PRESIDENTIAL DECREE NO. 442, AS AMENDEDA DECREE INSTITUTING A LABOR CODE THEREBY REVISING AND CONSOLIDATING

LABOR AND SOCIAL LAWS TO AFFORD PROTECTION TO LABOR, PROMOTE EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT AND INSURE INDUSTRIAL

PEACE BASED ON SOCIAL JUSTICEPRELIMINARY TITLE

Chapter IGENERAL PROVISIONS

Art. 1. Name of Decree. This Decree shall be known as the "Labor Code of the Philippines".Art. 2. Date of effectivity. This Code shall take effect six (6) months after its promulgation.Art. 3. Declaration of basic policy. The State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work.Art. 4. Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.Art. 5. Rules and regulations. The Department of Labor and other government agencies charged with the administration and enforcement of this Code or any of its parts shall promulgate the necessary implementing rules and regulations. Such rules and regulations shall become effective fifteen (15) days after announcement of their adoption in newspapers of general circulation.Art. 6. Applicability. All rights and benefits granted to workers under this Code shall, except as may otherwise be provided herein, apply alike to all workers, whether agricultural or non-agricultural. (As amended by Presidential Decree No. 570-A, November 1, 1974)

ARTICLE XIIISOCIAL JUSTICE AND HUMAN RIGHTS

Section 1. The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good.To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments.Section 2. The promotion of social justice shall include the commitment to create economic opportunities based on freedom of initiative and self-reliance.

LABORSection 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.

 Book I - Pre employment

 Book II - HRD Program

 Book III - Conditions of Employment

 Book IV - Health, Safety and Social Welfare

 Book V - Labor Relations

 Book VI - Post Employment

The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct. 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.[28]

G.R. No. 164774             April 12, 2006STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners, vs.RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.

D E C I S I O NPUNO, J.:We are called to decide an issue of first impression: whether the policy of the employer banning spouses from working in the same company violates the rights of the employee under the Constitution and the Labor Code or is a valid exercise of management prerogative.At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.Petitioner Star Paper Corporation (the company) is a corporation engaged in trading – principally of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its Managing Director.The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company.1

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married, one of them should resign pursuant to a company policy promulgated in 1995,2 viz.:

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company.2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above.3

Simbol resigned on June 20, 1998 pursuant to the company policy.4

Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they decide to get married. Comia resigned on June 30, 2000.5

Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker. Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she opted to resign on December 21, 1999.6

The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money and property accountabilities in the company and that they release the latter of any claim or demand of whatever nature.7

Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with co-worker Zuñiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where one of the staff handed her a memorandum. The memorandum stated that she was being dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management asked her to write an explanation. However, after submission of the explanation, she was nonetheless dismissed by the company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her thirteenth month pay.8

Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorney’s fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to their union membership.On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.:[T]his company policy was decreed pursuant to what the respondent corporation perceived as management prerogative. This management prerogative is quite broad and encompassing for it covers hiring, work assignment, working method, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by special law, an employer is free to regulate, according to his own discretion and judgment all the aspects of employment.9 (Citations omitted.)

On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11, 2002. 10

Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for Certiorari.In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.:WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows:

(1) Declaring illegal, the petitioners’ dismissal from employment and ordering private respondents to reinstate petitioners to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement; and(2) Ordering private respondents to pay petitioners attorney’s fees amounting to 10% of the award and the cost of this suit.13

On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards marriage and the family of employees and of Article 136 of the Labor Code; and2. x x x respondents’ resignations were far from voluntary.14

We affirm.The 1987 Constitution15 states our policy towards the protection of labor under the following provisions, viz.:Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.

x x xArticle XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.The State shall promote the principle of shared responsibility between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.The Civil Code likewise protects labor with the following provisions:Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article 136 of the Labor Code which provides:

Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the first paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses have the right to choose who between them should resign. Further, they are free to marry persons other than co-employees. Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only intended to carry out its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the prerogatives of management.16

It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons based on their status as a relative, rather than upon their ability.17 These policies focus upon the potential employment problems arising from the perception of favoritism exhibited towards relatives.With more women entering the workforce, employers are also enacting employment policies specifically prohibiting spouses from working for the same company. We note that two types of employment policies involve spouses: policies banning only spouses from working in the same company (no-spouse employment policies), and those banning all immediate family members, including spouses, from working in the same company (anti-nepotism employment policies).18

Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there are twenty state statutes20 in the United States prohibiting marital discrimination. Some state courts21 have been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital status and sex discrimination.In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of employment discrimination: the disparate treatment and the disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of female employees, is discriminatory on its face.22

On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a disproportionate effect on a particular class. For example, although most employment policies do not expressly indicate which spouse will be required to transfer or leave the company, the policy often disproportionately affects one sex.23

The state courts’ rulings on the issue depend on their interpretation of the scope of marital status discrimination within the meaning of their respective civil rights acts. Though they agree that the term "marital status" encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their decisions vary.24

The courts narrowly25 interpreting marital status to refer only to a person's status as married, single, divorced, or widowed reason that if the legislature intended a broader definition it would have either chosen different language or specified its intent. They hold

that the relevant inquiry is if one is married rather than to whom one is married. They construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse." These courts have upheld the questioned policies and ruled that they did not violate the marital status discrimination provision of their respective state statutes.The courts that have broadly26 construed the term "marital status" rule that it encompassed the identity, occupation and employment of one's spouse. They strike down the no-spouse employment policies based on the broad legislative intent of the state statute. They reason that the no-spouse employment policy violate the marital status provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual effect on the individual's qualifications or work performance.27 These courts also find the no-spouse employment policy invalid for failure of the employer to present any evidence of business necessity other than the general perception that spouses in the same workplace might adversely affect the business.28 They hold that the absence of such a bona fide occupational qualification29 invalidates a rule denying employment to one spouse due to the current employment of the other spouse in the same office.30 Thus, they rule that unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discriminate against an employee based on the identity of the employee’s spouse.31 This is known as the bona fide occupational qualification exception.We note that since the finding of a bona fide occupational qualification justifies an employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity for which no alternative exists other than the discriminatory practice.32 To justify a bona fide occupational qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job.33

The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard ofreasonableness of the company policy which is parallel to the bona fide occupational qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors. We considered the prohibition against personal or marital relationships with employees of competitor companies upon Glaxo’s employeesreasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.35

The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the employee was dismissed in violation of petitioner’s policy of disqualifying from work any woman worker who contracts marriage. We held that the company policy violates the right

against discrimination afforded all women workers under Article 136 of the Labor Code, but established a permissible exception, viz.:[A] requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance.37 (Emphases supplied.)The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not in PT&T.We do not find a reasonable business necessity in the case at bar.Petitioners’ sole contention that "the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity"38 is lame. That the second paragraph was meant to give teeth to the first paragraph of the questioned rule39 is evidently not the valid reasonable business necessity required by the law.It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employee’s right to security of tenure.Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employee’s right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company.40

Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislature’s silence41 that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic.As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her resignation letter was written in her own handwriting. Both ruled that her resignation was voluntary and thus valid. The respondent court failed to categorically rule

whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol and Comia.Estrella claims that she was pressured to submit a resignation letter because she was in dire need of money. We examined the records of the case and find Estrella’s contention to be more in accord with the evidence. While findings of fact by administrative tribunals like the NLRC are generally given not only respect but, at times, finality, this rule admits of exceptions,42 as in the case at bar.Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged immoral conduct. At first, she did not want to sign the termination papers but she was forced to tender her resignation letter in exchange for her thirteenth month pay.The contention of petitioners that Estrella was pressured to resign because she got impregnated by a married man and she could not stand being looked upon or talked about as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary, Estrella’s dismissal is declared illegal.IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004 isAFFIRMED.1avvphil.net

ANGELINA FRANCISCO,                      G.R. No. 170087                             Petitioner,                                                          

                                        - versus -                                                                                                                   NATIONAL LABOR RELATIONSCOMMISSION, KASEI CORPORATION,SEIICHIRO TAKAHASHI, TIMOTEOACEDO, DELFIN LIZA, IRENEBALLESTEROS, TRINIDAD LIZA        Promulgated:and RAMON ESCUETA,                             Respondents.                                                                   August 31, 2006x ---------------------------------------------------------------------------------------- x 

DECISION YNARES-SANTIAGO, J.:

            This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004[1] and October 7, 2005,[2] respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco.  The appellate court reversed and set aside the Decision of the National Labor Relations

Commission (NLRC) dated April 15, 2003,[3] in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, [4] in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.           In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.  She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company.  She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company.[5]

 Although she was designated as Corporate Secretary, she was not entrusted with

the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary.  However, on some occasions, she was prevailed upon to sign documentation for the company.[6] 

 In 1996, petitioner was designated Acting Manager.  The corporation also hired

Gerry Nino as accountant in lieu of petitioner.  As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation.[7]

 For five years, petitioner performed the duties of Acting Manager.  As of December

31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.[8]

 In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.  Petitioner

alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation.  Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.[9]

 Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning

January up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well.  On October 2001, petitioner did not receive her salary from the company.  She made repeated follow-ups with the company cashier but she was advised that the company was not earning well.[10]

 On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the

officers but she was informed that she is no longer connected with the company.[11]  Since she was no longer paid her salary, petitioner did not report for work and filed

an action for constructive dismissal before the labor arbiter. 

Private respondents averred that petitioner is not an employee of Kasei Corporation.  They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary.  As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted.  The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to her profession.  Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant.  The money received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the company’s employees.[12]

 Petitioner’s designation as technical consultant depended solely upon the will of

management.  As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.

 To prove that petitioner was not an employee of the corporation, private

respondents submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner.  SSS records were also submitted showing that petitioner’s latest employer was Seiji Corporation.[13] 

 The Labor Arbiter found that petitioner was illegally dismissed, thus:           WHEREFORE, premises considered, judgment is hereby rendered as follows: 

1.         finding complainant an employee of respondent corporation;

2.         declaring complainant’s dismissal as illegal;3.         ordering respondents to reinstate complainant to her

former position without loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation: 

a.         Backwages 10/2001 – 07/2002                        275,000.00(27,500 x 10 mos.)

b.         Salary Differentials (01/2001 – 09/2001)            22,500.00c.         Housing Allowance (01/2001 – 07/2002)           57,000.00d.         Midyear Bonus 2001                                          27,500.00e.         13th Month Pay                                                  27,500.00f.          10% share in the profits of Kasei            Corp. from 1996-2001                         361,175.00g.         Moral and exemplary damages              100,000.00h.         10% Attorney’s fees                                           87,076.50

          P957,742.50 

            If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to actual payment of separation pay.             SO ORDERED.[14]

 On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor

Arbiter, the dispositive portion of which reads: 

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

 1)         Respondents are directed to pay complainant separation

pay computed at one month per year of service in addition to full backwages from October 2001 to July 31, 2002;

 2)         The awards representing moral and exemplary damages

and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;

 3)         The award of 10% attorney’s fees shall be based on salary

differential award only; 4)         The awards representing salary differentials, housing

allowance, mid year bonus and 13th month pay are AFFIRMED. SO ORDERED.[15]

           On appeal, the Court of Appeals reversed the NLRC decision, thus: 

            WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.             SO ORDERED.[16]

           The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

 The core issues to be resolved in this case are (1) whether there was an employer-

employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

 Considering the conflicting findings by the Labor Arbiter and the National Labor

Relations Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending parties is supported by substantial evidence.[17]

 We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no

uniform test to determine the existence of an employer-employee relation.  Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end.  In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship. 

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to the complexity of such a relationship where several positions have been held by the worker.  There are instances when, aside from the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.

 The better approach would therefore be to adopt a two-tiered test involving: (1)

the putative employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship.

 This two-tiered test would provide us with a framework of analysis, which would

take into consideration the totality of circumstances surrounding the true nature of the relationship between the parties.  This is especially appropriate in this case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the worker over the period of the latter’s employment.

 The control test initially found application in the case of Viaña v. Al-Lagadan and

Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.

 In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing

economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker.

 Thus, the determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity,[22] such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed

independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business.[23]

 The proper standard of economic dependence is whether the worker is dependent

on the alleged employer for his continued employment in that line of business.[24]  In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency.[25]  By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer.

 By applying the control test, there is no doubt that petitioner is an employee of

Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant.  She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement.

 Under the broader economic reality test, the petitioner can likewise be said to be

an employee of respondent corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000.[26]  When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros.  Petitioner’s membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent corporation.[27]

 It is therefore apparent that petitioner is economically dependent on respondent

corporation for her continued employment in the latter’s line of business. In Domasig v. National Labor Relations Commission,[28] we held that in a business

establishment, an identification card is 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.  Together with the cash vouchers covering petitioner’s salaries for the months stated therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.

