila and informed the latter that if it was still interested, it should send a waiver indicating its willingness to hire Pedro notwithstanding his unfitness for work.
Akkila replied that it had a strict qualification not to hire an applicant who is not fit for work. Subsequently, in a letter dated May 22, 2011, Akkila informed Pedro that he cannot be hired due to medical reasons.
In the case of SRL International Manpower Agency v. Yarza, the Supreme Court resolved three issues:
First: Was the “Offer of Employment” furnished by Akkila to Pedro valid?
The Supreme Court stated that since employment contracts of Overseas Filipino Workers are perfected in the Philippines, and following the principle of lex loci contractus (the law of the place where the contract is made), such contracts are governed primarily by the Labor Code of the Philippines and its implementing rules and regulations.
The Court added that the laws generally apply even to employment contracts of Overseas Filipino Workers since the Constitution explicitly provides that the State shall afford full protection to labor, whether local or overseas. Thus, even if a Filipino is employed abroad, he or she is entitled to security of tenure, among other constitutional rights. Security of tenure remains even if employees, particularly the Overseas Filipino Workers, work in a different jurisdiction.
Furthermore, the Court also stated that under the Labor Code of the Philippines, employers hiring Overseas Filipino Workers may only do so through entities authorized by the Secretary of the Department of Labor and Employment. The Court continued that unless the employment contract of an Overseas Filipino Worker is processed through the POEA, the same does not bind the concerned Overseas Filipino Worker because if the contract is not reviewed by the POEA, certainly the State has no means of determining the suitability of foreign laws to our overseas workers.
In the present case, the Court found that the “Offer of Employment” was perfected when Pedro agreed to the same while he was still in the Philippines.
However, the Court found that the “Offer of Employment” ran contrary to the Constitution and the law and was not approved by the POEA. Specifically, the Court found that the “Offer of Employment”, although stating that the rules and regulations found in UAE’s labor laws should apply, contained stipulations contrary to the policies of the Philippines concerning labor contracts and security of tenure.
With these findings, the Court declared the “Offer of Employment” invalid.
Second: Did an employer-employee relationship exist between Akkila and Pedro.
The Court ruled in the affirmative. Notwithstanding the invalidity of the “Offer of Employment,” the Court ruled that an employer-employee relationship existed between Akkila and Pedro.
According to the Court, absent a valid employment contract, the following elements of the four fold test should be considered:
- selection and engagement of the employee;
- payment of wages;
- power of dismissal; and
- the employer’s power to control the employee’s conduct.
The Court reiterated that the most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. However, the power of control refers merely to the existence of the power, and not to the actual exercise thereof. No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. However, a finding that such relationship exists must still rest on some substantial evidence.
In the present case, the Court found:
- For the first element, Akkila, through the participation of SRL, selected and engaged the services of Pedro, precisely because he was deployed through a visit visa under Akkila’s instruction and endorsement.
- For the second element, Akkila did not deny that it paid Pedro’s wages with the “Offer of Employment” as reference.
- Regarding the third element, Akkila had the power to dismiss Pedro. In fact, it did so when it issued the termination letter dated May 22, 2011.
- Lastly, on the fourth element, Akkila had control over Pedro’s work conduct, which included the means and methods he would employ to produce the results required by the company.
In addition, the Court took into consideration the fact that Akkila did not show proof that it took no part in directing Pedro’s job output. In particular, Akkila did not appeal the finding of employer-employee relationship before the Court of Appeals. Hence, the Court bound Akkila by such conclusion.
Third: Was Pedro illegally dismissed from employment?
With the existence of the employer-employee relationship, the Court ruled that Akkila should accord Pedro due process, both substantial and procedural, before terminating his employment.
The Court stated that to comply with substantive due process, Pedro can only be dismissed for a just or authorized cause, the absence of which renders his dismissal illegal.
In the present case, it was found that Akkila dismissed the services of Pedro on the ground of disease, under Article 299 [284] of the Labor Code of the Philippines. The said provision essentially provides that “an employer would be authorized to terminate the services of an employee found to be suffering from any disease if the employee’s continued employment is prohibited by law or is prejudicial to his health or to the health of his fellow employees.”
