Paulino Ungos III

Lawyer | Law Professor | Author

Tag: decision

  • Minimum Salary Rates as a Management Prerogative

    An exclusive bargaining representative of the supervisory employees claimed for “accrued differentials and salary adjustments due to underpayment of salary” for its recently regularized members, on the basis of the employer’s Local Policy on minimum salary rates. Record showed that several supervisory employees were regularized by the employer, but the latter provided them with salary rates lower than those prescribed under the Local Policy.

    The employer refused to pay the claims and denied that the Local Policy was binding. It argued that the decision to implement any company policy is a prerogative of management.

    Can the employer refuse to implement its Local Policy relating to the minimum salary rates for regularized employees?

    No.

    The Supreme Court acknowledged that employers enjoy management prerogative when it comes to the formulation of business policies, including those that affect their employees.1Lagatic v. National Labor Relations Commission, G.R. No. 121004, January 28, 1998, 349 PHIL 172-186 and Pantoja v. SCA Hygiene Products Corporation, G.R. No. 163554, April 23, 2010, 633 PHIL 235-243 However, the Court also clarified that company policies resulting from an exercise of management prerogative can implicate the rights and obligations of employees. The Court added that they become part of the employment contract to that extent.2Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R. No. 162994, September 17, 2004, 481 PHIL 687-705

    In the present case, the Court interpreted the Local Policy and found that:

    • The employer has the discretion to pay newly-hired employees a salary rate lower than the minimum rate during the probationary period;
    • However, once the probationary period ends and the employee is regularized, the employer must pay the minimum rate.
    • Entitlement to the minimum rate requires mere regularization based solely on performance review, without need of merit promotion.

    The Court ruled that the employer had no discretion over the payment of the minimum rate upon regularization of an employee. Once the employee is regularized, management prerogative must give way and be subject to the limitations composed by law, the collective bargaining agreement and general principles of fair play and justice.

    For the Court, the employer should implement its Local Policy. The employees should accordingly be granted their claim for salary differentials.

    Further reading:

    • Del Monte Fresh Produce (Philippines), Inc. v. Del Monte Fresh Supervisors Union, G.R. No. 225115, January 27, 2020.

  • But His Dismissal from Employment Was Harsh

    On 31 March 1992, the employee was hired as an able seaman by the employer on board one of its vessels. One of his primary duties entailed being a duty look-out during vessel navigation.

    In 2016, after serving for 24 years, the employee was dismissed from employment for his failure to call out and report instances of oil pilferage when he was on duty. According to the employer, the employee was undoubtedly aware of the oil pilferage, for he had a good vantage point from his post. Despite said pilferage, Cordero did not report the same to his employer.

    When the case reached the Court of Appeals, it affirmed the validity of the employee’s dismissal. However, it also awarded separation pay as a measure of compassionate justice since it found the penalty of dismissal too harsh.

    The issue determined by the Supreme Court was on the propriety of the award of separation pay for this validly-dismissed employee.

    The Supreme Court ruled that the award of separation pay was devoid of basis in fact and in law.

    According to the Court, jurisprudence dictates that as a general rule, an employee who has been dismissed for any of the just causes enumerated under Article 282 of the Labor Code is not entitled to a separation pay. In exceptional cases, however, separation pay has been granted to a legally dismissed employee as an act of “social justice” or on “equitable grounds.” In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the employee.1Manila Water Co. v. Del Rosario, G.R. No. 188747, January 29, 2014, 725 PHIL 513-525 It is stressed that separation pay shall be allowed as a measure of social justice only in the instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. A contrary rule would have the effect of rewarding rather than punishing the erring employee for his offense. The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. Equity as an exceptional extenuating circumstance does not favor, nor may it be used to reward, the indolent or the wrongdoer for that matter. A party will not be allowed, in guise of equity, to benefit from his own fault.2Philippine Long Distance Telephone Co. v. National Labor Relations Commission, G.R. No. 80609, August 23, 1988, 247 PHIL 641-652 and Toyota Motor Phils. Corp. Workers Association v. National Labor Relations Commission, G.R. Nos. 158786, 158789 & 158798-99, October 19, 2007, 562 PHIL 759-817

    In the present case, the Court acknowledged that the dismissal of the employee was valid. It also found that his infractions involved moral turpitude and constituted serious misconduct. No basis thus supported the award of separation pay.

    The Court added that the employee’s long years of service did not serve to mitigate his offense and it should not be considered in meting out the appropriate penalty therefor. According to the Court, the infraction that he committed against his employer demonstrated the highest degree of ingratitude to an institution that has been the source of his livelihood for 24 years, constitutive of disloyalty and betrayal of the trust and confidence reposed upon him. The full trust and confidence reposed by the employer in him, coupled with the fact that he occupied a position that allowed him full access to its property, aggravated the offense.

    Further reading:

    • Herma Shipping and Transport Corp. v. Cordero, G.R. Nos. 244144 & 244210, January 27, 2020.

  • An Assessment Reflective of the Seafarer’s Medical Condition

    On 25 March 2015, the seafarer entered into an 8-month employment contract with SSA, PTE. LTD., through its agent, MSM, Inc. to work as a cabin stewardess in the vessel Viking Mimir. She boarded the vessel and commenced her work on 15 May 2015.

    The seafarer alleged that on 17 July 2015, she assisted in the unloading of luggage of departing passengers and in retrieving boxes of mattresses and bedsheets from the laundry section to the state rooms. She then felt pain in her back while in the middle of replacing the mattresses. When the pain did not subside the following day, she went to see the ship’s doctor and was given pain relievers. She was allowed to continue her work, but the pain persisted and became unbearable after almost 2 weeks of continuous duty.

    She further alleged that she was able to visit a hospital in Hungary on 23 July 2015, where she was diagnosed to have lower back pain and muscle strain. Despite having been prescribed pain relievers, her back pain worsened. She was able to have an X-ray and MRI on her back in Germany on 29 July 2015. There, she was suspected to have lumbar spine problem. She was prescribed with medicines to alleviate the pain and advised to have a thorough check-up.

    As she was unable to receive further check up, her condition deteriorated and her mobility was seriously impaired after 2 months of heavy manual labor. Thus, when the vessel arrived in Austria on 21 September 2015, she was sent to a hospital. She was found to have serious back pain and was advised to be repatriated and undergo physiotherapy.

    She was finally repatriated on 24 September 2015 and was able to visit the company-designated physician. She underwent various laboratory examinations the results of which revealed that she was suffering from back pain and Lumbago. She was advised to undergo physical therapy sessions and continue her medications.