 We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its

workers with the SSS is proof that the latter were the former’s employees.  The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

 Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly

established that petitioner never acted as Corporate Secretary and that her designation as

such was only for convenience.  The actual nature of petitioner’s job was as Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meeting of the corporation.  She was never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for the company.[30] 

 The second affidavit of Kamura dated March 7, 2002 which repudiated the

December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case.[31]  Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

 Granting arguendo, that the second affidavit validly repudiated the first one, courts

do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses.[32]  A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution.[33]

 Based on the foregoing, there can be no other conclusion that petitioner is an

employee of respondent Kasei Corporation.  She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business.  Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement.  Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.

 The corporation constructively dismissed petitioner when it reduced her salary by

P2,500 a month from January to September 2001.  This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages.  Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement.[34]

 A diminution of pay is prejudicial to the employee and amounts to constructive

dismissal.  Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee.[35]  In Globe Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer.  Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment.

 

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed.  Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees.  This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development.

 WHEREFORE, the petition is GRANTED.  The Decision and Resolution of the Court

of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE.  The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED.  The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year.

[G.R. No. 86963.  August 6, 1999]BATONG BUHAY GOLD MINES, INC., petitioner, vs. HONORABLE DIONISIO DELA

SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER COMPLAINANTS*  IN CASE NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER HOLDINGS PTY. LTD., respondents.

R E S O L U T I O N

PURISIMA, J.:At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a

Prayer for Preliminary Injunction and or Restraining Order brought by Batong Buhay Gold Mines, Inc. (BBGMI for brevity) to annul three orders issued by respondent  Undersecretary Dionisio dela Serna of the Department of Labor and Employment, dated September 16, 1988, December 14, 1988 and February 13, 1989, respectively.

The Order of September 16, 1988 stated the facts as follows:"xxx on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O. Reyes and 1,247 others filed a complaint against Batong Buhay Gold Mines, Inc. for: (1) Non-payment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984, inclusive, under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for the period 16 June 1984 to 5 October 1986, inclusive under Wage Order No. 5; (3) Non-payment of their salaries for the period 16 March 1986 to the present; (4) Non-payment of their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick leave, and the compensatory leaves of mine site employees; and (6) Non-payment of the salaries of employees who were placed on forced leaves since November, 1985 to the present, if this is not feasible, the affected employees be awarded corresponding separation pay.On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.

On 27 February 1987, the complainants filed a Motion for the issuance of an inspection authority.

xxxOn 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the following recommendations:‘WHEREFORE, premises considered, this case is hereby submitted with the recommendation that an Order of Compliance be issued directing respondent Batong Buhay Gold Mines Inc. to pay complainants’ Elsie Rosalina Ty, et al. FOUR MILLION EIGHT HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-SIX PESOS AND FORTY CENTAVOS (P4,818,746.40) by way of  unpaid salaries of workers from March 16, 1987 to present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months pay for 1985 and 1986, and upaid (sic) vacation/sick/compensatory leave benefits.’On 31 July 1987, the Regional Director[1] adopted the recommendation of the LSWOs and issued an order directing the respondent to pay the complainants the sum of P4,818,746.40 representing their unpaid 13th month pay for 1985 and 1986, wage and ECOLA differentials under wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to present and vacation/sick leave benefits for 1984, 1985 and 1986.On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of execution and appointment of special sheriff.

xxxOn 21 August 1987, the Regional Director issued an Order directing the respondent to put up a cash or surety bond otherwise a writ of execution will be issued.

xxxWhen the respondent failed to post a cash/surety bond, and upon motion for the issuance of a writ of execution by the complainants, the Regional Director, on 14 September 1987 issued a writ of execution appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing him to do the following:‘You are to collect the above-stated amount from the respondent and deposit the same with Cashier of this Office for appropriate disposition to herein complainants under the supervision of the office of the Director.  Otherwise, you are to execute this writ by attaching the goods and chattels of the respondent not exempt from execution or in case of insufficiency thereof against the real or immovable property of the respondent.’The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and seized three (3) units of Peterbuilt trucks and then sold the same by public auction.  Various materials and motor vehicles were also seized on different dates and sold at public auction by said sheriff.

xxx xxx                              xxxOn 11 December 1987, the respondent finally posted a supersedeas bond which prompted this Office to issue an Order dated 26 January 1988, restraining the complainants and sheriff Ramos from enforcing the writ of execution. xxx“[2]

BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent Undersecretary Dionisio de la Serna, contending that the Regional Director had no jurisdiction over the case.

On September 16, 1988, the public respondent issued the first challenged Order upholding the jurisdiction of the Regional Director and annulling all the auction sales conducted by Special Sheriff John Ramos.  The decretal portion of the said Order ruled:“WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital Region, is hereby AFFIRMED.  Accordingly, the writ of execution dated 14 September 1987 issued in connection thereto is hereby declared VALID.

However, the public auction sales conducted by special sheriff John Ramos pursuant to the writ of execution dated 14 September 1987 on 24 September 2, 20, 23, and 29 October 1987 are all hereby declared NULL AND VOID.  Furthermore, the personal properties sold and the proceeds thereof which have been turned over to the complainants thru their legal counsel are hereby ordered returned to the custody of the respondent and the buyers respectively.SO ORDERED.”[3]

On October 13, 1988, a Motion for Reconsideration of the aforesaid order was presented by the complainants in Case No. NCR-LSED-CI-2047-87 but the same was denied.

On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting attention to a Deed of Sale executed in its favor by Fidel Bermudez, the highest bidder in the auction sale conducted on October 29, 1987.

On December 2, 1988, another Motion for Intervention was filed, this time by Salter Holdings Pty., Ltd., claiming that MFT Corporation assigned its rights over the subject properties in favor of movant as evidenced by a Sales Agreement between MFT Corp. and Salter Holdings Pty., Ltd.

The two Motions for Intervention were granted in the second questioned order dated December 14, 1988, directing the exclusion from annulment of the properties sold at the October 29, 1987 auction sale and claimed by the intervenors, including one cluster of junk mining machineries, equipment and supplies, and disposing thus:“WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors MFT and Salter are hereby granted.  Correspondingly, this Office’s Order dated 16 September 1988 is hereby modified to exclude from annulment “the one lot of junk mining machineries, equipment and supplies as-is-where-is” sold by Sheriff John C. Ramos in the auction sale of 29 October 1987.

xxx xxx                              xxx”Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and

the respondent employees but to no avail.  The same were likewise denied in the third assailed Order dated February 13, 1989.

Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to lack or excess of jurisdiction to the public respondent in issuing the three Orders under attack.

The questioned Orders aforementioned have given rise to the issues: (1) whether the Regional Director has jurisdiction over the complaint filed by the employees of BBGMI; and (2) whether or not the auction sales conducted by the said Special Sheriff are valid.

Anent the first issue, an affirmative ruling is indicated. The Regional Director has jurisdiction over the BBGMI employees who are the complainants in Case Number NCR-LSED-CI-2047-87.

The subject labor standards case of the petition arose from the visitorial and enforcement powers by the Regional Director of Department of Labor and Employment (DOLE).  Labor standards refers to the minimum requirements prescribed by existing laws, rules and regulations relating to wages, hours of work, cost of living allowance and other monetary and welfare benefits, including occupational, safety and health standards.[4] Labor standards cases are governed by Article 128(b) of the Labor Code.

The pivot of inquiry here is whether the Regional Director has jurisdiction over subject labor standards case.

As can be gleaned from the records on hand, subject labor standards case was filed on February 5, 1987 at which time Article 128 (b) read as follows[5]:

Art. 128 ( b) Visitorial and enforcement powers -“(b)  The Minister of Labor or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.”

Petitioner theorizes that the Regional Director is without jurisdiction over subject case, placing reliance on the ruling in Zambales Base Inc. vs. Minister of Labor[6]and Oreshoot Mining Company vs. Arellano.[7]

Respondent Undersecretary Dionision C. Dela Serna, on the other hand, upheld the jurisdiction of Regional Director Luna C. Piezas by relying on E.O. 111, to quote:“Considering therefore that there still exists an employer-employee relationship between the parties; that the case involves violations of the labor standard provisions of the labor code; that the issues therein could be resolved without considering evidentiary matters that are not verifiable in the normal course of inspection; and, if only to give meaning and not render nugatory and meaningless the visitorial and enforcement powers of the Secretary of Labor and Employment as provided by Article 128(b) of the Labor Code, as amended by Section 2 of Executive Order No. 111 which states:‘The provisions of article 217 of this code to the contrary notwithstanding and in cases where the relationship of employer-employee still exists, the Minister of Labor and Employment or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provision of this Code based on the findings of the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.’We agree with the complainants that the regional office a quo has jurisdiction to hear and decide the instant labor standard case.

xxx xxx                              xxx”[8]

The Court agrees with the public respondent.  In the case of Maternity Children’s Hospital vs Secretary of Labor (174 SCRA 632), the Court in upholding the jurisdiction of the Regional Director over the complaint on underpayment of wages and ECOLAs filed on May 23, 1986, by the employees of Maternity Children’s Hospital, held:“This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as amended by E.O. 111.

xxx xxx                              xxxPrior to the promulgation of E.O. 111 on December 24, 1986, the Regional Director’s authority over money claims was unclear.  The complaint in the present case was filed on May 23, 1986 when E.O. 111 was not yet in effect.  xxx      xxxWe believe, however , that even in the absence of E.O. 111 , Regional Directors already had enforcement powers over money claims, effective under P.D. 850, issued on December 16, 1975, which transferred labor standards cases from the arbitration system to the enforcement system.“

In the aforecited case, the Court in reinforcing its conclusion that Regional Director has jurisdiction over labor standards cases, treated E.O. 111 as a curative statute, ruling as follows:“E.O. No. 111 was issued on December 24, 1986 or three(3) months after the promulgation of the Secretary of Labor’s decision upholding private respondents’ salary differentials and ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers of the Regional Director (Article 128(b)) by said E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolve uncontested money claims in cases where an employer-employee relationship still exists.  This intention must be given weight and entitled to great respect.  As held in Progressive Worker’s Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:.’xx  The interpretation by officers of laws which are entrusted to their administration is entitled to great respect.  We see no reason to detract from this rudimentary rule in administrative law, particularly when later events have proved said interpretation to be in accord with the legislative intent.  xx’The proceedings before the Regional Director must, perforce be upheld on the basis of Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order ‘to be considered in the nature of a curative statute with retrospective application.’ (Progressive Workers’ Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez, et al. G.R.No. l-47629, may 28,1979, 90 SCRA 331).

With regard to the petitioner’s reliance on the cases of Zambales Base, Inc. vs. Minister of Labor (supra) and Oreshoot Mining Company vs. Arellano, (supra), this is misplaced.  In the case of Zambales Base, Inc., the court has already ruled that:“xxx, in view of the promulgation of Executive Order No. 111, Zambales Base Metals vs. Minister of Labor is no longer good law. (Emphasis supplied)  Executive Order No. 111 is in the character of a curative law, that is to say, it was intended to remedy a defect that, in the opinion of the Legislature (the incumbent Chief Executive in this case, in the exercise of her lawmaking powers under the Freedom Constitution) had attached to the provision under the amendment.

xxx xxx                              xxx”[9]

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of illegally dismissed employees.  As the employer-employee relationship has already ceased and reinstatement is sought, jurisdiction necessarily falls under the Labor Arbiter.  Petitioner should not have used this to support its theory as this petition involves labor standards cases and not monetary claims of illegally dismissed employees.

The Court would have ruled differently had the petitioner shown that subject labor standards case is within the purview of the exception clause in Article 128 (b) of the Labor Code.  Said provision requires the concurrence of the following elements in order to divest the Regional Director or his representatives of jurisdiction, to wit: (a) that the petitioner (employer) contests the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.[10]

Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds.  In fact, in its Motion for Reconsideration of the Order of the Regional Director dated August 20, 1987, the grounds which petitioner raised were the following:“1.  This Honorable Office has no jurisdiction to hear this case and its Order of 31 October 1987 is therefore null and void;

2.  Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent, the complaint should have been directed also against the Asset Privatization Trust.

In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent Omnibus Motion to declare void the Writ of Execution for lack of jurisdiction and the Oppositions it filed on the Motions for Intervention questioning the legal personality of the intervenors, questions as to the amounts complained of by the employees or absence of violation of labor standards laws were never raised.  Raising lack of jurisdiction in a Motion to Dismiss is not the contest contemplated by the exception clause under Article 128(b) of the Labor Code which would take the case out of the jurisdiction of the Regional Director and bring it before the Labor Arbiter.