The Court further stated that to be considered valid, the dismissal on the ground of disease must satisfy two requisites:
- the employee suffers from a disease which cannot be cured within six months and his/her continued employment is prohibited by law or prejudicial to his/her health or to the health of his/her co-employees, and
- a certification to that effect must be issued by a competent public health authority.
In the present case, record showed Akkila’s decision to inform Pedro that he could not be hired due to medical reasons. However, the Court found that Akkila failed to present any certification from a competent public health authority citing that Pedro’s disease not could be cured within six months, or that his employment was prejudicial to his health or that of his co-employees. Said the Court, absent this certification, Akkila failed to comply with Article 299 [284] of the Labor Code of the Philippines as well as applicable regulations. For the Court, Pedro’s dismissal was not based on a valid cause.
Furthermore, the Court found that Akkila did not accord Pedro procedural due process. Record showed that Akkila unilaterally dismissed him by simply issuing a letter dated May 22, 2011. Additionally, Akkila sent this termination letter after it already issued a “new” Contract of Employment dated April 15, 2011 to him. Clearly, Akkila, after discovering that Pedro was deemed unfit for work due to diabetes, sought to immediately sever ties with him.
The Court accordingly ruled that Pedro was illegally dismissed from employment.
On the relief granted, the Court stated that even with the invalid “Offer of Employment”, the existence of an employer-employee relationship between Akkila and Pedro, as well as the illegality of his dismissal, entitled him to claim for the payment of his salaries for the unexpired portion of his contract.
In this regard, the Court also found it proper to award moral and exemplary damages under prevailing jurisprudence which allows the migrant worker to claim such damages in connection with the employment contract or as provided by law. Moreover, the Court awarded Pedro attorney’s fees at the rate of ten percent (10%) under Article 2208 of the Civil Code of the Philippines.
The Court stressed that the liability of Akkila and SRL was solidary, under Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, as amended.
Further reading:
- SRL International Manpower Agency v. Yarza, Jr., G.R. No. 207828, February 14, 2022.
2022 February 14
A Prejudicial Transfer
The employer, a business process outsourcing (BPO) company, hired Mario as one of its technical support representatives and assigned him to handle a client account.
On October 30, 2009, the employer informed Mario that he would be transferred to a different client account upon successfully passing the training, assessment and examination and that his refusal to take the examinations would result in the termination of his services on the ground of redundancy.
Mario refused to undergo training and take the examinations under the belief that he was entitled to security of tenure.
Thereafter, Mario received a memorandum informing him that those who declined to comply with the transfer directive were no longer required to log in their system since their respective team leaders will take care of their attendance instead until the redundancy offer is finalized.
On November 17, 2009, Mario received a notice dated November 16, 2009 informing him of his dismissal due to redundancy effective December 16, 2009.
Through his counsel, Mario sent a demand letter to his employer asserting that no redundancy in the company occurred considering that it was continuously hiring other technical support representatives. Mario further asserted that as a regular employee, he should no longer be required to take another examination to prove his qualifications.
On January 7, 2010, Mario filed a complaint for illegal dismissal against the employer before the arbitration branch of the National Labor Relations Commission in Bacolod City.
The employer argued that the decrease in volume of calls for the account to which Mario was originally assigned led to an excess number of technical support representatives working on the same. It stated that instead of immediately dismissing its employees, it offered to transfer Mario and other technical support representatives to another account, using the following criteria:
- first call resolution scores for the last three preceding months; and
- existence of remediation cases.
The employer pointed out that using the foregoing criteria, Mario was one of the “bottom performers.” It then explained that transferring the said employees to another client account was without any demotion in rank or diminution in pay as long as they successfully passed the standard product training and assessment. It added that undergoing training and assessment were necessary due to the differences between the two client accounts. It posited that it was forced to dismiss Mario on the ground of redundancy since he refused to transfer and go through the training and examination. Finally, it claimed it sent a notice of termination to the Department of Labor and Employment (DOLE).