    She claimed that despite treatment and therapy, she was not able to recover from her back pain.

    On 1 December 2015, the company-designated doctor cleared the seafarer from the cause of her repatriation despite her failure to recover, declared that her Lumbago was resolved, discontinued her treatment, and ignored her plea to continue medical treatment.

    The seafarer stated that this constrained her to consult her personal doctor (an orthopedic specialist). Upon advice of said doctor, she underwent MRI on her thorax and lumbar spine on 4 February 2016 and was prescribed pain relievers. On 10 March 2016, her personal doctor issued a Certification declaring her “permanently UNFIT in any capacity to resume her sea duties as a Sea woman.”

    Without observing the third doctor referral provision in the POEA-SEC, the seafarer filed a complaint for total and permanent disability benefits against her employer.

    Was the seafarer entitled to payment of total permanent disability benefit despite her failure to observe the third-doctor referral provision in the POEA-SEC?

    Yes.

    The Supreme Court stated that the POEA-SEC provides for the procedure to be followed in case there is a divergence in medical findings between the company-designated physician and the seafarer’s personal doctor. Under Section 20 (A) (3) of the 2010 POEA-SEC, “[if] 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.” The provision refers to the declaration of fitness to work or the degree of disability. It presupposes that the company-designated physician came up with a valid, final and definite assessment as to the seafarer’s fitness or unfitness to work before the expiration of the 120-day or 240-day period. The company can insist on its disability rating even against a contrary opinion by another doctor, unless the seafarer signifies his intent to submit the dispute assessment to a third physician. The duty to secure the opinion of a third doctor belongs to the employee asking for disability benefits. He must actively or expressly request for it.1Hernandez v. Magsaysay Maritime Corp., G.R. No. 226103, January 24, 2018. This referral to a third doctor has been held to be a mandatory procedure2INC Shipmanagement, Inc. v. Rosales, G.R. No. 195832, October 1, 2014, 744 PHIL 774-790 and the seafarer’s non-compliance with the conflict-resolution procedure results in the affirmance of the fit-to-work certification of the company-designated physician.3Philippine Hammonia Ship Agency, Inc. v. Dumadag, G.R. No. 194362, June 26, 2013, 712 PHIL 507-524

    The Court, however, stressed that non-compliance with the third doctor referral does not automatically make the diagnosis of the company-designated physician conclusive and binding on the courts. The Court has previously held that, “if the findings of the company-designated physician are clearly biased in favor of the employer, then courts may give greater weight to the findings of the seafarer’s personal physician. Clear bias on the part of the company-designated physician may be shown if there is no scientific relation between the diagnosis and the symptoms felt by the seafarer, or if the final assessment of the company-designated physician is not supported by the medical records of the seafarer.”4C.F. Sharp Crew Management, Inc. v. Castillo, G.R. No. 208215, April 19, 2017, 809 PHIL 180-206 A seafarer’s compliance with such procedure presupposes that the company-designated physician came up with an assessment as to his fitness or unfitness to work before the expiration of the 120-day or 240-day periods. Alternatively put, absent a certification from the company-designated physician, the seafarer has nothing to contest and the law steps in to conclusively characterize his disability as total and permanent.5Kestrel Shipping Co., Inc. v. Munar, G.R. No. 198501, January 30, 2013, 702 PHIL 717-738

    In the present case, the Court found that the medical report of the company-designated physician failed to state a definite assessment of the seafarer’s fitness or unfitness to work, or to give a disability rating of her injury. According to the Court, the report lacked substantiation on the medical condition of the seafarer concerning her fitness to return to the type of work she was performing at the time of her injury. Furthermore, the report showed that the seafarer has not fully recovered from her injury as she “was advised to continue home exercises and that pain was foreseen to improve with time” and since she had to undergo “15 Physical Therapy Sessions.” The Court construed such statements as an admission from the company-designated physician that the pain experienced by the seafarer was still subsisting and that it was thru the passage of time that it was expected to improve.

    On the other hand, the Court considered the medical report issued by the seafarer’s personal doctor, and found that this doctor gave an explanation on the nature, cause, effects, and possible treatment of the injury sustained by the seafarer. The Court pointed out that the medical report of the company-designated physician merely described the MRI of the Lumbosacral spine as “unremarkable,” while the report of the personal doctor on the MRI of the Thoraco-Lumbar Spine (Non-Contrast) conducted on the seafarer, contained the following impression: “L4-L5: Mild bilateral neural foraminal narrowing due to disc bulge; L5-S1: Mild bilateral neural foraminal narrowing due to disc bulge and facet hypertrophy; Facet arthrosis and ligamentum flavum hypertrophy; Mild lumbar curvature to the right may be positional versus mild lumbar dextroscoliosis; Small non-specific pelvic fluid; Small uterine myomas.” The Court found that consistent with the result of the said MRI, the seafarer’s personal doctor explained that:

    “The significance of this posterior bulge of the degenerated disc is that this is the area where the nerves run that supply the extremities. This patient has been complaining of back pain. The vast majority of patients responded well to non-surgical treatment though. Probably the most important of which is time, that is to say, that no matter what is done, most cases of acute back and neck pain slowly resolve if given enough time to get better. x x x If a long term and more permanent result are desired however, she should refrain from activities producing torsional stress on the back and those that require repetitive bending and lifting. Things Ms. Briones is expected to do as a Sea woman.”

    The Court, thus, viewed the assessment of the personal doctor as exhaustive and more reflective of the seafarer’s medical condition especially so since both medical reports acknowledged the passage of time as a key factor in resolving the back pain experienced by Briones.

    The Court clarified that a total disability does not require that the employee be completely disabled, or totally paralyzed, for what is necessary is that the injury must be such that the employee cannot pursue his or her usual work and earn from it. It added that a total disability is considered permanent if it lasts continuously for more than 120 days, as what is crucial is whether the employee who suffers from disability could still perform his work notwithstanding the disability he incurred.6Talaroc v. Arpaphil Shipping Corp., G.R. No. 223731, August 30, 2017, 817 PHIL 598-618

    Further reading:

    • Multinational Ship Management, Inc. v. Briones, G.R. No. 239793, January 27, 2020.