The only instance when there was a semblance of raising the aforestated grounds, was when they filed an Appeal Memorandum dated January 14, 1988, before the respondent undersecretary.  In the said Appeal Memorandum, petitioner comes up with the defense that the Regional Director was without jurisdiction, as employer-employee relationship was absent, since petitioner had ceased doing business since 1985.

Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other related documents.  The officers of the petitioner alleged that the company is presently under receivership of the Development Bank of the Philippines.[11] In lieu of this, the Regional Director had ordered that a summary investigation be conducted. [12] Despite proper notices, the petitioner refused to appear before the Regional Director.  To give it another chance, an order to file its position paper was issued to substantiate its defenses.  Notwithstanding all these opportunities to be heard, petitioner chose not to avail of such.

As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266 SCRA 111):“xxx  Under Art. 128(a) of the Labor Code, the Secretary of Labor or his duly authorized representatives, such as the Regional Directors, has visitorial powers which authorize him to inspect the records nd premises of an employer at any time of the day or night whenever work is being undertaken therein, to question any employee and investigate any fact, condition or matter, and to determine violations of labor laws, wage orders or rules and regulations.  If the employer refuses to attend the inspection or conference or to submit any record, such as payrolls and daily time records, he will be deemed to have waived his right to present evidence.” (emphasis supplied)

Petitioner’s refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the premises of their head office in Makati and the failure to file their position paper is equivalent to a waiver of its right to contest the claims of the employees.  This Court had occasion to hold there is no violation of due process where the Regional Director merely required the submission of position papers and resolved the case summarily thereafter.[13] Furthermore, the issuance of the compliance order was well within the jurisdiction of the Regional Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases provides:Section 14.  Failure to Appear -  Where the employer or the complainant fails or refuses to appear during the investigation, despite proper notice, for two (2) consecutive hearings without justifiable reasons, the hearing officer may recommend to the Regional Director the issuance of a compliance order based on the evidence at hand or an order of dismissal of the complaint as the case may be. (Emphasis supplied)

It bears stressing that this petition involves a labor standards case and it is in keeping with the law that “the worker need not litigate to get what legally belongs to him, for the

whole enforcement machinery of the Department of Labor exists to insure its expeditious delivery to him free of charge.“[14]

Thus, their claim of closure for business, among other things, are factual issues which cannot be brought here for the first time.  As petitioner refused to participate in the proceedings below where it could have ventilated the appropriate defenses, to do so in this petition is unavailing.  The reason for this is that factual issues are not proper subjects of a special civil action for certiorari to the Supreme Court.[15]

It is therefore abundantly clear that at the time of the filing of the claims of petitioner’s employees, the Regional Director was already exercising visitorial and enforcement powers.

Regional Director’s visitorial and enforcement powers under Art. 128 (b) has undergone series of amendments which the Court feels to be worth mentioning.

Confusion was engendered by the promulgation of the decision in the case of Servando’s Inc. vs. Secretary of Labor and Employment and the Regional Director, Region VI, Department of Labor and Employment.[16] In the said case, the Regional Director took cognizance of the labor standards cases of the employees of Servando’s Inc., but this Court held that:“In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus Engineering Corp. vs. Sec. Of labor applying E.O. 111 the Court recognized the concurrent jurisdiction of the Secretary of labor (or Regional Directors) and the labor Arbiters to pass on employees money claims, including those cases which the labor Arbiters had previously exercised jurisdiction.  However, in a subsequent modificatory resolution in the Briad Agro Case, dated 9 November 1989, the Court modified its original decision in view of the enactment of RA 6715, and upheld the power of the Regional Directors to adjudicate money claims subject to the conditions set forth in Section 2 of said law (RA 6715).The power then of the Regional Director (under the present state of law) to adjudicate employees money claims is subject to the concurrence of all the requisites provided under Sec. 2 of RA 6715, to wit:

(a)  the claim is represented by an employer or person employed in domestic or household service, or househelper;

(b)  the claim arises from employer-employee relationship;(c)  the claimant does not seek reinstatement; and(d)  the aggregate money claim of each employee or househelper does not

exceed P5,000.xxx  xxx                              xxx”[17]

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA 6715 as to include labor standards cases under Article 128 (b) and no longer limited to ordinary monetary claims under Article 129.

In fact, in the Motion for Reconsideration[18] presented by the private respondents in the Servando case, the court applied more squarely the P5,000 limit to the visitorial and enforcement power of the Regional Director, to wit:“To construe the visitorial power of the Secretary of Labor to order and enforce compliance with labor laws as including the power to hear and decide cases involving employee’s claims for wages, arising from employer-employee relations, even if the amount of said claims exceed P5,000 for each employee, would, in our considered opinion, emasculate and render meaningless, if not useless, the provisions of Art. 217 (a) and (6) and Article 129 of the Labor Code which, as above-pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear and decide such employees’ claims, regardless of amount, can be

heard and determined by the Secretary of Labor under his visitorial power.  This does not, however, appear to be the legislative intent.”

But prevailing law and jurisprudence rendered the Servando ruling inapplicable.  In the recent case of Francisco Guico, Jr. versus The Honorable Secretary of Labor & Employment Leonardo A. Quisumbing, GR # 131750, promulgated on November 16, 1998 , this Court upheld the jurisdiction of the Regional Director notwithstanding the fact that the amounts awarded exceeded P5,000.

Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor Secretary and his representatives reads:“Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection.  The Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

xxx xxx                              xxx”  (emphasis supplied)The present law, RA 7730, can be considered a curative statute to reinforce the

conclusion that the Regional Director has jurisdiction over the present labor standards case.

Well-settled is the rule that jurisdiction over the subject matter is determined by the law in force when the action was commenced, unless a subsequent statute provides for its retroactive application, as when it is a curative legislation.[19]

Curative statutes are intended to supply defects, abridge superfluities in existing laws and curb certain evils.  They are intended to enable persons to carry into effect that which they have designed and intended, but has failed of expected legal consequence by reason of some statutory disability or irregularity in their own action.  They make valid that which, before the enactment of the statute, was invalid.[20]

In arriving at this conclusion, the case of Briad Agro Development vs. De la Cerna[21] comes to the fore.  In the said case, RA 6715 was held to be a curative statute.  There, the Court ruled that RA 6715 is deemed a curative statute and should be applied to pending cases.  The rationale of the ruling of the Court was that prior to RA 6715, Article 217 as amended by E.O. 111, created a scenario where the Labor Arbiter and the Regional Director of DOLE had overlapping jurisdiction over money claims.  Such a situation was viewed as a defect in the law so that when RA 6715 was passed, it was treated or interpreted by the Court as a rectification of the infirmity of the law, and therefore curative in nature, with retroactive application.

Parenthetically, the same rationale applies in treating RA 7730 as a curative statute.  Explicit in its title[22] is the legislative intent to rectify the error brought about by this Court’s ruling that RA 6715 covers even labor standards cases where the amounts to be awarded by the Regional Director exceed P5,000 as provided for under RA 6715.  Congressional records relative to Republic Act 7730 reveal that, “this bill seeks to do away with the jurisdictional limitations imposed thru said ruling (referring to Servando) and to finally settle any lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment.”[23]

All the foregoing studiedly considered, the ineluctable conclusion is that the application of RA 7730 to the case under consideration is proper.

Thus, it is decisively clear that the public respondent did not act with grave abuse of discretion in issuing the Order dated September 16, 1988.

The second issue for resolution is the validity of the auction sales conducted by Special Sheriff Ramos.  It bears stressing that the writ of execution issued by the Regional Director led to the several auction sales conducted on September 24, 1987, October 2, 1987, October 23, 1987, October 29, 1987 and October 30, 1987.

In the first Order of public respondent, the five (5) auction sales were declared null and void.  As the public respondent put it, “the scandalously low price for which the personal properties of the respondent were sold leads us to no other recourse but to invalidate the auction sales conducted by the special sheriff.”[24]

In the September 16, 1988 Order[25] of public respondent, the personal properties and corresponding prices for which they were sold were as follows:“Personal properties sold on September 24, 1987:

1.  One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis No. 139155-P not running condition.

2.  One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis No. 6A410235, truck with Engine No. (Truck 4) not running condition.

3.  One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis No. 139163-P Truck No. 4 not running condition.

Proceeds of Sale ............P178,000.00Personal Properties Sold on October 2, 1987:

1.  One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis No. 1391539-P.

2.  One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis No. 139149.

3.  One (1) unit payloader (caterpillar with Engine No. (not visible) 966.4.  One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and

one (1) Lot of scrap irons impounded inside the Batong Buhay Compound, Calanan, Kalinga Apayao.

5.  One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.Proceeds of Sale....P228,750.00

Personal Properties Sold on October 23, 1987:1.  One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No.

81400500227, Plate No. BAT 353, burned, damage not running condition, type of body jeep motor not visible.

2.  Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and Chassis Nos. not visible.

3.  One (1) Unit Layland, burned, damaged and Motor No. not visible.4.  Two (units) air compressor, burned, damaged and one (1) generator.5.  One (1) Unit Loader Michigan 50, damaged and burned, and6.  One (1) rock crasher, damaged, burned, scrap iron junk.

Proceeds of Sale...........P98,000.00Properties sold on October 29, 1987:

1.  One (1) lot of scrap construction materials2.  One (1) lot of scrap mining machineries equipments and supplies.3.  One (1) lot of junk machineries, equipments and supplies.

Proceeds of  Sale............P1,699,999.99

Personal Properties Sold on October 20, 1987 * 1.  One (1) lot of scrap construction materials2.  One (1) lot of scrap mining machineries, equipments and supplies

Proceeds of Sale...........P2,185,000.00Total Proceeds Sale....  P4,389,749.99

to satisfy the judgment award in the amount of P4,818,746.00.”As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial

agencies are not to be disturbed absent any showing of grave abuse of discretion tainting the same.  But in the case under scrutiny, there was grave abuse of discretion when the public respondent, without any evidentiary support, adjudged such prices as “scandalously low”.  He merely relied on the self-serving assertion by the petitioner that the value of the auctioned properties was more than the price bid.  Obviously, this ratiocination did not suffice to set aside the auction sales.

The presumption of regularity in the performance of official function is applicable here.  Conformably, any party alleging irregularity vitiating auction sales must come forward with clear and convincing proof.

Furthermore, it is a well-settled principle that:“Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale where the sale is regular, proper and legal in other respects, the parties stand on an equal footing, there are no confidential relation between them, there is no element of fraud, unfairness, or oppression, and there is no misconduct, accident, mistake or surprise connected with, and tending to cause, the inadequacy.”[26]

Consequently, in declaring the nullity of the subject auction sales on the ground of inadequacy of price, the public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

But, this is not to declare the questioned auction sales as valid.  The same are null and void since on the properties of petitioner involved was constituted a mortgage between petitioner and the Development Bank of the Philippines, as shown by the:

(a)  Deed of Mortgage dated December 28,1973;(b)  Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;(c)  Amendment to Joint Mortgage dated October 18, 1976.(d)  Confirmation of Mortgage dated March 27,1979; and(e)  Additional Joint First Mortgage dated March 31, 1981.[27]

The aforementioned documents were executed between the petitioner and Development Bank of the Philippines (DBP) even prior to the filing of the complaint of petitioner’s employees.  The properties having been mortgaged to DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3 December 1986, otherwise known as the “The 1986 Revised Charter of the Development Bank of the Philippines,” which exempts the properties of petitioner mortgaged to DBP from attachment or execution sales.  Section 14 of E.O. 81, reads:“Sec. 14.  Exemption from Attachment.  The provisions of any law to the contrary notwithstanding, securities on loans and/or other accommodations granted by the Bank or its predecessor-in-interest shall not be subject to attachment, execution or any other court process, nor shall they be included in the property of insolvent persons or institutions, unless all debts and obligations of the Bank or its predecessor-in-interest, penalties, collection of expenses, and other charges, subject to the provisions of paragraph (e) of Sec. 9 of this Charter.”

In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of the Asset Privatization Trust, to the Office of the Clerk of Court of the Supreme Court,

certified that the petitioner is covered by Proclamation No. 50 issued on December 8, 1986 by President Corazon C. Aquino.