The Office of the Labor and the National Labor Relations Commission ruled that the dismissal of Mario from employment on the ground of redundancy was valid.
The Court of Appeals ruled that Mario was illegally dismissed from employment in view of the employer’s failure to show that his position was redundant.
The employer went to the Supreme Court.
Was Mario validly dismissed on the ground of redundancy?
The Supreme Court ruled in the negative.
The Court stated that in termination cases, the employer bears the burden of proving that the employee’s dismissal was for a valid and authorized cause. Consequently, an employer’s failure to prove that the dismissal was valid renders the dismissal illegal.
Here, the Court ruled that Mario was illegally dismissed from employment since the employer’s evidence was found to be insufficient to support a claim of valid redundancy.
The Court reiterated established principles by stating that redundancy exists when an employee’s services are in excess of what is reasonably demanded by the actual requirements of the business. To successfully invoke a valid dismissal due to redundancy, there must be:
- a written notice served on both the employees and the DOLE at least one month prior to the intended date of termination of employment;
- payment of separation pay equivalent to at least one month pay for every year of service;
- good faith in abolishing the redundant positions; and
- fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.
Moreover, the company must provide substantial proof that the services of the employees are in excess of what is required of the company.
The Court noted the employer’s assertion that its business was slowing down and that it would require fewer representatives beginning November 2009. The Court also looked into the following documents submitted by the employer to support its claim of redundancy:
- Affidavit of the human capital delivery site manager;
- Mario’s Employment Contract;
- FCR scores of the technical support representatives considered to be bottom performers;
- FAQs for Transition Plans;
- Attendance sheet for meeting with representatives dated October 30, 2009;
- Transfer Agreement;
- Recruitment Flowchart;
- Comparison of the duties of representatives assigned to the different clients;
- Notice of Termination addressed to Mario; and
- Termination Report to DOLE.
However, the Court was not convinced of the alleged decline in the employer’s business and the expected decrease in volume of calls. This was because other than the bare assertions of the human capital delivery site manager, the Court found no other evidence proving the business slow down or the alleged low volume of calls. According to the Court, the affidavit of the human capital delivery site manager did not substantiate the claim of slow down or decreased call volume and is mainly self-serving. The Court explained that the employer should have presented any document proving the decline in volume of calls for the past months, or affidavits of client officers who determined that business was slowing down and the basis thereof. Although other documents were submitted, the Court found that these hardly proved the fact of redundancy.
The Court was also not convinced of the employer’s claim of good faith when Mario was offered a transfer. Under jurisprudence, for a transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Failure of the employer to overcome this burden of proof, the employee’s demotion shall no doubt be tantamount to unlawful constructive dismissal.
In the present case, the Transfer Agreement was found to be prejudicial to him. According to the Court, by requiring Mario to pass additional trainings and examination as a condition to retain his employment under the pain of dismissal, the employer disregarded his right to security of tenure. For the Court, the employer’s failure to prove redundancy, coupled with the imposition of a prejudicial condition to retain employment, rendered the offer of transfer invalid.
Having been illegally dismissed from employment, Mario was awarded separation pay and backwages.
Further reading:
- Teletech Customer Care Management Philippines, Inc. v. Gerona, Jr., G.R. No. 219166, November 10, 2021.
2021 November 10
But My Motion to Reduce Bond was Impliedly Approved by the NLRC
Pacific Royal Basic Foods, Inc. (Pacific Royal) is a company that makes, processes, and sells coconut goods for export. It hired Violeta and a few other people as coconut parers.
Pacific Royal received complaints about a product contamination incident from some of its clients. In response to the complaints, Pacific Royal sent letters to Violeta and her group.
Violeta and some of her co-employees said they had nothing to do with product contamination when they answered Pacific Royal’s letters.
Pacific Royal still dismissed Violeta and her group from employment, which prompted the latter to file a complaint against Pacific Royal for illegal dismissal.