  • Invalid Addendum

    Norly M. Baybayan (Baybayan) was hired by Wacoal through its agent, petitioner Prime Stars, for a contract period of 24 months or two years, with a monthly salary of NT$15,840.00. However, he soon discovered that he was only paid NT$9,000.00 a month. Upon inquiry, he was informed that an amount of NT$4,000.00 was being deducted from his salary for expenses for his board and lodging. Since he still had debts to pay back home, he finished the contract and returned to the Philippines on 19 May 2009. He then instituted a complaint for underpayment of salaries and the reimbursement of his transportation expenses against petitioners Prime Star and Peralta.

    Michelle V. Beltran (Beltran) was hired by Avermedia, through its agent, petitioner Prime Stars, as an “operator” who assembles TV boxes and USBs. Her contract duration was for two years with a monthly salary of NT$17,280.00. She was deployed on 22 June 2008. After a year, she was abruptly and unceremoniously dismissed by her supervisor and was immediately repatriated to the Philippines on 3 July 2009. Beltran then instituted a complaint for illegal dismissal and sought for the payment of salaries for the unexpired portion of her contract, the refund of her repatriation expenses, plus damages and attorney’s fees against the petitioners.

    Petitioners denied that Baybayan was underpaid as his payslips for the months of March and April 2009 indicated that he received a monthly salary of NT$17,280.00 during his employment with Wacoal. Petitioners explained that Baybayan signed an Addendum to the Employment Contract (Addendum), which authorized the deduction of the amount of NT$4,000.00 as payment for his monthly food and accommodation. In the same Addendum, Baybayan was apprised that the transportation expenses for his round trip tickets from the Philippines to Taiwan shall be at his own expense. Petitioners further explained that these were supported by Baybayan’s sworn statement, Written Acknowledgment, Foreign Worker’s Affidavit Regarding Expenses Incurred for Entry into the Republic of China to Work and the Wage and Salary and Overseas Contract Worker’s Questionnaire.

    With respect to Beltran, petitioners contended that it was Beltran who voluntarily preterminated her contract for personal reasons. According to petitioners, Beltran approached them and expressed her intent to return to the Philippines, as evidenced by her handwritten statement which she duly signed on 4 July 2009. Petitioners add that the handwritten statement was supported by her sworn statement, written acknowledgment, Foreign Worker’s Affidavit, and Overseas Contract Worker’s Questionnaire.

    The issues of illegal dismissal, salary differentials, transportation expenses, damages, attorney’s fees and liability of petitioner Peralta were elevated to the Supreme Court.

    RULING:

    Beltran did not voluntarily preterminate her employment contract. She was illegally dismissed.

    The Supreme Court found that petitioners’ complete reliance on Beltran’s alleged voluntary execution of the Mutual Contract Annulment Agreement and the Worker Discontinue Employment Affidavit to support the claim that Beltran voluntarily preterminated her contract was unavailing. This was because her supposed resignation was inconsistent with her filing of the complaint for illegal dismissal.

    Furthermore, the Court found the wordings of Beltran’s relinquishment of her contract of employment ambiguous and doubtful. The burden of proving that Beltran voluntary preterminated her contract fell upon petitioners as the employer. Petitioners failed to discharge such burden despite their claim that the latter resigned.

    Specifically, the Court found it highly unlikely that Beltran would just quit even before the end of her contract after all the expenses she incurred and still needed to settle and the sacrifices she went through in seeking financial upliftment. According to the Court, it was incongruous for Beltran to simply give up her work, return home, and be unemployed once again given that so much time, effort, and money have already been invested to securing her employment abroad and enduring the tribulations of being in a foreign country, away from her family.

    Beltran was accordingly awarded her salaries for the unexpired portion of her employment contract.

    Baybayan and Beltran should be granted salary differentials and refund of transportation expenses.

    Paragraph (i) of Article 34 of the Labor Code of the Philippines prohibits the substitution or alteration of employment contracts approved and verified by the Department of Labor and Employment from the time of the actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the said Department.

    Furthermore, Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, explicitly prohibits the substitution or alteration to the prejudice of the worker of employment contracts already approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the said Department.

    In the present case, petitioners admitted that the employment contracts of Baybayan and Beltran were indeed amended, but posited that the Addendum, while apparently did not appear to contain any indication of Philippine Overseas Employment Administration approval, actually contained provisions which have been approved by the Philippine Overseas Employment Administration through Baybayan and Beltran’s Foreign Worker’s Affidavits.

    The Supreme Court did not agree.

    According to the Court, the clear and categorical language of the law imposes upon foreign principals minimum terms and conditions of employment for land-based overseas Filipino workers, which include basic provisions for food, accommodation and transportation. The licensed recruitment agency shall also, prior to the signing of the employment contract, inform the overseas Filipino workers of their rights and obligations, and disclose the full terms and conditions of employment, and provide them with a copy of the Philippine Overseas Employment Administration-approved contract, to give them ample opportunity to examine the same.

    Article IV of Baybayan and Beltran’s Employment Contract, in relation to Section 2, Rule 1, Part V of the Philippine Overseas Employment Administration Rules and Regulations Governing the Recruitment and Employment of Land-based Overseas Workers,1“Section 2. Minimum Provisions of Employment Contract. — Consistent with its welfare and employment facilitation objectives, the following shall be considered minimum requirements for contracts of employment of land-based workers:

    x x x

    b. Free transportation to and from the worksite, or offsetting benefit;

    c. Free food and accommodation, or offsetting benefit;”     provided Baybayan and Beltran with:

    • free food and accommodation for the duration of the contract
    • an economy class air ticket from the country of origin to Taiwan
    • a ticket back to the country of origin upon completion of the contract.

    Furthermore, it was stated therein that an employment contract cannot be altered or modified without the prior approval of the Philippine Overseas Employment Administration.

    In the present case, the Addendum required Baybayan and Beltran shoulder their food and accommodation and transportation fare.

    Although the Court recognized the fact that the parties may stipulate on other terms and conditions of employment as well as other benefits, such stipulations should not violate the minimum requirements required by law as these would be disadvantageous to the employee. Section 3, Rule 1, Part V of the Philippine Overseas Employment Administration Rules and Regulations Governing the Recruitment and Employment of Land-based Overseas Workers states:

    “Section 3. Freedom to Stipulate. — Parties to overseas employment contracts are allowed to stipulate other terms and conditions and other benefits not provided under these minimum requirements; provided the whole employment package should be more beneficial to the worker than the minimum; provided that the same shall not be contrary to law, public policy and morals, and provided further, that Philippine agencies shall make foreign employers aware of the standards of employment adopted by the Administration.”