Quoted hereunder are the pertinent portions of the said letter:[28]

RE:  BBGMI vs. Hon. dela Serna, GR No. 86963Supreme Court CertiorariSIR:xxx     xxx       xxxxxx  all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI) have been transferred and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation No. 50 dated December 8, 1986 of her Excellency, President Corazon C. Aquino.  All the said assets of BBGMI are covered by real and chattel mortgages executed in favor of the Philippine National Bank (‘PNB’), the Development Bank of the Philippines (‘DBP’) and the National Investment and Development Corporation (‘NIDC’).

xxx xxx                              xxxSection 14, Executive Order No. 81:

xxx xxx                              xxxPursuant to the above-quoted provision of law, you are hereby warned that all the assets (real and personal /chattel) of BBGMI are exempted from writs of execution, attachment, or any other lien or court processes. The Government, through APT, shall initiate any administrative measures and remedies against you for any violation of the vested rights of PNB, DBP and APT.

xxx xxx                              xxx(sgd)                           

JOSE C. SISONThe exemption referred to in the aforecited letter is one of the circumstances

contemplated by Rule 39 of the Revised Rules of Court, to wit:“Sec. 13. Property exempt from execution. -  Except as otherwise expressly provided by law, the following properties, and no other, shall be exempt from execution:

xxx xxx                              xxx(m) Properties specially exempted by law.

xxx xxx                              xxx”Private respondents contend that even if subject properties were mortgaged to DBP

(now under Asset Privatization Trust), Article 110[29] of the Labor Code, as amended by RA 6715, applies just the same. According to them, the said provision of law grants preference to money claims of workers over and above all credits of the petitioner.  This contention is untenable.  In the case of DBP vs. NLRC,[30] the Supreme Court held that the workers preference regarding wages and other monetary claims under Article 110 of the Labor Code, as amended, contemplates bankruptcy or liquidation proceedings of the employer’s business.  What is more, it does not disregard the preferential lien of mortgagees considered as preferred credits under the provisions of the New Civil Code on the classification, concurrence and preference of credits.

We now come to the issue with respect to the second Order, dated December 14, 1988, which declared as valid the auction sale conducted on October 29, 1987 by Special Sheriff John Ramos. Public respondent had no authority to validate the said auction sale on the ground that the intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as purchasers for value, acquired legal title over subject properties.

It is well to remember that the said properties were transferred to the intervenors, when Fidel Bermudez, the highest bidder at the auction sale, sold the properties to MFT Corporation which, in turn, sold the same properties to Salter Holdings Pty., Ltd.  Public

respondent opined that the contract of sale between the intervenors and the highest bidder should be respected as these sales took place during the interregnum after the auction sale was conducted on October 29, 1987 and before the issuance of the first disputed Order declaring all the auction sales null and void.

On this issue, the Court rules otherwise.As regards personal properties, the general rule is that title, like a stream, cannot rise

higher than its source.[31] Consequently, a seller without title cannot transfer a title better than what he holds.  MFT Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest bidder of a void auction sale over properties exempt from execution.  Such being the case, the subsequent sale made by him (FidelBermudez) is incapable of vesting title or ownership in the vendee.

The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid, was issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December 14, 1988 of Undersecretary Dionisio dela Serna is concerned, which Order is SET ASIDE.  The Order of September 16, 1988, upholding the jurisdiction of the Regional Director, is AFFIRMED.  No pronouncement as to costs.

G.R. No. 159577             May 3, 2006CHARLITO PEÑARANDA, Petitioner, vs.BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.

D E C I S I O NPANGANIBAN, CJ:Managerial employees and members of the managerial staff are exempted from the provisions of the Labor Code on labor standards. Since petitioner belongs to this class of employees, he is not entitled to overtime pay and premium pay for working on rest days.

The CaseBefore us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27, 20032 and July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 74358. The earlier Resolution disposed as follows:"WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4

The latter Resolution denied reconsideration.On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in the CA disposed as follows:"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime pay and premium pay for rest day to complainant is hereby REVERSED and SET ASIDE, and the complaint in the above-entitled case dismissed for lack of merit.5

The FactsSometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee of Baganga Plywood Corporation (BPC) to take charge of the operations and maintenance of its steam plant boiler.6 In May 2001, Peñaranda filed a Complaint for illegal dismissal with money claims against BPC and its general manager, Hudson Chua, before the NLRC.7

After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their position papers and submit supporting documents.9 Their respective allegations are summarized by the labor arbiter as follows:"[Peñaranda] through counsel in his position paper alleges that he was employed by respondent [Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally terminated on December 19,

2000. Further, [he] alleges that his services [were] terminated without the benefit of due process and valid grounds in accordance with law. Furthermore, he was not paid his overtime pay, premium pay for working during holidays/rest days, night shift differentials and finally claims for payment of damages and attorney’s fees having been forced to litigate the present complaint."Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under Philippine laws and is represented herein by its General Manager HUDSON CHUA, [the] individual respondent. Respondents thru counsel allege that complainant’s separation from service was done pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on temporary closure due to repair and general maintenance and it applied for clearance with the Department of Labor and Employment, Regional Office No. XI to shut down and to dismiss employees (par. 2 position paper). And due to the insistence of herein complainant he was paid his separation benefits (Annexes C and D, ibid). Consequently, when respondent [BPC] partially reopened in January 2001, [Peñaranda] failed to reapply. Hence, he was not terminated from employment much less illegally. He opted to severe employment when he insisted payment of his separation benefits. Furthermore, being a managerial employee he is not entitled to overtime pay and if ever he rendered services beyond the normal hours of work, [there] was no office order/or authorization for him to do so. Finally, respondents allege that the claim for damages has no legal and factual basis and that the instant complaint must necessarily fail for lack of merit."10

The labor arbiter ruled that there was no illegal dismissal and that petitioner’s Complaint was premature because he was still employed by BPC.11 The temporary closure of BPC’s plant did not terminate his employment, hence, he need not reapply when the plant reopened.According to the labor arbiter, petitioner’s money claims for illegal dismissal was also weakened by his quitclaim and admission during the clarificatory conference that he accepted separation benefits, sick and vacation leave conversions and thirteenth month pay.12

Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on rest days, and attorney’s fees in the total amount of P21,257.98.13

Ruling of the NLRCRespondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium pay for working on rest days. According to the Commission, petitioner was not entitled to these awards because he was a managerial employee.14

Ruling of the Court of AppealsIn its Resolution dated January 27, 2003, the CA dismissed Peñaranda’s Petition for Certiorari. The appellate court held that he failed to: 1) attach copies of the pleadings submitted before the labor arbiter and NLRC; and 2) explain why the filing and service of the Petition was not done by personal service.15

In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner still failed to submit the pleadings filed before the NLRC.16

Hence this Petition.17

The IssuesPetitioner states the issues in this wise:"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it entertained the APPEAL of the respondent[s] despite the lapse of the mandatory period of TEN DAYS.1avvphil.net"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of jurisdiction when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST

16, 2002 REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor arbiter] with respect to the following:

"I. The finding of the [labor arbiter] that [Peñaranda] is a regular, common employee entitled to monetary benefits under Art. 82 [of the Labor Code]."II. The finding that [Peñaranda] is entitled to the payment of OVERTIME PAY and OTHER MONETARY BENEFITS."18

The Court’s RulingThe Petition is not meritorious.

Preliminary Issue:Resolution on the Merits

The CA dismissed Peñaranda’s Petition on purely technical grounds, particularly with regard to the failure to submit supporting documents.In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying the petition before the CA sufficiently supported the allegations therein. Citing this case, Piglas-Kamao v. NLRC20 stayed the dismissal of an appeal in the exercise of its equity jurisdiction to order the adjudication on the merits.The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to challenge the finding that he was a managerial employee.21 In his Motion for Reconsideration, petitioner also submitted the pleadings before the labor arbiter in an attempt to comply with the CA rules.22 Evidently, the CA could have ruled on the Petition on the basis of these attachments. Petitioner should be deemed in substantial compliance with the procedural requirements.Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of petitioner and to tackle his substantive arguments in the present case. Rules of procedure must be adopted to help promote, not frustrate, substantial justice.23 The Court frowns upon the practice of dismissing cases purely on procedural grounds.24 Considering that there was substantial compliance,25 a liberal interpretation of procedural rules in this labor case is more in keeping with the constitutional mandate to secure social justice.26

First Issue:Timeliness of AppealUnder the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should be filed within 10 days from receipt thereof.27

Petitioner’s claim that respondents filed their appeal beyond the required period is not substantiated. In the pleadings before us, petitioner fails to indicate when respondents received the Decision of the labor arbiter. Neither did the petitioner attach a copy of the challenged appeal. Thus, this Court has no means to determine from the records when the 10-day period commenced and terminated. Since petitioner utterly failed to support his claim that respondents’ appeal was filed out of time, we need not belabor that point. The parties alleging have the burden of substantiating their allegations.28

Second Issue:Nature of EmploymentPetitioner claims that he was not a managerial employee, and therefore, entitled to the award granted by the labor arbiter.Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor standards provide the working conditions of employees, including entitlement to overtime pay and premium pay for working on rest days.29 Under this provision, managerial employees are "those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision."30

The Implementing Rules of the Labor Code state that managerial employees are those who meet the following conditions:

"(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof;"(2) They customarily and regularly direct the work of two or more employees therein;"(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to the hiring and firing and as to the promotion or any other change of status of other employees are given particular weight."31

The Court disagrees with the NLRC’s finding that petitioner was a managerial employee. However, petitioner was a member of the managerial staff, which also takes him out of the coverage of labor standards. Like managerial employees, officers and members of the managerial staff are not entitled to the provisions of law on labor standards.32 The Implementing Rules of the Labor Code define members of a managerial staff as those with the following duties and responsibilities:

"(1) The primary duty consists of the performance of work directly related to management policies of the employer;"(2) Customarily and regularly exercise discretion and independent judgment;"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii) execute under general supervision special assignments and tasks; and"(4) who do not devote more than 20 percent of their hours worked in a workweek to activities which are not directly and closely related to the performance of the work described in paragraphs (1), (2), and (3) above."33

As shift engineer, petitioner’s duties and responsibilities were as follows:"1. To supply the required and continuous steam to all consuming units at minimum cost."2. To supervise, check and monitor manpower workmanship as well as operation of boiler and accessories."3. To evaluate performance of machinery and manpower."4. To follow-up supply of waste and other materials for fuel."5. To train new employees for effective and safety while working."6. Recommend parts and supplies purchases."7. To recommend personnel actions such as: promotion, or disciplinary action."8. To check water from the boiler, feedwater and softener, regenerate softener if beyond hardness limit."9. Implement Chemical Dosing."10. Perform other task as required by the superior from time to time."34

The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a member of the managerial staff. His duties and responsibilities conform to the definition of a member of a managerial staff under the Implementing Rules.Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the operation of the machines and the performance of the workers in the engineering section. This work necessarily required the use of discretion and independent

judgment to ensure the proper functioning of the steam plant boiler. As supervisor, petitioner is deemed a member of the managerial staff.35

Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he was the foreman responsible for the operation of the boiler.36 The term foreman implies that he was the representative of management over the workers and the operation of the department.37 Petitioner’s evidence also showed that he was the supervisor of the steam plant.38 His classification as supervisor is further evident from the manner his salary was paid. He belonged to the 10% of respondent’s 354 employees who were paid on a monthly basis; the others were paid only on a daily basis.39

On the basis of the foregoing, the Court finds no justification to award overtime pay and premium pay for rest days to petitioner.WHEREFORE, the Petition is DENIED. Costs against petitioner.

ARCO METAL PRODUCTS, CO., G.R. No. 170734INC., and MRS. SALVADOR UY,                                                  Petitioners,                              Present:                                                                    QUISUMBING, J.,

                                      Chairperson,                -  versus  -                                  TINGA,

          VELASCO, andBRION,  JJ.

                      SAMAHAN NG MGA MANGGAGAWA         SA ARCO METAL-NAFLU (SAMARM-NAFLU),                                                   Promulgated:                     Respondent.                                                                    May 14, 2008 x---------------------------------------------------------------------------x 

D E C I S I O N 

TINGA, J.:  

This treats of the Petition for Review[1] of the Resolution[2] and Decision[3]  of  the  Court  of  Appeals  dated  9  December  2005 and 29 September 2005, respectively in  CA-G.R. SP No.  85089  entitled Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,[4] which ruled that the 13th month pay, vacation leave and sick leave conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they rendered within a year.