The Office of the Labor Arbiter ruled that Violeta and her group were regular employees who were illegally dismissed from employment. According to the Office of the Labor Arbiter, Pacific Royal failed to establish specific circumstances of the infractions allegedly committed by Violeta and her group. The said Office also found that Violeta and her group were likewise not informed of, and given opportunity to, explain their alleged violation of company policies and regulations on quality control, poor work performance, and repeated defiance of lawful orders of their supervisors. The Office of the Labor Arbiter directed the reinstatement of Violeta and her group. They were also awarded backwages and attorney’s fees.
Pacific Royal appealed the Decision of the Office of the Labor Arbiter.
The National Labor Relations Commission reversed the ruling of the Office of the Labor Arbiter.
Record showed that Pacific Royal filed a Motion to Reduce Bond before the National Labor Relations Commission. However, the Commission did not act on the same.
The Commission, nonetheless, resolved Pacific Royal’s appeal and found that Violeta and her group failed to dispute the fact of product contamination and was unable to show any ill motive on Pacific Royal’s part in charging them with causing such contamination. The Commission considered the difficulties of a food product export industry, which demanded a higher degree of cooperation and concern from the employees. According to the Commission, Violeta and her group were indifferent to such difficulties of Pacific Royal. In fact, some of them did not even participate in the investigation when they opted not to respond to the letters sent to them. The Commission classified Violeta and her group’s conduct as gross negligence, as they were not new to their jobs and were expected to know fully well the consequences of food product contamination to the company, its employees, and public health.
Violeta and her group filed a Petition for Certiorari before the Court of Appeals. They imputed grave abuse of discretion on the part of the Commission for entertaining Pacific Royal’s appeal. In addition to their assertion of illegality of their dismissal from employment, Violeta and her group pointed out that Pacific Royal failed to timely post the requisite appeal bond as the same was posted only almost a month after the appeal period had lapsed.
The Court of Appeals granted the petition of Violeta and her group. It found that Pacific Royal did not find any proof of compliance with the required posting of an appeal bond. According to the Court of Appeals, Pacific Royal’s appeal before the Commission should have been deemed not perfected, and such Commission did not acquire jurisdiction over Pacific Royal’s appeal. The Court of Appeals stressed that Pacific Royal cannot rely on the presumption of regularity in the Commission’s performance of official duties.
Pacific Royal filed before the Supreme Court its petition for review on certiorari to assail the decision of the Court of Appeals. Pacific Royal asserted, among others, that the inaction of the National Labor Relations Commission on its Motion to Reduce Bond, coupled with the Commission’s resolution of the case on all its substantial points, was tantamount to an implied affirmance of the perfection of the appeal.
The Supreme Court was confronted with the issue of whether there is a need for the Commission to expressly rule on motions filed by the employer to reduce the appeal bond. Or could an implied approval of such motion to reduce bond by way of the disposal of the appeal by final decision, order, or resolution suffice as a grant of the employer’s motion to reduce bond?
The Supreme Court in this case emphasized the need for an express ruling by the National Labor Relations Commission on the appellant’s motion to reduce bond.
The Court reiterated established principles as follows:
Appeals by an employer before the National Labor Relations Commission of decisions by the Office of the Labor Arbiter that involve monetary awards to an employee must be secured by a cash or surety bond in the full amount of the monetary award.
By way of exception, the payment of this full amount may be excused if the appealing employer files a motion to reduce bond showing meritorious grounds, and upon posting of a bond in a reasonable amount.
Mcburnie v. Ganzon¹ has already set the “reasonable amount” of the provisional reduced bond at a percentage of 10% of the monetary award, excluding the amount of damages and attorney’s fees, if any.
The Court stated that Mcburnie requires the concurrence of the following conditions before an aggrieved employer appealing before the National Labor Relations Commission may be allowed to post a bond in a reduced amount:
- The employer-appellant files a motion to reduce bond;
- The motion to reduce bond shall be based on meritorious grounds;
- The employer-appellant posts the provisional percentage of at least 10% of the monetary award, excluding therefrom the award of damages and attorney’s fees;
- The provisional bond must be posted within the reglementary period for appeal; and
- If the National Labor Relations Commission eventually determines that a greater or the full amount of the bond shall be posted, the employer-appellant shall comply accordingly within ten (10) days from notice of the order issued by the Commission directing such posting of the increased or full amount of the bond.