    The Court found that the minimum provisions for employment of Baybayan and Beltran were not met, and that there was diminution of their benefits which were already guaranteed by law and granted in their favor under their Philippine Overseas Employment Administration-approved contracts of employment.

    Accordingly, the Court ruled that the Addendum, absent the approval of the Philippine Overseas Employment Administration, was declared invalid for being contrary to law and public policy.

    Baybayan and Beltran should be awarded moral and exemplary damages and attorney’s fees.

    This was because the acts of the petitioners were evidently tainted with bad faith. Petitioners’ failure to comply with the stipulations on the Philippine Overseas Employment Administration-approved employment contracts constituted an act oppressive to labor and more importantly, contrary to law and public policy. Petitioners even tried to justify the execution and validity of the Addendum and cloak the latter as legal and binding through Baybayan and Beltran’s execution of Foreign Worker’s affidavits. According to the Court, petitioners’ circumvention of labor laws and the intentional diminution of employee’s benefits to land-based overseas workers were indicative of petitioners’ exercise of bad faith and fraud in their dealings with Filipino workers.

    With regard to Beltran’s dismissal from employment, the Court found nothing “voluntary” in putting words into Beltran’s own mouth in the guise of her handwritten statement of resignation. Petitioners’ attempt to demonstrate voluntariness should fail since “cooperate” was more of an imposition coming from the employer rather than from a disadvantaged overseas employee. The Court considered the execution of the documents plainly oppressive and violative of Beltran’s security of tenure.

    The Court accordingly awarded Baybayan and Beltran moral and exemplary damages to allay the sufferings they experienced and by way of example or correction for public good, respectively.

    Peralta should be solidarily liable with Prime Stars.

    Section 10 of Republic Act No. 8042 mandates solidary liability among the corporate officers, directors, partners and the corporation or partnership for any claims and damages that may be due to the overseas workers, viz.:

    “Section 10. Monetary Claims. — x x x The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a condition precedent for its approval. The performance bond to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and damages.”

    Further Reading:

    • Prime Stars International Promotion Corp. v. Baybayan, G.R. No. 213961, January 22, 2020.

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  • But She Went Home for Personal Reasons

    On 7 November 2010, Hazel entered into a 2-year employment contract with Kuwait by Al-Masiya, through its agent, Saad Mutlaq Al Asmi Domestic Staff Recruitment Office (Saad Mutlaq)/Al Dakhan Manpower where she to work as a domestic helper with a monthly salary of US$400.00.

    Hazel arrived in Kuwait on 8 November 2010. Due to disagreement in the working conditions, Hazel’s employment with her first and second employers did not succeed. Her employment with her third employer also did not succeed as the latter could not obtain a working visa for her.

    On 16 December 2010, Hazel went to the Philippine Embassy where she related her employment problems to a Labor Attaché in Kuwait who offered to help them.

    On 5 January 2011, Hazel left the Philippine Embassy after a certain Mr. Mutlaq offered to give her a job at a chocolate factory. However, this chocolate factory turned out to be inexistent.

    Then, the employees of Al Rekabi, an employment agency, told her that they would be bringing her to Hawally at night. She refused to take the trip as it was cold and drizzling. She then attempted to report the matter to the Labor Attaché using her cellular phone, but the employees of Al Rekabi confiscated it. Mr. Hassan, the Manager of Al Rekabi, did not accede to her request to postpone the trip to the following day. It came to a point where Mr. Hassan scolded Hazel and forced her to make a written admission that her employers treated her well.

    Sometime after 6 January 2011, Hazel was brought to the office of Al Rekabi at Salmiya. On an unspecified date thereafter, at around 7:00 p.m., two men offered her a job at a restaurant in front of the main office of the agency. She accepted the offer. However, instead of being brought to a restaurant in Hawally, where she was supposed to work, Hazel was taken to a flat where she was told to apply makeup and wear attractive and sexy clothes. Another man joined them. Hazel was then told that she would be brought to her place of work. However, she was instead taken to an unlighted area which had buildings but no restaurant or coffee shop signboards. At the area, she saw another man walking. After recognizing that the man was an employee of Al Rekabi, she asked him to bring her to the main office of the agency. She was able to leave at around 11:00 p.m. when the three other men agreed to release her.

    On 7 February 2011, Hazel was asked to affix her signature on a letter that she copied purportedly showing that she admitted having preterminated her contract of employment and that she no longer had any demandable claim as she was treated well. Hazel’s execution of this letter of resignation was made as a precondition to the release of her passport and plane ticket which were in the possession of petitioners.

    Hazel arrived in the Philippines on 12 February 2011 and thereafter filed a complaint for constructive dismissal against her employer.

    In response to Hazel’s complaint, the employers filed a motion to dismiss on 11 May 2011, alleging that on 7 February 2011, Hazel executed an Affidavit of Quitclaim and Desistance, Sworn Statement, and Receipt and Quitclaim before the Assistant Labor Attaché in Kuwait, where she allegedly stated that she voluntarily agreed to release her employers from all her claims arising from her employment abroad. They also presented her handwritten statement where she expressed that her cause for terminating her employment was her own personal reasons.

    Was Hazel constructively dismissed from employment?

    The Supreme Court stated that in cases of constructive dismissal, the impossibility, unreasonableness, or unlikelihood of continued employment leaves an employee with no other viable recourse but to terminate his or her employment. “An employee is considered to be constructively dismissed from service if an act of clear discrimination, insensibility or disdain by an employer has become so unbea[r]able to the employee as to leave him or her with no option but to forego his or her continued employment.” From this definition, it can be inferred that various situations, whereby the employer intentionally places the employee in a situation which will result in the latter’s being coerced into severing his ties with the former, can result in constructive dismissal.1Torreda v. Investment and Capital Corporation of the Philippines, G.R. No. 229881, September 5, 2018 and Agcolicol, Jr. v. Casiño, G.R. No. 217732, June 15, 2016.

    The Court found that the circumstances of the present case strongly indicated that Hazel was constructively dismissed.

    First, Hazel’s foreign employer never secured a working visa for her, in violation of the categorical requirement for an employer’s accreditation with the Philippine Overseas Employment Agency.

    Second, Hazel was not properly paid in accordance with the terms of her employment contract. During her 3-month stay, she was only paid US$227.75 instead of the stipulated pay of US$400 per month.