 Petitioner is a company engaged in the manufacture of metal products, whereas

respondent is the labor union of petitioner’s rank and file employees.  Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave encashment of three

union members in amounts proportional to the service they actually  rendered in a year, which is less than a full twelve (12) months.  The employees were: 

1. Rante Lamadrid        Sickness       27 August 2003 to 27 February 20042. Alberto Gamban       Suspension   10 June 2003 to 1 July 20033. Rodelio Collantes     Sickness        August 2003 to February 2004 

 Respondent protested the prorated scheme, claiming that on several occasions

petitioner did not prorate the payment of the same benefits  to seven (7) employees who had not served for  the full 12 months.  The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004.  According to respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB).  The parties submitted the case for voluntary arbitration.           The voluntary arbitrator, Apron  M. Mangabat, ruled in favor of petitioner and found that the giving of  the contested benefits in full, irrespective of the actual service rendered within one year has not  ripened  into a practice.  He noted  the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full of the benefit was a mere error.  He also interpreted the phrase  “for each year of service” found in the pertinent CBA provisions to mean that an employee must have rendered  one year of service in order to be entitled to the full benefits provided in the CBA.[5]

           Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the Court of Appeals, imputing serious error to Mangabat’s conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the application of prorated payments of leave benefits to covered employees.  The appellate court found that petitioner, however, had an existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim that   petitioner  erred  in  paying  full  benefits  to  its seven employees.  The appellate court noted that aside from the affidavit of petitioner’s officer, it has not presented any evidence in support of its position that it has no voluntary practice of granting the contested benefits in full and without regard to the service actually rendered within the year.  It also questioned why it took petitioner eleven (11) years before it was able to discover the alleged error.  The dispositive portion  of the court’s decision reads: 

            WHEREFORE,  premises considered,  the instant petition is hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation leave and sick leave conversions to cash shall be paid  to the employees in full, irrespective of the actual service rendered within a year.[7]

            Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition. 

          Petitioner submits that the Court of Appeals erred when it ruled that the  grant of 13th month pay, bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary employer practice and, consequently, the prorated payment of the said benefits does not constitute diminution of benefits under Article 100 of the Labor Code.[8]

          The petition ultimately fails.           First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually rendered by an employee to the company. According to petitioner, there is a one-year cutoff  in the entitlement to the benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the existing law.   

We agree with petitioner on the first issue.  The applicable CBA provisions read: 

ARTICLE XIV-VACATION LEAVE 

Section 1.  Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled  to sixteen (16) days vacation leave  with pay for each year of service. Unused leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every 1st Saturday of December of each year.

 However, if the 1st Saturday of December falls in December 1,

November 30 (Friday) being a holiday, the management will give the cash conversion of leaves in November 29.

 Section 2. In case of resignation or retirement of an employee, his

vacation leave shall be paid proportionately to his days of service rendered during the year.

  ARTICLE XV-SICK LEAVE

 Section 1.  Employees/workers covered by this agreement who have

rendered at least one (1) year of service shall be entitled  to sixteen (16) days of sick leave  with pay for each year of service. Unused  sick leave  shall not be cumulative but shall be converted into its cash equivalent and shall become due and payable every 1st Saturday of December of each year.              Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company physician or by a licensed physician.             Section 3. All commutable earned leaves will be paid proportionately upon retirement or separation. 

ARTICLE XVI – EMERGENCY LEAVE, ETC. 

            Section 1. The Company shall grant six (6) days emergency leave to employees covered by this agreement and if unused shall be converted into cash and become due and payable on the 1st Saturday of December each year.             Section 2.  Employees/workers covered by this agreement who have rendered at least one (1) year of service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employee’s legitimate spouse gave birth.  Said benefit shall be non-cumulative and non-commutative and shall be deemed in compliance with the law on the same.             Section 3.  Maternity leaves for married female employees shall be in accordance with the SSS Law plus a cash grant of P1,500.00 per month. x x x

ARTICLE XVIII- 13TH MONTH PAY & BONUS             Section 1.  The Company shall grant 13th Month Pay to all employees covered by this agreement. The basis of computing such pay shall be the basic salary per day of the employee multiplied by 30 and shall become due and payable every 1st Saturday of December.             Section 2. The Company shall grant a bonus to all employees as practiced which shall be distributed on the 2nd Saturday of December.              Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.[9] (Underscoring ours)

 There is no doubt that in order to be entitled to the full monetization of sixteen

(16) days of vacation and sick leave, one must have rendered at least one year of service. The clear wording of the provisions does not allow any  other interpretation.  Anent the 13th month pay and bonus, we agree with the findings of  Mangabat that the CBA provisions did not give any meaning different  from that given by the law, thus it should be computed at 1/12 of the total compensation which an employee receives for the whole calendar year.  The bonus is also equivalent to the amount of the 13th month pay given, or in proportion to the actual service rendered by an employee within the year.  

 On the second issue, however, petitioner founders. As a general rule, in petitions for review under Rule 45,  the Court,  not being a

trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.[10]  The rule, however, admits of several exceptions, one of which is when the findings of the Court of Appeals are contrary to that of the lower tribunals.  Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the voluntary arbitrator.

 

Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:

           Name                     Reason                                 Duration1. Percival Bernas             Sickness       July 1992 to November 19922. Cezar Montero             Sickness       21 Dec. 1992 to February 19933. Wilson Sayod               Sickness       May 1994 to July 19944. Nomer Becina              Suspension   1 Sept. 1996 to 5 Oct. 19965. Ronnie Licuan               Sickness       8 Nov. 1999 to 9 Dec. 19996. Guilbert Villaruel           Sickness       23 Aug. 2002 to 4 Feb. 20037. Melandro Moque          Sickness       29 Aug. 2003 to 30 Sept. 2003[11]

  Petitioner claims that its full payment of benefits  regardless of the length of

service to the company does not constitute voluntary employer practice.  It points out that the payments had been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003.  According to petitioner, it was only in 2003 that the accounting department discovered the error “when there were already three (3) employees involved with prolonged absences and the error was corrected by implementing the pro-rata payment of benefits pursuant to law and their existing CBA.”[12] It adds that the seven earlier cases of full payment of benefits  went  unnoticed considering the  proportion of one employee concerned (per year) vis à vis the 170 employees  of the company.   Petitioner describes the situation as a “clear oversight” which should not be taken against it.[13] To further bolster its case, petitioner argues that for a grant of a benefit to be considered a practice, it should have been practiced over a long period of time and must be shown to be consistent, deliberate and intentional, which is not what happened in this case.  Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate the giving of full benefits regardless of the length of service, proof that the grant has  not  ripened into company practice.

 We disagree. Any benefit and supplement being enjoyed by employees cannot be reduced,

diminished, discontinued or eliminated by the employer.[14]  The principle of non-diminution of benefits  is founded on the Constitutional mandate to "protect the rights of workers and promote their welfare,”[15] and  “to afford labor full protection.”[16] Said mandate in turn is the basis of Article 4 of the Labor Code which states that “all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations shall be rendered in favor of labor.” Jurisprudence is replete with cases which recognize the right of employees  to benefits which were voluntarily given by the employer and which ripened into company practice.  Thus in Davao Fruits Corporation v.  Associated Labor Unions, et al.[17] where an employer had freely and continuously included in the computation of the 13th month pay those items that were expressly excluded by the law, we held that the act which was  favorable to the employees though not conforming to law had thus ripened into a practice and could not  be withdrawn, reduced, diminished, discontinued or eliminated.   In Sevilla Trading Company v. Semana,[18] we ruled that the employer’s act of including non-basic benefits in the computation of the 13 th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn.  Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,[19]  the

Court ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent workers after finding that  said workers had received these benefits for almost four years until the grant was stopped due to a different interpretation of the CBA provisions. We held that the employer   cannot unilaterally  withdraw  the  existing  privilege  of commutation or conversion to cash given to said workers, and as also noted that the employer had in fact granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to some intermittent workers.

 In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a

policy of freely, voluntarily and consistently granting full benefits to its employees regardless of  the length of service rendered.  True, there were only a total of seven employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years within which a company practice  must be exercised in order to constitute voluntary company practice.[20] Thus, it can be six (6) years,[21] three (3) years,[22] or even as short as two (2) years.[23] Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an error,  supported only by an affidavit of its manufacturing group head  portions of which read:

 5. 13th month pay, bonus, and cash conversion of unused/earned

vacation leave, sick leave and emergency leave are  computed and paid in full to employees who rendered  services to the company for the entire year and proportionately to those employees who rendered service to the company for a period less than one (1) year or twelve (12) months in accordance with the CBA provision relative thereto.

 6.  It was never the intention much less the policy of the

management to grant the aforesaid benefits to the employees in full regardless of whether or not the employee has rendered  services  to the company  for the entire year, otherwise, it would be unjust and inequitable not only to the company but to other employees as well.[24]

  

          In cases involving money claims of employees, the employer has the burden  of  proving  that  the  employees  did  receive  the  wages   and  benefits  and  that  the  same were paid in accordance with law.[25]

[G.R. No 140692.  November 20, 2001]ROGELIO C. DAYAN, petitioner, vs. BANK OF THE PHILIPPINE ISLANDS, XAVIER

LOINAZ, OSCAR CONTRERAS, and GERLANDA DE CASTRO,respondents.D E C I S I O N

VITUG, J.:The petition for review seeks the reversal of the decision and resolution, dated 30

April 1999 and 30 August 1999, respectively, of the Court of Appeals in CA-G.R. SP No. 51421 reversing the resolution of 30 August 1996 of the National Labor Relations Commission ("NLRC").

Petitioner Rogelio C. Dayan started his employment on 30 June 1956 with the Commercial Bank and Trust Company.  He rose from the ranks from that of a mere clerk to FX clerk in 1957, FX Bookkeeper in 1959, Chief Bookkeeper in 1964, Supervisor of the Administrative Department in 1969, and Supervisor of the Reconciliation Department in 1978, which latter position he continuously occupied until respondent Bank of the Philippine Islands acquired and absorbed the Commercial Bank and Trust Company.  In 1981, Dayan was promoted Administrative Assistant by respondent bank in its centralized accounting office.  He held several positions thereafter - Assistant Manager of Internal Operations in 1983, Assistant Manager of Correspondent Bank in 1988, Assistant Manager of Branch Operations in 1990, Assistant Manager of the Supplies Inventory in 1991, and then Senior Assistant Manager of the Supplies Inventory in 1991-1992.  In addition to the series of promotions, Dayan was the recipient of various commendations.

Sometime in December 1991, the post of Purchasing Officer became vacant as its former occupant had retired.  The vacated position was offered to Dayan which he initially declined but, due to the insistence of his superiors, he later accepted on a temporary basis in February 1993.

On 10 June 1993, Assistant Vice President Gerlanda E. De Castro of the bank, in a memorandum of even date, placed petitioner under suspension.  The full text of the communication read:"Date          :              June 10, 1993For              :              SAM Rogelio C. DayanRE                             :              SUSPENSION----------------------------------------------------------------------------------------------------------------"This is to advice that you are placed under suspension effective immediately, until further notice, due to matters/issues presented to you during our meeting this morning with SVP OL Contreras, VP EO Adre, SM VGuillermo and myself."[1]

It would appear that respondent bank had earlier conducted interviews and took statements given by bank suppliers, forwarders and bank employees regarding certain supposed malpractices committed by petitioner during his term as a purchasing officer of the bank.  The report,[2] dated 07 July 1993, signed and noted by Rodolfo D. Bernejo and Victor M. Guillermo, Manager and Senior Manager, respectively, contained the alleged misconduct committed by petitioner, such as in asking for a 5% commission on purchase orders, "donations totaling P5K" to pay off his medical bills, and a bottle of cognac from Alta Printing Services, as well as for overpricing the BPI Family Bank's passbook, soliciting a gift (refrigerator) for his daughter's wedding from Bind Master Enterprises and JLI Transport, and obtaining gifts from suppliers on the occasion of his birthday in March 1993.  The report also made negative findings and observations about his work performance.

On 14 June 1993, petitioner wrote a memorandum to the bank narrating what had transpired in his meeting with the bank on 10 June 1993 where he denied all the accusations against him and contested his preventive suspension.  In another 11-page letter of 20 August 1993 to the Bank, he refuted, point by point, the charges leveled against him.  His denials and plea for compassion notwithstanding, petitioner was dismissed by respondent bank via a notice of termination, dated 25 October 1993, signed by AVP Gerlanda de Castro.[3] In a letter of confession, dated 28 October 1993, petitioner ultimately admitted his infractions and instead asked for financial assistance. [4] He, at the same time, executed an undated "Release Waiver and Quitclaim" acknowledging receipt of P400,000.00 financial assistance from the bank and thereby releasing and discharging it, as well as its officers, stockholders and directors, including the bank "Retirement Plan,"

from any action or claim arising from his employment with the bank and membership in the retirement plan.[5]

Subsequently, however, petitioner claimed that the letter and the quitclaim were signed by him under duress.  On 14 February 1994, he filed a case for Illegal Dismissal and Illegal Suspension, with a prayer for an award of retirement benefits, before the Labor Arbiter.