Once these are complied with, the aggrieved employer’s appeal of the Office of the Labor Arbiter’s decision before the National Labor Relations Commission shall be deemed perfected.
The Court further noted that the requisites laid out by Mcburnie also presupposes a sixth requirement: that the National Labor Relations Commission issue an express ruling on the appellant’s motion to reduce bond.
In the present case, the Supreme Court found that Pacific Royal’s Motion to Reduce Bond was never acted upon by the National Labor Relations Commission. Still, the Commission resolved Pacific Royal’s appeal of the Labor Arbiter’s Decision on the merits and issued its own resolutions thereon.
However, the Court stressed that Section 6, Rule VI of the 2011 NLRC Rules of Procedure, as amended, provides that an appeal may be perfected by the appellant-employer only by the posting of a bond in the equivalent amount of the full monetary award granted to the appellee-employee. The Court then repeated that the perfection of an appeal in the manner and within the period set by law is not only mandatory but jurisdictional.²
Consequently, for the Court, there should be no implied approval of a jurisdictional requirement that has not been complied with. Otherwise, the Court said, the ground of lack of jurisdiction becomes a waivable defect in procedure. Whether the National Labor Relations Commission accepts or rejects the appellant’s motion to reduce bond, the ruling must be unequivocal, and such ruling must be issued before or at the time the Commission resolves the appeal by final judgment. Failure to do so shall render the National Labor Relations Commission liable for grave abuse of discretion for having ruled on an appeal without acquiring jurisdiction over the same, and the judgment it had issued shall be vacated as null and void.
The Court further stated that Pacific Royal could not rely on the mere presumption of regularity in the performance of official duties in favor of the National Labor Relations Commission when the latter gave due course to its appeal; not when it is faced with a serious imputation of non-compliance from Violeta and her group. Considering that the requirements provided under the Labor Code of the Philippines and its Implementing Rules are mandatory for purposes of perfecting an appeal, the rule on presumption of regularity cannot apply.
The Supreme Court affirmed the Decision of the Court of Appeals and explained that in setting aside the ruling of the National Labor Relations Commission, it is merely exercising prudence in applying the provisions of the law.
Further reading:
- Pacific Royal Basic Foods, Inc. v. Noche, G.R. No. 202392, October 4, 2021.
2021 October 04
The Subcontractor Assigned Him to Work on Our Projects
Freddie alleged that in April 2012, he was hired by Helenar Construction as painter and made to work in its various products.
Freddie narrated that on October 24, 2014, Helenar Construction’s foreman required him to sign a labor contract for a period of 3 months with a clause stating that his employment would be renewable depending on the evaluation of such company’s site engineer and foreman. Believing that the contract would violate his security of tenure, Freddie refused to sign the contract. On November 7, 2014, Helenar Construction’s project-in-charge, barred him from entering the construction site.
On November 9, 2014, Freddie filed a complaint claiming that he was Helenar Construction’s regular employee who was illegally dismissed from employment.
Helenar Construction countered that Freddie is not its regular employee. It explained that Freddie was hired by its subcontractor as a painter for projects. Helenar Construction pointed out that in the construction industry, subcontractors are hired for the flooring, ceiling, painting, electrical and other related services. It likewise claimed that Freddie unjustifiably stopped reporting for work after refusing to sign the labor contract it prepared.
The Office of the Labor Arbiter declared Freddie as a regular employee of Helenar Construction and ruled that he was illegally dismissed from service.