    Third, Hazel was not assigned to a permanent employer abroad for the entire contractual period of 2 years. Upon her arrival in Kuwait, she was consistently promised job placements which were found to be inexistent. The Court found it clear that the foreign employer intended to use Hazel as an entertainer of some sort in places of ill repute; and she would have fallen victim to human trafficking “[w]ere it not for some favorable providence.”

    Finally, Hazel was made to copy and sign a prepared resignation letter and this was made as a condition for the release of her passport and plane ticket.

    For the Court, it was logical for Hazel to consider herself constructively dismissed. since the impossibility, unreasonableness, or unlikelihood of continued employment has left her with no other viable recourse but to terminate her employment. The Court further stated:

    Our overseas workers belong to a disadvantaged class. Most of them come from the poorest sector of our society. Their profile shows they live in suffocating slums, trapped in an environment of crimes. Hardly literate and in ill health, their only hope lies in jobs they find with difficulty in our country. Their unfortunate circumstance makes them easy prey to avaricious employers. They will climb mountains, cross the seas, endure slave treatment in foreign lands just to survive. Out of despondence, they will work under sub-human conditions and accept salaries below the minimum. The least we can do is to protect them with our laws.

    On that note, the Court reminds petitioners to observe common decency and good faith in their dealings with their unsuspecting employees, particularly in undertakings that ultimately lead to waiver of workers’ rights. The Court will not renege on its duty to protect the weak against the strong, and the gullible against the wicked, be it for labor or for capital. The Court scorns petitioners’ reprehensible conduct. As employers, petitioners are bound to observe candor and fairness in their relations with their hapless employees.

    Further reading:

    • Al-Masiya Overseas Placement Agency, Inc. v. Viernes, G.R. No. 216132, January 22, 2020.

  • Exemption from Payment of Commissioners’ Fees

    In Land Bank of the Philippines v. Heirs of Sanchez1G.R. No. 214902, January 22, 2020, the Supreme Court ruled that the Land Bank of the Philippines is exempt from paying the costs of the suit under Section 1, Rule 142 of the Rules of Court,2Section 1 of Rule 142 provides: Section 1. Costs ordinarily follow results of suit. — Unless otherwise provided in these rules, costs shall be allowed to the prevailing party as a matter of course but the court shall have power, for special reasons adjudge that either party shall pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be allowed against the Republic of the Philippines unless otherwise provided by law. since it is an instrumentality performing a governmental function in agrarian reform proceedings charged with the disbursement of public funds. Since the Land Bank of the Philippines is performing a governmental function in an agrarian reform proceeding, it is exempt from payment of costs of suit, including commissioners’ fees, as it is considered part of costs of suit.3Land Bank of the Phils. v. Rivera, G.R. No. 182431, November 17, 2010, 649 PHIL 575-589; Land Bank of the Phils. v. Gonzalez, G.R. No. 185821, June 13, 2013, 711 PHIL 98-121; Land Bank of the Phils. v. Ibarra, G.R. No. 182472, November 24, 2014, 747 PHIL 691-702; and Land Bank of the Philippines v. Baldoza, G.R. No. 221571, July 29, 2019.

    The Court also applied Section 12, Rule 67 of the Rules of Court, which states:

    Sec. 12. Costs, by whom paid. — The fees of the commissioners shall be taxed as a part of the costs of the proceedings. All costs, except those of rival claimants litigating their claims, shall be paid by the plaintiff, unless an appeal is taken by the owner of the property and the judgment is affirmed, in which event the costs of the appeal shall be paid by the owner.

    Based on the said provision, the Court added that the Land Bank of the Philippines is not liable to pay for commissioners’ fees considering that the Heirs of Sanchez were the plaintiffs or the ones who initiated the complaint for determination of just compensation before the Special Agrarian Court.

    Further reading:

    • Land Bank of the Philippines v. Heirs of Sanchez, G.R. No. 214902, January 22, 2020.

  • Payment of Employment Bond

    On 4 April 2011, CP, Inc. hired the employee as its Network Engineer.

    The employment contract stated that the employee shall pay an “employment bond” of Eighty Thousand Pesos (Php80,000.00) if she resigns within twenty-four (24) months from the time of her employment.

    On 5 August 2011, the employee informed CP, Inc. of her intention to resign effective 9 September 2011. However, the employee was found to have committed an infraction and was placed on preventive suspension from 25 August up to 9 September 2011.

    The employee thus filed a complaint for illegal suspension, while CP, Inc. pursued its claim of payment of “employment bond” in the same proceedings.

    Should the claim for payment of “employment bond” be filed before the labor tribunals?

    Yes.

    Article 224 of the Labor Code of the Philippines clothes the labor tribunals with original and exclusive jurisdiction over claims for damages arising from employer-employee relationship, viz.:

    Art. 224. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: x x x

    4 Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;

    Jurisprudence1Bañez v. Valdevilla, G.R. No. 128024, May 9, 2000, 387 PHIL 601-612 also teaches that the jurisdiction of labor tribunals is comprehensive enough to include claims for all forms of damages “arising from the employer-employee relations.” Thus, labor tribunals have jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by the Civil Code. Furthermore, while Article 224 of the Labor Code had been invariably applied to claims for damages filed by an employee against the employer, the said provision was also applied with equal force to an employer’s claim for damages against its dismissed employee, provided that the claim had arisen from or was necessarily connected with the fact of termination and entered as a counterclaim in the illegal dismissal case.2Supra Multi-Services, Inc. v. Labitigan, G.R. No. 192297, August 3, 2016, 792 PHIL 336-370. Thus, the “reasonable causal connection with the employer-employee relationship” is a requirement not only in employees’ money claims against the employer but is, likewise, a condition when the claimant is the employer.3Portillo v. Rudolf Lietz, Inc., G.R. No. 196539, October 10, 2012, 697 PHIL 232-250

    In the present case, the Supreme Court found that the controversy was rooted in the employee’s resignation from the company within twenty-four (24) months from the time she got employed, in violation of the “Minimum Employment Length” clause of her employment contract. The Court added that CP, Inc.’s claim for payment was inseparably intertwined with its employment relation with the employee. This was because it was the employee’s act of prematurely severing her employment with the company which gave rise to the latter’s cause of action for payment of “employment bond.” According to the Court, the claim was an offshoot of the employee’s resignation and its complications which eventually led to the filing of the case before the Office of the Labor Arbiter. For the Court, the employer’s claim fell within the original and exclusive jurisdiction of the labor tribunals.

    Should the employee pay the “employment bond”?