In his decision of 30 June 1995, the Labor Arbiter upheld the validity of the dismissal of petitioner based on loss of trust and confidence and denied his claim for retirement benefits and damages; thus:"All told, in the light of a justifiable cause for dismissal, complainant as supervisory/managerial employee, having breached the trust and confidence reposed on him by respondent and substantial compliance to due process, complainant's dismissal is deemed valid and legal."Consequently, his claim for retirement benefits and damages having no factual or legal leg to stand on, must and is hereby DENIED."ACCORDINGLY, premises considered, the instant case is hereby DISMISSED for lack of merit."[6]

On appeal, the NLRC reversed the decision of the labor arbiter and declared the dismissal to be illegal on the ground that petitioner was denied due process ratiocinating that a hearing should have been afforded petitioner for a chance to confront the witnesses against him.  In its ruling of 30 August 1996, the NLRC concluded:"IN VIEW OF THE FOREGOING, respondent is hereby ordered to reinstate complainant Rogelio Dayan to his former position without loss of seniority rights and other privileges appurtenant thereto with full backwages from the time his salary was withheld from him up to [the] time of his retirement, less the amount already received by him."[7]

Respondent bank filed with this Court, docketed G.R. No. 127115, a petition for certiorari questioning the NLRC decision.  The Court referred the petition to the Court of Appeals.  The appellate court rendered its decision on 30 April 1999 and resolution of 30 August 1999, reversing the judgment of the NLRC.

In its petition for review before this Court, petitioner argues that the Court of Appeals has wrongly relied on unsworn statements taken by the bank from its contractual employees.  Petitioner believes that the factual conclusions of the NLRC which has acquired expertise on the matters entrusted to it should have instead been respected by the appellate court.

The Court is not convinced that the Court of Appeals has committed an error in holding to be justifiable the dismissal of petitioner from respondent bank.  The pieces of evidence on the malpractices attributed to petitioner are simply too numerous to be ignored.

Contrary to petitioner's claim, the suppliers who complained about the mulcting activities did, in fact, execute affidavits, such as the sworn statements of Alberto Tadeo, owner of Alta Printing Services, and Jesus Ibe, owner of JLI Transport, which formed part of the records of his case.[8] Alfredo Baldonado, an employee under the supervision of petitioner, himself affirmed under oath the veracity of the suppliers' complaint and narrated still other incidents of irregularities which had come to his personal knowledge during the time he worked as a purchasing clerk under petitioner.  The charges against petitioner were supported and backed up by an audit report conducted by the bank's audit team.

Petitioner bewails his preventive suspension.  The policy of preventively suspending an employee under investigation for charges involving dishonesty is an acceptable

precautionary measure in order to preserve the integrity of vital papers and documents that may be material and relevant to the case and to which he, otherwise, would have access by virtue of his position.[9]

It would appear that it was only after an exhaustive investigation that respondent bank finally decided to terminate the services of petitioner on 25 October 1993 via a "Notice of Termination."

The Court of Appeals was convinced that petitioner's dismissal had been justified under Article 282 of the Labor Code.  It held:"`(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative.'

"x x x          x x x      x x x"The statements of witnesses against respondent amply established that respondent was guilty of malfeasance against his employer.  Thus, Alberto Tadeo, a supplier of printing materials for the company, attested that respondent demanded a 5% commission, a `donation' of P2,000.00 and a bottle of cognac for his birthday.  Witness Jesus Ibe further testified that respondent demanded a refrigerator for his daughter's wedding and that when Ibe declined, respondent offered to shoulder half of the cost which he proposed to pay in installments to Ibe.  Witness George Chee, another supplier, testified that respondent also asked for a refrigerator for his daughter's wedding.  These statements are apart from the verbal complaints of other suppliers against respondent for extortion of a P5,000.00 to P7,000.00 commission."The suppliers' accounts have been substantially corroborated by respondent's own subordinates who directly observed his dealings with petitioner's suppliers.  Among these are petitioner's purchasing clerk, Alfredo Baldonado, respondent's own secretary Sharon Lopez, and typist Joel Lim, all of whom testified that respondent asked for gifts from suppliers.  The bank's janitor also testified that respondent deliberately delayed the facilitation of the documents of suppliers, by among others, asking for a massage while suppliers waited for the signing of vouchers."These sworn statements are replete with details, which to the mind of this court, are clear indications of the veracity of the witness' statements.  They evince substantive and reasonable causes that would justify dismissal on the ground of loss of trust and confidence."Juxtaposed with respondent's sweeping denials and imputations of evil motives against these witnesses on the theory that the suppliers, his subordinates and even the audit team which conducted the investigation were all engaged in a grand conspiracy to bring him down, the witnesses' statements are certainly more believable.  Viewed together with respondent's own letter admitting his liability, it is easy to see that petitioner had reasonable basis to lose confidence in respondent."[10]

Petitioner was not just a rank and file employee.  He held the critical posts of Senior Assistant Manager of the Supplies Inventory and Purchasing Officer of the bank at the time of his dismissal, handling fiduciary accounts and transactions and dealing with the bank's suppliers.  His positions carried authority for the exercise of independent judgment and discretion[11]characteristic of sensitive posts in corporate hierarchy where a wide latitude could be supposed in setting up stringent standards for continued employment.

A bank, its operation being essentially imbued with public interest, owes great fidelity to the public it deals with.  In turn, it cannot be compelled to continue in its employ a person in whom it has lost trust and confidence and whose continued employment would patently be inimical to the bank interest.  The law, in protecting the rights of labor,

authorized neither oppression nor self-destruction of an employer company which itself is possessed of rights that must be entitled to recognition and respect.[12]

The Court of Appeals, in addressing the issue of lack of due process raised by petitioner, ruled:"Instead, what he vigorously protests is the alleged lack of due process which attended his dismissal.  He asserts that he was not fully given the chance to air his side."We rule in favor of respondent on this point."The law requires that the employer must furnish the worker sought to be dismissed with two written notices before termination of an employee can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss him.  (International Pharmaceuticals, Inc. v. National Labor Relations Commission, 287 SCRA 213 [1998]) Apart from this, a hearing where the employee can explain his side is also necessary."In the case at bench, it may be recalled that after complaints were received by the management, respondent was called to a meeting on June 10, 1993, where he denied charges against him.  Right after the meeting, he was given a notice of preventive suspension.  During the period of his suspension, the bank's audit team conducted an investigation and took statements of witnesses against respondent.  Respondent also filed his written explanation.  After the investigation, respondent was given a notice of dismissal."From this sequence of events, it is clear that petitioner failed to comply with the notice and hearing requirement of the law.  The preliminary meeting between respondent and his superiors is not sufficient compliance with these requirements, as it was, as observed by the NLRC, merely exploratory and no witnesses were presented against him.  It is doctrinal that a consultation or conference with the employee is not a substitute for the actual observance of notice and hearing.  (Pepsi Cola Bottling Co. v. National Labor Relations Commission, 210 SCRA 276 [1992]; Equitable Banking Corporation v. National Labor Relations Commission, supra.) Moreover, where the employee denies charges against him, a hearing is necessary to thresh out any doubt.  (Roche [Philippines] v. National Labor Relations Commission, 178 SCRA 386 [1989])"Settled is the rule that the twin requirements of notice and hearing are indispensable for a dismissal to be validly effected.  (Falguera v. Linsangan, 251 SCRA 365 [1995] However, when the dismissal is effected for a just and valid cause, as in this case, the failure to observe procedural requirements does not invalidate or nullify the dismissal of an employee.  Hence, if the dismissal of an employee is for a just and valid cause but he is not accorded due process, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of due process.  (Agao v. National Labor Relations Commission, supra.)"The dismissal of an employee must be for a just or authorized cause and after due process.  Petitioner failed to comply with the second requirement.  For such omission, an appropriate sanction should be imposed which generally varies depending upon the facts of each case and gravity of the omission.  (Mabaylan v. National Labor Relations Commission, 203 SCRA 570 [1991]; Wenphil Corporation v. National Labor Relations Commission, 170 SCRA 69 [1994] In the case at bench, we rule that the amount of P5,000.00 is ample indemnity under the circumstances."[13]

The now prevailing rule has recently been handed down in Ruben Serrano vs. NLRC.[14] The Court has there clarified that -

"Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with Due Process Clause of the Constitution.  The time for notice and hearing is at the trial stage.  Then that is the time we speak of notice and hearing as the essence of procedural due process.  Thus, compliance by the employer with the notice requirement before he dismisses an employee does not foreclose the right of the latter to question the legality of his dismissal.  As Art. 277(b) provides, `Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission.'"Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the employer-employee relationship the right to terminate their relationship by giving notice to the other one month in advance.  In lieu of notice, an employee could be laid off by paying him a mesada equivalent to his salary for one month.  This provision was repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950.  But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted reviving the mesada.  On June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving of advance notice or the payment of compensation at the rate of one-half month for every year of service."The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which was to give the employer the opportunity to find a replacement or substitute, and the employee the equal opportunity to look for another job or source of employment.  Where the termination of employment was for a just cause, no notice was required to be given to the employee.  It was only on September 4, 1981 that notice was required to be given even where the dismissal or termination of an employee was for cause.  This was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code.  And it was still much later when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989.  It cannot be that the former regime denied due process to the employee.  Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause and without prior notice to his employer, his act should be void instead of simply making him liable for damages."The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer or the latter's immediate family or duly authorized representatives, or other analogous cases)."[15]

In fine, the lack of notice and hearing is considered as being a mere failure to observe a procedure for the termination of employment which makes the dismissal ineffectual but not necessarily illegal.  The procedural infirmity is then remedied by ordering the payment to the employee his full backwages from the time of his dismissal until the court finally rules that the dismissal has been for a valid cause.  Re-examining the Wenphil doctrine, the Court has concluded:"Not all notice requirements are requirements of due process.  Some are simply part of a procedure to be followed before a right granted to a party can be exercised.  Others are simply an application of the Justinian precept, embodied in the Civil Code, to act with

justice, give everyone his due, and observe honesty and good faith toward one's fellowmen.  Such is the notice requirement in Arts. 282-283.  The consequence of the failure either of the employer or the employee to live up to this precept is to make him liable in damages, not to render his act (dismissal or resignation, as the case may be) void.  The measure of damages is the amount of wages the employee should have received were it not for the termination of his employment without prior notice.  If warranted, nominal and moral damages may also be awarded.

"x x x          x x x      x x x"In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination of employment was due to an authorized cause, then the employee concerned should not be ordered reinstated even though there is failure to comply with the 30-day notice requirement.  Instead, he must be granted separation pay in accordance with Art. 283, to wit:

"In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one month for every year of service, whichever is higher.  In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher.  A fraction of at least six months shall be considered one (1) whole year.