Helenar Construction appealed to the National Labor Relations Commission, which reversed the Office of the Labor Arbiter’s findings. According to the Commission, no employment relationship existed between Freddie and Helenar Construction. Applying the four-fold tests, the Commission ruled that the subcontractor was Freddie’s true employer, based on the following findings: First, the unsigned contract bore the name of the subcontractor and identified him as the employer. Second, through cash vouchers, it was revealed that the subcontractor paid Freddie’s weekly wages. Third, the contract showed that the subcontractor reserved the right to dismiss his painters if they have violated the terms of the labor contract. Finally, Helenar Construction hired subcontractors for specific works such as painting.
Freddie elevated the case to the Court of Appeals, which, however, affirmed the judgment of the Commission.
Freddie thus filed his petition before the Supreme Court and maintained that he was a regular employee of Helenar Construction and that he was illegally dismissed from employment.
Was Freddie a regular employee of Helenar Construction?
The Supreme Court ruled that Freddie was a regular employee of Helenar Construction.
The Court discussed that what determines regular employment is not the employment contract, written or otherwise, but the nature of the job. The applicable test is the reasonable connection between the particular activity performed by the employee, in relation to the usual business of the employer. The standard supplied by Article 295 of the Labor Code of the Philippines is whether the work undertaken is necessary or desirable in the usual business or trade of the employer. This can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business is pursued in the usual course.
In the present case, the Court found that Helenar Construction was principally engaged in the construction business and that Freddie, as a painter, was tasked with preparing, sanding and painting various construction works. The Court mentioned that the nature of Freddie’s job inarguably required him to perform activities which were deemed necessary in Helenar Construction’s usual business and that Freddie’s continuous rehiring to different construction projects from April 2012 until his dismissal in November 2014 attested to the desirability of his services.
The Court added that at any rate, Helenar Construction, as well as the supposed subcontractor, did not comply with the requirements of the law with respect to the hiring of project employees. The Court reiterated that the principal test in determining project-based employment is whether a person is assigned to carry out a specific project or undertaking, the duration and scope of which was specified at, and made known to him, at the time of his engagement. It is crucial that the worker was informed of his status as a project employee at the time of hiring and that the period of his employment must be knowingly and voluntarily agreed upon by the parties, without any force, duress, or improper pressure vitiating consent.
In the present case, the Court found no substantial evidence proving that Freddie was adequately informed of his status as a project employee at least at the time of his engagement. There was also no showing that Freddie was fully apprised of the duration and scope of the projects.
While the Court noted the reliance on the provisions of the unsigned labor contract to characterize Freddie as a project employee, the Court viewed the labor contract as an afterthought designed to deny Freddie the benefits of a regular employee, particularly, his security of tenure. The Court stressed that a worker shall be presumed a regular employee absent clear agreement showing that he was properly informed of the nature of his employment. For the Court, the Office of the Labor Arbiter correctly held that Freddie was a regular employee of Helenar Construction.
As a regular employee, said the Court, Freddie may be dismissed subject to both substantive and procedural limitations.
Was the termination of Freddie’s employment valid?
The Court expounded that the dismissal must be for a just or authorized cause provided in the Labor Code of the Philippines, and the employee must be accorded procedural due process, basic of which is the opportunity to be heard and to defend himself. The Court reiterated that in termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a valid cause, failure to do so would necessarily mean that the dismissal is not justified. Likewise, evidence must be clear, convincing and free from any inference that the prerogative to dismiss an employee was abused and unjustly used by the employer to further any vindictive end.
In the present case, the Court found that Helenar Construction failed to establish a valid cause for dismissing Freddie since there was no proof that Freddie unjustifiably stopped reporting for work. The Court gathered that Freddie refused to sign the belated labor contract that Helenar Construction prepared. This irked the foreman and engineer of Helenar Construction and resulted in Freddie being barred from the construction site. The Court similarly found that Freddie’s dismissal from employment was attended with procedural infirmity as there was no administrative investigation conducted. Neither were there prior notices served upon Freddie.
The Court thus affirmed the Office of the Labor Arbiter’s ruling of Freddie’s illegal dismissal.
Further reading:
- Laurente v. Helenar Construction, G.R. No. 243812, 07 July 2021.
2021 July 07

Category: Labor Law

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