    The Court ruled that the employee was liable because of her undertaking in the employment contract and since the employee herself neither disputed said liability nor assailed the existence and validity of such provision in said contract.

    Further reading:

    • Comscentre Phils., Inc. v. Rocio, G.R. No. 222212, January 22, 2020.

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  • General Return-to-Work Orders

    The employee alleged that sometime in May 2006, he was hired as a security guard by SF Security Services, Inc. He narrated that on December 25, 2013, he was suddenly relieved from his post upon request of SF Security Services, Inc.’s client. The next day, he received an order suspending him for 10 days. After the lapse of his 10-day suspension, or on January 7, 2014, he reported for work. However, SF Security Services, Inc. informed him that he was placed on floating status and he was just advised to wait for a call.

    The employee further narrated that on May 16, 2014, he received a letter from SF Security Services, Inc. directing him to report to its office within 48 hours from receipt thereof. The employee claimed that he went to SF Security Services, Inc. ‘s office on May 19, 2014, but he was not allowed to enter and was made to wait outside the office. Before leaving the premises, he handed a letter to SF Security Services, Inc. to inform his readiness to report for duty on the same day. SF Security Services, Inc. wrote a second letter dated May 28, 2014, allegedly to make it appear that he failed to report to work despite its return to work order. In a letter dated July 11, 2014, the employee inquired the status of his employment. However, SF Security Services, Inc. refused to provide him with work.

    On July 28, 2014, the employee filed a complaint for constructive dismissal against SF Security Services, Inc.

    SF Security Services, Inc. admitted the suspension of the employee for a period of 10 days, starting December 26, 2013. However, it asserted that on May 14, 2014, it sent the employee a letter directing him to report for posting, but the latter did not comply with the directive. On May 28, 2014, SF Security Services, Inc. sent him another letter reiterating the instruction to report for posting. However, it still received no word from the employee. According to SF Security Services, Inc., it was surprised to learn of the employee’s complaint for illegal dismissal.

    Was the employee validly placed on floating status?

    The Supreme Court stated that in security services, the “floating status” or temporary “off-detail” of an employee may take place when there are no available posts to which the employee may be assigned — which may be due to the non-renewal of contracts with existing clients of the agency, or from a client’s request for replacement of guards assigned to it.1Salvaloza v. National Labor Relations Commission, G.R. No. 182086, November 24, 2010, 650 PHIL 543-561. It added that while there is no specific provision in the Labor Code of the Philippines governing the “floating status” or temporary “off-detail” of employees, Article 3012Formerly Article 286. Article 301 reads: ART. 301. When Employment not Deemed Terminated. — The bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty. of the said law, by analogy, considers this situation as a form of temporary retrenchment or lay-off.3on ||| Superior Maintenance Services, Inc. v. Bermeo, G.R. No. 203185, December 5, 2018.

    The Court further stated that conformably with the above provision, the placement of an employee on “floating status” must not exceed six months. Otherwise, the employee may be considered constructively dismissed.4Ibon v. Genghis Khan Security Services, G.R. No. 221085, June 19, 2017, 811 PHIL 250-260. Furthermore, the burden of proving that there are no posts available to which the security guard can be assigned rests on the employer.5Nationwide Security and Allied Services, Inc. v. Valderama, G.R. No. 186614, February 23, 2011, 659 PHIL 362-374. However, the mere lapse of six months in “floating status” should not automatically result to constructive dismissal. The peculiar circumstances of the employee’s failure to assume another post must still be inquired upon.6Exocet Security and Allied Services Corp. v. Serrano, G.R. No. 198538, September 29, 2014, 744 PHIL 403-422.

    In the present case, the Supreme Court found that the employee was placed on floating status beginning on the lapse of his 10-day suspension on January 7, 2014 and that he had been on floating status for six months and 21 days from the time he filed the complaint for constructive dismissal on July 28, 2014.

    The Court also found that although SF Security Services, Inc. sent the employee letters dated May 14, 2014 and May 28, 2014, the same were in the nature of general return to work orders. According to the Court, jurisprudence requires not only that the employee be recalled to the agency’s office, but that the employee be deployed to a specific client before the lapse of six months.7Ibon v. Genghis Khan Security Services, G.R. No. 221085, June 19, 2017, 811 PHIL 250-260.

    The Court stated that considering that the employee was placed on floating status for more than six months without being deployed to a specific assignment he was deemed to have been constructively dismissed from employment. The employee was granted the reliefs of separation pay 8considering that he no longer asked to be reinstated and backwages.

    Could the employee be said to have abandoned his employment?

    The Court ruled that with the finding of constructive dismissal it followed that the employee could not have abandoned his employment. The Court stressed that abandonment is incompatible with constructive dismissal.

    The Court reiterated the principle that abandonment, as a just cause for termination, requires “a deliberate and unjustified refusal of an employee to resume his work, coupled with a clear absence of any intention of returning to his or her work.”9Veterans Security Agency Inc. v. Gonzalvo Jr., G.R. No. 159293, December 16, 2005, 514 PHIL 488-505 The following elements must therefore concur: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor and being manifested by some overt acts.10Icawat v. National Labor Relations Commission, G.R. No. 133573, June 20, 2000, 389 PHIL 441-447

    In the present case, the Court found no proof that the employee intended to sever his employment. On the contrary, the Court found strong indications of the employee’s desire to resume work. According to the Court, after the employee served his 10-day suspension, he reported for work but was instead told that he was being placed on floating status and instructed to wait for a call. The employee also sent SF Security Services, Inc. a letter dated May 19, 2014 to inform the latter that he was ready to report for duty, and a letter dated July 11, 2014 to inquire on the status of his employment. He also filed the complaint for constructive dismissal shortly after the lapse of his six-month floating status. For the Court, his immediate filing of the complaint sufficiently established his desire to return to work and negated any suggestion of abandonment. In addition, considering that the employee been in the service of SF Security Services, Inc. since 2006, or for eight years already before his dismissal in 2014, the employee could not have had such intention to abandon his work. The Court concluded that the totality of these circumstances negated the existence of a clear intention to sever the employment relation.

    Further reading:

    • Seventh Fleet Security Services, Inc. v. Loque, G.R. No. 230005, January 22, 2020.

  • But Are You a De Jure Tenant?

    Lutero Romero (Lutero) owned property by virtue of an approved homestead application in 1967. Although ownership of the said property was subject of a legal dispute involving Lutero and his siblings, the Supreme Court eventually declared Lutero the true and lawful owner of the property in De Romero v. Court of Appeals1G.R. No. 109307, November 25, 1999, 377 PHIL 189-202.