"If the employee's separation is without cause, instead of being given separation pay, he should be reinstated.  In either case, whether he is reinstated or only granted separation pay, he should be paid full backwages if he has been laid off without written notice at least 30 days in advance."On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstated.  However, he must be paid backwages from the time his employment was terminated until it is determined that the termination of employment is for a just cause because the failure to hear him before he is dismissed renders the termination of his employment without legal effect."WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate 13th month pay, in addition, full backwages from the time his employment was terminated on October 11, 1991 up to the time the decision herein becomes final.  For this purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary awards to petitioner."[16]

Although his reinstatement would then be out of the question, petitioner could have been entitled, nevertheless, to backwages from the time of his termination on 25 October 1993 until his retirement on 24 March 1994 or a period of five (5) months had it not been for his duly executed letter of 28 October 1993 and "Release, Waiver and Quitclaim," acknowledging receipt of P400,000.00 from the bank, thereby releasing and discharging it, as well as its officers, stockholders, directors and the Bank Retirement Plan, from any action or claim arising from his employment with the bank and membership in the Retirement Plan.  The documents read:"Dear Sir/Madam:

"I received your letter dated 25 October 1993 terminating my employment for the reason stated therein.  I admit the fault attributed to me and accept all the consequences of my infraction, including the forfeiture of whatever benefits and interests I may have under the Bank's Retirement Plan and policies, without any reservation."I however appeal for humanitarian considerations and request Management to grant me financial assistance to help me endure these difficult times.  I understand that whatever amount Management might grant me will be purely out of its generosity and not because of any legal obligation."Thank you."[17]

The document of "Release, Waiver and Quitclaim" reads:"THAT I, ROGELIO C. DAYAN, of legal age, Filipino citizen and a resident of 50 Bulusan Street, Quezon City, Metro Manila, acknowledge that my employment with Bank of the Philippine Islands (hereinafter called the `Bank') validly ceased effective 25 October 1993, and that I have received a financial assistance from the Bank in the amount of Four Hundred Thousand Pesos (P400,000.00), Philippine currency."Furthermore, and in consideration of the foregoing –"1. I acknowledge the value of the opportunity afforded to me to be of service to the Bank."2. I release, remise and forever discharge the Bank, its stockholders, officers, directors, agents or employees, and the Bank's Retirement Plan and its trustee, from any action, claim for sum of money, or other obligations arising from all incidents of my employment with the Bank and membership in the aforesaid Retirement Plan or the cessation of such employment or membership."3. I acknowledge that I have received all amounts that are now or in the future may be due me from the Bank."4. I will not at any time, in any manner whatsoever, directly or indirectly engage in any activity prejudicial to the interest of the Bank, its stockholders, officers, directors, agents or employees, and will not disclose any confidential information concerning the business of the Bank."5. I acknowledge that I have no cause of action, compliant, case or grievance whatsoever against the Bank, its stockholders, officers, directors, agents or employees, nor against the Bank's Retirement Plan and its trustee, in respect of any matter incident to or arising out of my employment with the Bank or membership in the aforesaid Retirement Plan, or the cessation of such employment or membership.  I further warrant that I will institute no action against the Bank, its stockholders, officers, directors, agents or employees nor against the Bank's Retirement Plan and its trustee, and will not continue to prosecute any pending action which I may have filed or which may have been filed on my behalf against them."6. I manifest that the grant to me by the Bank of the financial assistance hereinbefore stated shall not be taken by me, my heirs or assigns as a confession or admission of liability on the part of the Bank, its stockholders, officers, directors, agents or employees for any matter, cause, demand or claim for damage which I may have against any or all of them.  I confirm that the Bank has given to me the aforesaid financial assistance not as a matter of legal obligation, but as a pure act of generosity."7. I agree that the Bank may bring action to seek an award for damages resulting from my breach of this release, waiver and quitclaim.  Such award shall include but not be limited to the return of the financial assistance given to me by the Bank."8.               I finally declare that I have read this entire document, the contents of which have been explained to me and which I acknowledge to understand, and that the entire

release, waiver and quitclaim hereby given are made by me willingly, voluntarily and with full knowledge of my rights under the law."[18]

Petitioner would now claim that the letter and quitclaim, aforequoted, were obtained through deception and coercion.

The contention hardly persuades.Far from having been pressured into executing the documents, it would appear that

petitioner even haggled and pled for some consideration from respondent bank invoking his longevity of service in the company. Sicangco vs. NLRC[19]explained -"Quitclaims executed by employees are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the worker's legal rights.  Neither does acceptance of benefits estop the employee from prosecuting his employer for unfair labor practice acts.  The reason is plain.  Employer and employee obviously do not stand on the same footing."Nevertheless, the above rule is not without exception, as this Court held in Periquet v. NLRC:"`Not all waivers and quitclaims are invalid as against public policy.  If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind.  It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction.  But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking."[20]

Petitioner was a managerial employee and held the rank of Senior Assistant Manager with a vast experience behind him.  As so aptly observed by the Labor Arbiter –"Moreover, we do not believe that a person such as complainant occupying a sensitive position after rising from the ranks would be willing to compromise his future by agreeing to execute a document highly prejudicial to his interest.  It was simply not a question of choosing between the devil and the deep blue sea, but more of a case of one making the most of worse situation.  Complainant knew and was well aware of the consequences of his act hence, his act of repentance at the last moment to save his lost 37 years of service."[21]

Surely, petitioner cannot now be allowed to renege on the voluntary settlement of his claim with the bank.

WHEREFORE, the decision of the Court of Appeals reinstating the decision of the Labor Arbiter and setting aside the NLRC's decision is AFFIRMED.

[G. R. No. 129329.  July 31, 2001]ESTER M. ASUNCION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

Second Division, MABINI MEDICAL CLINIC and DR. WILFRIDO JUCO, respondents.

D E C I S I O NKAPUNAN, J.:

In her petition filed before this Court, Ester Asuncion prays that the Decision, dated  November 29, 1996, and the Resolution, dated February 20,1997, of the public respondent National Labor Relations Commission, Second Division, in NLRC CA. 011188 which reversed the Decision of  the Labor Arbiter, dated May 15, 1996 be set aside.

The antecedents of this case are as follows:

On August 16, 1993, petitioner Ester M. Asuncion was employed as an accountant/bookkeeper by the respondent Mabini Medical Clinic.  Sometime in May 1994,  certain officials of the NCR-Industrial Relations Division of the Department of Labor and Employment conducted a routine inspection of the premises of the respondent company and discovered upon the disclosure of the petitioner of (documents) violations of the labor standards law such as the non-coverage from the SSS of the employees.  Consequently, respondent Company was made to correct these violations.

On August 9, 1994, the private respondent, Medical Director Wilfrido Juco, issued a memorandum to petitioner charging her with the following offenses:

1. Chronic Absentism (sic) – You have incurred since Aug. 1993 up to the present 35 absences and 23 half-days.

2. Habitual tardiness – You have late (sic) for 108 times.  As shown on the record book.

3. Loitering and wasting of company time – on several occasions and witnessed by several employees.

4. Getting salary of an absent employee without acknowledging or signing for it.5. Disobedience and insubordination - continued refusal to sign memos given to

you.[1]

Petitioner was required to explain within two (2) days why she should not be terminated based on the above charges.

Three days later, in the morning of August 12, 1994, petitioner submitted her response to the memorandum.  On the same day, respondent Dr. Juco, through a letter dated August 12, 1994, dismissed the petitioner on the ground of disobedience of lawful orders and for her failure to submit her reply within the two-day period.

This prompted petitioner to file a case for illegal termination before the NLRC. In a  Decision, dated  May 15,  1996, Labor Arbiter Manuel Caday rendered judgment

declaring that the petitioner was illegally dismissed.  The Labor Arbiter found that the private respondents were unable to prove the allegation of chronic absenteeism as it failed to present in evidence the time cards, logbooks or record book which complainant signed recording her time in reporting for work. These documents, according to the Labor Arbiter, were in the possession of the private respondents.  In fact, the record book was mentioned in the notice of termination.  Hence, the non-presentation of these documents gives rise to the presumption that these documents were intentionally suppressed since they would be adverse to private respondent’s  claim.  Moreover, the Labor Arbiter ruled that the petitioner’s absences were with the conformity of the private respondents as both parties had agreed beforehand that petitioner would not report  to work on  Saturdays.  The handwritten listing of the days when complainant was absent from work or late in reporting for work and even the computerized print-out, do not suffice to prove that petitioner’s absences were unauthorized as they could easily be manufactured.[2] Accordingly, the dispositive portion of the decision states, to wit:WHEREFORE, Premises Considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal and ordering the respondent company to immediately reinstate her to her former position without loss of seniority rights and to pay the complainant’s backwages and other benefits, as follows:

1) P73,500.00 representing backwages as of the date of this decision until she is actually reinstated in the service;

2) P20,000.00 by way of moral damages and another P20,000.00 representing exemplary damages; and

3) 10% of the recoverable award in this case representing attorney’s fees.

SO ORDERED.[3]

On appeal, public respondent NLRC rendered the assailed decision which set aside the Labor Arbiter’s ruling.  Insofar as finding the private respondents as having failed to present evidence relative to petitioner’s absences and tardiness, the NLRC agrees with the Labor Arbiter.  However, the NLRC ruled that petitioner had admitted the tardiness and absences though offering justifications for the infractions. The decretal portion of the assailed  decision reads:WHEREFORE, premises considered, the appealed  decision  is hereby VACATED and SET ASIDE and a NEW ONE entered dismissing the complaint for illegal dismissal for lack of merit.However, respondents Mabini Medical Clinic and Dr. Wilfrido Juco are jointly and solidarily ordered to pay complainant Ester Asuncion the equivalent of her three (3) months salary for and as a penalty for respondents’ non-observance of complainant’s  right  to due process.SO ORDERED.[4]

Petitioner filed a motion for reconsideration which the public respondent denied in its Resolution, dated February 19, 1997.  Hence, petitioner through a petition for certiorari under Rule 65 of the Rules of Court seeks recourse to this Court and raises the following issue:THE PUBLIC RESPONDENT ERRED IN FINDING THAT THE PETITIONER WAS DISMISSED BY THE PRIVATE RESPONDENT FOR A JUST OR AUTHORIZED CAUSE.

The petition is impressed with merit.Although, it is a legal tenet that factual findings of administrative bodies are entitled

to great weight and respect, we are constrained to take a second look at the facts before us because of the diversity in the opinions of the Labor Arbiter and the NLRC.[5] A disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court.[6]

It bears stressing that a worker’s employment is property in the constitutional sense.  He cannot be deprived of his work without due process.  In order for the dismissal to be valid, not only must it be based on just cause supported by clear and convincing evidence,[7] the employee must also be given an opportunity to be heard and defend himself. [8] It is the employer who has the burden of proving that the dismissal was with just or authorized cause.[9] The failure of the employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and backwages.[10]

In the case at bar, there is a paucity of evidence to establish the charges of absenteeism and tardiness.  We note that the employer company submitted mere handwritten listing and computer print-outs.  The handwritten listing was not signed by the one who made the same.  As regards the print-outs, while the listing was computer generated, the entries of time and other annotations were again handwritten and unsigned.[11]

We find that the handwritten listing and unsigned computer print-outs were unauthenticated and, hence, unreliable.  Mere self-serving evidence of which the listing and print-outs are of that nature should be rejected as evidence without any rational probative value even in administrative proceedings.  For this reason, we find the findings of the Labor Arbiter to be correct.  On this point, the Labor Arbiter ruled, to wit:x x x In the instant case, while the Notice of Termination served on the complainant clearly mentions the record book upon which her tardiness (and absences) was based, the respondent (company) failed to establish (through)  any of these documents and the

handwritten listing, notwithstanding, of (sic) the days when complainant was absent from work or late in reporting for work and even the computerized print-outs, do not suffice to prove the complainant’s absences were unauthorized as they could easily be manufactured. x x x[12]

In IBM Philippines, Inc. v. NLRC,[13] this Court clarified that the liberality of procedure in administrative actions is not absolute and does not justify the total disregard of certain fundamental rules of evidence.  Such that evidence without any rational probative value may not be made the basis of order or decision of administrative bodies.  The Court’s ratiocination in that case is relevant to the propriety of rejecting the unsigned handwritten listings and computer print-outs submitted by private respondents which we quote, to wit:However, the liberality of procedure in administrative actions is subject to limitations imposed by basic requirements of due process.  As this Court said in Ang Tibay v. CIR, the provision for flexibility in administrative procedure “does not go so far as to justify orders without a basis in evidence having rational probative value.”  More specifically, as held in Uichico v. NLRC:“It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases.  However, this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules.  While the rules of evidence prevailing in the courts of law or equity are not controlling in proceedings before the NLRC, the evidence presented before it must at least have a modicum of admissibility for it to be  given some probative value.  The Statement of Profit and Losses submitted by Crispa, Inc. to prove its alleged losses, without the accompanying signature of a certified public accountant or audited by an independent auditor, are nothing but self-serving documents which ought to be treated as a mere scrap of paper devoid of any probative value.”The computer print-outs, which constitute the only evidence of petitioners, afford no assurance of their authenticity because they are unsigned.  The decisions of this Court, while adhering to a liberal view in the conduct of proceedings before administrative agencies, have nonetheless consistently required some proof of authenticity or reliability as condition for the admission of documents.

In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC,[14] this Court held as incompetent unsigned daily time records presented to prove that the employee was neglectful of his duties:Indeed, the DTRs annexed to the present petition would tend to establish private respondent’s neglectful attitude towards his work duties as shown by repeated and habitual absences and tardiness and propensity for working undertime for the year 1992.  But the problem with these DTRs is that they are neither originals nor certified true copies.  They are plain photocopies of the originals, if the latter do exist.  More importantly, they are not even signed by private respondent nor by any of the employer’s representatives.  x x x.

In the case at bar, both the handwritten listing and computer print-outs being unsigned, the authenticity thereof is highly suspect and devoid of any rational probative value especially in the light of the existence of the official record book of the petitioner’s alleged absences and tardiness in the possession of the employer company.