    After the Court’s Decision in De Romero v. Court of Appeals became final and executory, the Heirs of Lutero filed a Motion for the Issuance of a Writ of Execution before the Regional Trial Court (RTC) on 10 March 2003. On 16 June 2003, the RTC issued a Writ of Execution. However, the implementation of the writ was held in abeyance because Crispina Sombrino (Sombrino) filed a Motion for Intervention, alleging that she was a tenant of the subject property. After due hearing and deliberation, the RTC ordered the implementation of the writ. Sombrino was consequently ousted from the subject property.

    Sombrino then filed a Complaint against the Heirs of Lutero for Illegal Ejectment and Recovery of Possession before the Office of the Provincial Agrarian Reform Adjudicator. At the heart of Sombrino’s claim of tenancy was her allegation that the parents of Lutero installed her as tenant in 1952.

    The consistent ruling of the Provincial Agrarian Reform Adjudicator, the Department of Agrarian Reform Adjudication Board, and the Court of Appeals on the said complaint was that an agricultural leasehold tenancy relation existed between Sombrino and the Heirs of Lutero because the supposed original landowners of the subject property, i.e., parents of Lutero, allegedly entered into a tenancy agreement with Sombrino in 1952. Said ruling viewed the following pieces of evidence as proof of the existence of said tenancy relation:

    • Affidavits of certain persons stating that Sombrino occupied the subject property; and
    • Acknowledgment Receipts pertaining to payment of irrigation and fees to a sister of Lutero.

    According to said tribunals, Lutero and, subsequently, his heirs should also be bound by this leasehold relation and respect Sombrino’s tenancy rights.

    Did an agricultural leasehold tenancy relationship exist between Sombrino and the Heirs of Lutero?

    The Supreme Court ruled that no agricultural leasehold tenancy relationship existed between them.

    According to the Court, an agricultural leasehold tenancy exists “when a person who, either personally or with the aid of labor available (from) members of his immediate farm household, undertakes to cultivate a piece of agricultural land susceptible of cultivation by a single person together with members of his immediate farm household, belonging to or legally possessed by, another in consideration of a fixed amount in money or in produce or in both.”2Section 4, Agricultural Tenancy Act of the Philippines, Republic Act No. 1199, as amended by Republic Act No. 2263

    The Court also reiterated established jurisprudence:

    The existence of a tenancy relation is not presumed, as the following indispensable elements must be proven in order for a tenancy agreement to arise:

    • the parties are the landowner and the tenant or agricultural lessee;
    • the subject matter of the relationship is an agricultural land;
    • there is consent between the parties to the relationship;
    • the purpose of the relationship is to bring about agricultural production;
    • there is personal cultivation on the part of the tenant or agricultural lessee; and
    • the harvest is shared between the landowner and the tenant or agricultural lessee.

    The absence of any of the requisites does not make an occupant, cultivator, or a planter a de jure tenant which entitles him to security of tenure under existing tenancy laws.3Heirs of Cadeliña v. Cadiz, G.R. No. 194417, November 23, 2016, 800 PHIL 668-679

    However, if all the aforesaid requisites are present and an agricultural leasehold relation is established, the same shall confer upon the agricultural lessee the right to continue working on the landholding until such leasehold relation is extinguished. The agricultural lessee shall be entitled to security of tenure on his landholding and cannot be ejected therefrom unless authorized by the Court for causes herein provided.4Section 7, Code of Agrarian Reforms In case of death or permanent incapacity of the agricultural lessor, the leasehold shall bind the legal heirs.

    Since a tenancy relationship cannot be presumed, an assertion that one is a tenant does not automatically give rise to security of tenure. Nor does the sheer fact of working on another’s landholding raise a presumption of the existence of agricultural tenancy. One who claims to be a tenant has the onus to prove the affirmative allegation of tenancy.5Soliman v. Pampanga Sugar Development Co., G.R. No. 169589, June 16, 2009, 607 PHIL 209-227 Hence, substantial evidence is needed to establish that the landowner and tenant came to an agreement in entering into a tenancy relationship.

    In the present case, the Court found that Sombrino failed to provide sufficient evidence that there was, in the first place, an agricultural leasehold tenancy agreement entered into by herself and the parents of Lutero.

    According to the Court, the joint affidavit of Sarillo Bacalso and Neil Ocopio revealed that Sombrino allegedly hired them in several occasions as planters, mud boat operators and thresher operators and that Sombrino occupied and cultivated the subject property at some point in time. The Court stressed that such document in no way confirmed that Sombrino’s presence on the land was based on a tenancy relationship as “[m]ere occupation or cultivation of an agricultural land does not automatically convert the tiller into an agricultural tenant recognized under agrarian laws.”6Heirs of Quilo v. Development Bank of the Philippines – Dagupan Branch, G.R. No. 184369, October 23, 2013, 720 PHIL 414-426 The Court thus said that self-serving statements regarding supposed tenancy relations are not enough to establish the existence of a tenancy agreement.7Soliman v. Pampanga Sugar Development Co., G.R. No. 169589, June 16, 2009, 607 PHIL 209-227

    Furthermore, the Court found that the Affidavit of the Barangay Agrarian Reform Committee (BARC) Chairman deserved scant consideration since the said chairman was not the proper authority to make such determination. The Court emphasized that certifications issued by administrative agencies and/or officials concerning the presence or the absence of a tenancy relationship are merely preliminary or provisional and are not binding on the courts,8Soliman v. Pampanga Sugar Development Co., G.R. No. 169589, June 16, 2009, 607 PHIL 209-227 and have little evidentiary value without any corroborating evidence.9Reyes v. Heirs of Floro, G.R. No. 200713, December 11, 2013, 723 PHIL 755-775 The Court said that there should be independent evidence establishing the consent of the landowner to the relationship.10Caluzor v. Llanillo, G.R. No. 155580, July 1, 2015, 762 PHIL 353-370

    With respect to acknowledgment receipts presented by Sombrino showing the payment of irrigation fees and rentals to Lutero’s sibling, the Court declared such pieces of documentary evidence insufficient for the said receipts merely established that, at most, Sombrino entered into an arrangement with Lutero’s sister and not with their parents.

    The Court continued that assuming that it even existed, the supposed tenancy agreement was invalid as it was not entered into with the true and lawful landowner of the subject property.

    According to the Court, tenancy relationship can only be created with the consent of the true and lawful landowner who is the owner, lessee, usufructuary or legal possessor of the land. It cannot be created by the act of a supposed landowner, who has no right to the land subject of the tenancy, much less by one who has been dispossessed of the same by final judgment.11Cunanan v. Aguilar, G.R. No. L-31963, August 31, 1978, 174 PHIL 299-314

    In the present case, the Court doubted the existence of the alleged agricultural tenancy agreement because of the undisputed fact that Lutero’s father died sometime in 1948, and it was, thus, impossible for Lutero’s father to have instituted Sombrino as tenant of the subject property.

    With the absence of the first essential requisite of an agricultural tenancy relationship, i.e., that the parties to the agreement are the true and lawful landholders and tenants, the Court ruled that Sombrino was not a de jure tenant entitled to security of tenure under existing tenancy laws.

    In sum, the Court ruled that security of tenure may be invoked only by de jure tenants. Security of tenure may not be invoked by those who are not true and lawful tenants but became so only through the acts of a supposed landholder who had no right to the landholdings. Tenancy relation can only be created with the consent of the landholder who is either the owner, lessee, usufructuary or legal possessor of the land.

    Further reading:

    • Romero v. Sombrino, G.R. No. 241353, January 22, 2020.

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  • Your Employment Shall Start When You Are Issued a Boarding Confirmation

    Sometime in December 2012, a seafarer applied with Naess Shipping for possible employment as seaman upon learning of a job opening in its domestic vessel operations. He had completed the training on International Safety Management Code and had undergone the mandatory pre-employment medical examination where he was declared fit for sea service.

    On 15 February 2013, the seafarer signed an Embarkation Order stipulating the terms and conditions of his employment. On 18 February 2013, the seafarer executed a 6-month “Contract of Employment for Marine Crew on Board Domestic Vessels” with Royal Dragon, through its agent Naess Shipping, where he was to work as Second Officer with a gross monthly salary of Php30,000.00 aboard the vessel “M/V Melling 11,” an inter-island bulk and cargo carrier. It was stipulated that the contract shall take effect on 12 March 2013.

    Subsequently, the seafarer and Royal Dragon executed an “Addendum to Contract of Employment for Marine Crew Onboard Domestic Vessels” stating that the employment relationship between them shall commence once the Master of the Vessel issues a boarding confirmation to the seafarer.

    On 8 March 2013, Naess Shipping informed the seafarer that Royal Dragon cancelled his embarkation.

    As the seafarer was unable to leave, he filed a complaint for breach of contract against Royal Dragon and Naess Shipping before the Arbitration Branch of the National Labor Relations Commission.

    Royal Dragon and Naess Shipping, however, countered that the labor arbiter had no jurisdiction over the complaint. According to them, no employer-employee relationship had existed because the Master of the Vessel had not issued a boarding confirmation to the seafarer.

    The labor tribunals ruled in favor of the seafarer. However, the Court of Appeals reversed the said ruling. According to the Court of Appeals, the Office of the Labor Arbiter did not acquire jurisdiction over the seafarer’s complaint because no employer-employee relationship existed between him and Royal Dragon. It emphasized that the supposed contract of employment did not commence since the seafarer’s deployment to his vessel of assignment did not materialize.

    Did an employer-employee relationship exist between the seafarer and Royal Dragon?

    The Supreme Court ruled in the affirmative.

    The Court found that a contract of employment had already been perfected between the seafarer and Royal Dragon. Such contract had passed the negotiation stage or the time the prospective contracting parties had manifested their interest in the contract. It had reached the perfection stage or the so-called “birth of the contract” as it was clearly shown that the essential elements of a contract, i.e., consent, object, and cause, were all present at the time of its constitution. The seafarer and Royal Dragon, freely entered into the contract of employment, affixed their signatures thereto and assented to the terms and conditions of the contract (consent), under which the seafarer bound himself to render service (object) to Royal Dragon on board the domestic vessel “M/V Meiling 11” for the gross monthly salary of P30,000.00 (cause). According to the Court, the seafarer and Royal Dragon assumed obligations which pertain to those of an employer and an employee by virtue of said contract.

    Although the Court acknowledged that parties to a contract are free to adopt such stipulations, clauses, terms and conditions as they may deem convenient, such is qualified by the requirement that contractual stipulations therein should not be contrary to law, morals, good customs, public order or public policy.

    The Court found that the stipulation contained in Section D of the Addendum was a condition which held in suspense the performance of the respective obligations of the seafarer and Royal Dragon under the contract of employment, or the onset of their employment relations. The Court stated that such condition was solely dependent on the will or whim of Royal Dragon since the commencement of the employment relations was at the discretion or prerogative of the latter’s master of the ship through the issuance of a boarding confirmation to the seafarer. Applying the law1Article 1182 of the Civil Code of the Philippines, which reads: Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. and jurisprudence,2Naga Telephone Co., Inc. v. Court of Appeals, G.R. No. 107112, February 24, 1994, 300 PHIL 367-389. the Court viewed this kind of condition as a “potestative condition,” the fulfillment of which depends exclusively upon the will of the debtor, in which case, the conditional obligation is void.

    The Court clarified that where the so-called “potestative condition” is imposed not on the birth of the obligation but on its fulfillment, only the condition is avoided, leaving unaffected the obligation itself.3Romero v. Court of Appeals, G.R. No. 107207, November 23, 1995, 320 PHIL 269-284 In this regard, the condition set forth in the Addendum was one imposed not on the birth of the contract of employment since the contract has already been perfected, but only on the fulfillment or performance of their respective obligations, i.e., for the seafarer to render services on board the ship and for Royal Dragon to pay him the agreed compensation for such services. The Court accordingly ruled that a purely potestative imposition, such as the one in the Addendum, must be obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition related to the fulfillment of an already existing obligation and not to its inception. The Court added that the condition imposed for the commencement of the employment relations offends the principle of mutuality of contracts ordained in Article 1308 of the Civil Code of the Philippines which states that contracts must bind both contracting parties, and its validity or compliance cannot be left to the will of one of them. The Court was accordingly constrained to treat the condition as void and of no effect, and declare the respective obligations of the parties as unconditional. Consequently, the Court declared that the employer-employee relationship between the seafarer and Royal Dragon should be deemed to have arisen as of the agreed effectivity date of the contract of employment, or on 12 March 2013.

    Further reading:

    • Gemudiano, Jr. v. Naess Shipping Philippines, Inc., G.R. No. 223825, January 20, 2020.

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