Ironically, in the memorandum charging petitioner and notice of termination, private respondents referred to the record book as its basis for petitioner’s alleged absenteeism and tardiness. Interestingly, however, the record book was never presented in evidence.  Private respondents had possession thereof and the opportunity to present the same.  Being the basis of the charges against the petitioner, it is without doubt the best

evidence available to substantiate the allegations.  The purpose of the rule requiring the production of the best evidence is the prevention of fraud, because if a party is in possession of such evidence and withholds it, and seeks to substitute inferior evidence in its place, the presumption naturally arises that the better evidence is withheld for fraudulent purposes which its production would expose and defeat.[15] Thus, private respondents’ unexplained and unjustified non-presentation of  the record  book, which is the best evidence in its possession and control of the charges against the petitioner, casts serious doubts on the factual basis of the charges of absenteeism and tardiness.

We find that private respondents failed to present a single piece of credible evidence to serve as the basis for their charges against petitioner and consequently, failed to fulfill their burden of proving the facts which constitute the just cause for the dismissal of the petitioner.  However, the NLRC ruled that despite such absence of evidence, there was an admission on the part of petitioner in her Letter dated August 11, 1994 wherein she wrote:

I am quite surprised why I have incurred 35 absences since August 1993 up to the present.  I can only surmise that Saturdays were not included in my work week at your clinic.  If you will please recall, per agreement with you, my work days at your clinic is from Monday to  Friday without Saturday work.  As to my other supposed absences, I believe that said absences were authorized and therefore cannot be considered as absences which need not be explained (sic).  It is also extremely difficult to understand why it is only now that I am charged to explain alleged absences incurred way back August 1993.[16]

In reversing the decision of the Labor Arbiter, public respondent NLRC relied upon the supposed admission of the petitioner of her habitual absenteeism and chronic tardiness.

We do not subscribe to the findings of the NLRC that the above quoted letter of petitioner amounted to an admission of her alleged absences.  As explained by petitioner, her alleged absences were incurred on Saturdays.  According to petitioner, these should  not be considered as absences as there was an arrangement between her and the private respondents that she would not be required to work on Saturdays.  Private respondents have failed to deny the existence of this arrangement.  Hence, the decision of the NLRC that private respondent had sufficient grounds to terminate petitioner as she admitted the charges of habitual absences has no leg to stand on.

Neither have the private respondents shown by competent evidence that the petitioner was given any warning or reprimanded for her alleged absences and tardiness.  Private respondents claimed that they sent several notices to the petitioner warning her of her absences, however, petitioner refused to receive the same. On this point, the Labor Arbiter succinctly observed:The record is bereft of any showing that complainant was ever warned of her absences prior to her dismissal on August 9, 1994.  The alleged notices of her absences from August 17, until September 30, 1993, from October until November 27, 1993, from December 1, 1993 up to February 26, 1994 and the notice dated 31 May 1994 reminding complainant of her five (5) days absences, four (4) half-days and tardiness for 582 minutes (Annex "1" to "1-D" attached to respondent' Rejoinder), fail to show that the notices were received by the complainant.  The allegation of the respondents that the complainant refused to received (sic) the same is self-serving and merits scant consideration. xxx[17]

The Court, likewise, takes note of the fact that the two-day period given to petitioner to explain and answer the charges against her was most unreasonable, considering that she was charged with several offenses and infractions (35 absences, 23 half-days and 108 tardiness), some of which were allegedly committed almost a year before, not to mention the fact that the charges leveled against her lacked particularity.

Apart from chronic absenteeism and habitual tardiness, petitioner was also made to answer for loitering and wasting of company time, getting salary of an absent employee without acknowledging or signing for it and disobedience and insubordination.[18] Thus, the Labor Arbiter found that actually petitioner tried to submit her explanation on August 11, 1994 or within the two-day period given her, but private respondents prevented her from doing so by instructing their staff not to accept complainant’s explanation, which was the reason why her explanation was submitted a day later.[19]

The law mandates that every opportunity and assistance must be accorded to the employee by the management to enable him to prepare adequately for his defense.[20] In Ruffy v. NLRC,[21] the Court held that what would qualify as sufficient or “ample opportunity,” as required by law, would be “every kind of assistance that management must accord to the employee to enable him to prepare adequately for his defense.” In the case at bar, private respondents cannot be gainsaid to have given petitioner the ample opportunity to answer the charges leveled against her.

From the foregoing, there are serious doubts in the evidence on record as to the factual basis of the charges against petitioner.  These doubts shall be resolved in her favor in line with the policy under the Labor Code to afford protection to labor and construe doubts in favor of labor.[22] The consistent rule is that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.[23] Not having satisfied its burden of proof, we conclude that the employer dismissed the petitioner without any just cause.  Hence, the termination is illegal.

Having found that the petitioner has been illegally terminated, she is necessarily entitled to reinstatement to her former previous position without loss of seniority and the payment of backwages.[24]

WHEREFORE, the Decision of the National Labor Relations Commission, dated November 29, 1996 and the Resolution, dated February 20, 1997 are hereby REVERSED and SET ASIDE, and the Decision of the Labor Arbiter, dated May 15, 1996 REINSTATED.

G.R. No. 179801BANK OF THE PHILIPPINEISLANDS AND BPI FAMILY BANK,                                 Petitioners,                                                                       -versus-

HONORABLE NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION) AND MA. ROSARIO N. ARAMBULO,                               Respondents.

x----------------------------------------------------------------------------------------------- xD E C I S I O N

PEREZ, J.: 

Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court is the Decision[1] of the Court of Appeals dated 3 July 2007, as well as its Resolution [2] dated 20 September 2007 affirming the ruling of the National Labor Relations Commission (NLRC)[3] directing the payment of separation pay to respondent Ma. Rosario N. Arambulo.

 Records show that respondent was initially employed as Clerk in 1972 at Citytrust

Banking Corporation, which eventually merged with the Bank of Philippine Islands (BPI). She later became Lead Teller, then as Sales Manager, and subsequently, as Bank Manager in BPI-San Pablo, Laguna Branch in 1996. 

 On 4 October 2001, respondent was reprimanded for the improper handling and

retention of a client’s account.[4]  She was transferred to BPI Family Bank in Los Baños, Laguna on 21 November 2001.

 On 26 April 2002, a client of BPI-San Pablo, Laguna Branch requested for a

certification of her savings account.  Her balance reflected an amount less than the actual amount deposited.  Hence, BPI conducted an investigation and discovered that its bank teller, Teotima Helen Azucena (Azucena) was making unauthorized withdrawals.  A show cause memorandum was served to Azucena asking her to explain the unauthorized withdrawals.  In her written response, Azucena implicated respondent, in that the latter, on many occasions, would make temporary cash borrowings and would return the money at the end of the day through withdrawals from her own or other clients’ accounts. There were times when respondent would fail to return the money withdrawn resulting in shortages on the part of Azucena.  When respondent was transferred to Los Baños, Laguna, Azucena added that the same practice was continued by her son, Artie Arambulo.[5]

 BPI conducted a thorough investigation and discovered that respondent had

approved several withdrawals from various accounts of clients whose signatures were forged.[6]

 Azucena, in a letter dated 2 July 2002, again implicated respondent stating that the

latter instructed her to make unauthorized withdrawals.[7]  Ma. Concepcion Millares, the Assistant Manager of BPI San-Pablo, Laguna Branch,

was also directed to explain why no disciplinary action should be taken against her. Millares submitted a memorandum attributing the accommodation of unusual transactions to respondent.[8]

 On 22 August 2002, a show-cause memorandum was issued to respondent

informing her of the audit findings relating to temporary borrowings she made from the initial cash requisitions of Azucena, which support the finding of the claims that fraudulent withdrawals were used to cover the shortages/non-payment of temporary borrowings.  The report states:

 

ON TEMPORARY BORROWINGS 

Teller T.H. Azucena disclosed during the Audit investigation and in her reply to the “Show Cause Memo” from Branch Management that during your tenure as Branch Head of San Pablo-Regidor, you ordered her to request considerable amount of money from the branch cashier in the morning.  You would then borrow from her cash ranging from P500K to P1.0M without any supporting document(s).

 The “temporarily borrowed” fund/s was/were replaced either in

cash or through withdrawal from your savings account or from other clients’ accounts during the day.

 In instances when the amount borrowed from teller Azucena in the

morning was not returned in full in the afternoon, you would then instruct teller Azucena to withdraw the difference from the accounts of other depositors with sufficient balances.

 Ms. T.H. Azucena had disclosed that you have made the

“temporary borrowings” to accommodate Mr. Vicente Amante (formerly city mayor) whom you had allowed to fund his NSF honored checks after disposition of referred items or after banking hours.  The unfunded checks were covered through withdrawals or check/encashment from other depositors’ account, namely:  Mr. Emeterio Dikitan, Ms. Penny Penaloza, Mr.Cheung Tin Chee, Mr. Anderson Ong, Mr. Edmund Dee, among others.

 Audit report dated 09/12/01 covering the audit of BPI San Pablo-

Regidor with audit cut-off date June 22, 2001 further show the following: Two (2) withdrawal slips on 06/27/01 on the account of Mr. Amante

totaling P700K were validated but were not signed by said client at the time of validation.  Per audit report, you personally accomplished the withdrawal slip for P700K.  Immediately thereafter, said amount was deposited to the account of Mr. E. Dikitan. The two (2) (validated but unsigned) withdrawal slips held by you were signed by Mr. Liezl Amante Avanzado (co-depositor of V. Amante) only in the evening of 6/27/01-8:00PM.

 The unfunded checks of Mr. V Amante being deposited to other

depositor’s accounts with the branch were also covered by transfers of fund (thru the use of withdrawal/deposit slip) in the afternoon from the same account where the unfunded check was deposited.  Amount of withdrawal/transfer is the same as the unfunded check to be covered.  Amount of withdrawals ranged from P100K to 400K which were validated from 5:03PM to 6:26PM.

 Audit findings further show that you personally accomplished the

withdrawal slips of E. Dikitan for P100K dated 6/21/01 and for P400K dated 6/20/01.[9]

  Respondent admitted that she prepared the unsigned withdrawal slips on the

account of Mr. Vicente Amante (Mr. Amante) totaling P700,000.00 upon request of the latter. Respondent also explained that she processed the withdrawal slips of Mr. Emeterio Dikitan, with the latter signing later on, to expedite his transaction with the bank.  Respondent denied any knowledge with regard to the unfunded checks of Mr. Amante that were supposedly deposited to other depositor’s account.  She argued that the posting is done by the teller and only amounts over P150,000.00 pass through her.[10]

 A hearing was conducted on 2 September 2002 to give respondent opportunity to

present additional explanation. On 16 January 2003, respondent was served with the notice of termination on the

ground of loss of trust and confidence, for gross violation of policies and procedures as follows:

 a) Temporary Borrowings/Lapping – During your tenure as branch head of San Pablo-Regidor, and in connivance with Teller Teotima H. Azucena, you would order the latter to request considerable amounts of money from the branch cashier in the morning.  You would then borrow from her the said cash requisitioned and engage in private lending to accommodate a third person.  The “temporary borrowed” funds were returned/replaced either in cash or through withdrawal from your savings account or from other clients’ accounts during the day.  In instances when the amount borrowed from teller Teotima H. Azucena in the morning was not returned in full in the afternoon, you would then instruct teller Teotima H. Azucena to withdraw the difference from the accounts of other depositors with sufficient balances. Bank Internal Audit had verified 928 transactions in your and Ms. Azucena’s temporary borrowings/lapping activities which continued even after you were transferred to another branch in November 2001 and the net unaccounted amount of PHP 7,140,000.00 (of which 2,665,000.00 was reimbursed by Ms. Azucena) unauthorized withdrawals from various branch clients’ accounts. b) Two (2) withdrawals slips on June 27, 2001 on the Maxi-one account number 3413-0819-46 totaling PHP 700K were validated but unsigned by the said client at the time of validation.  Per internal audit report, you personally accomplished the withdrawal slips for PHP 700K.  Immediately thereafter, said amount was deposited to the account of 3413-0851-43.  The two (2) (validated but unsigned) withdrawal slips in your possession were signed by the co-depositor of account number 3413-0819-46 beyond banking hours of June 27, 2001. c)  You approved the deposit of unfunded checks of Maxi-one account 3413-0819-46 to other depositor’s account which were covered by transfers of funds thru the use of withdrawal/deposit slips ranging from

PHP 100K to PHP 400K in the afternoon from where the unfunded check was deposited.  The withdrawal slips were validated beyond banking hours.[11]

  On 14 March 2003, respondent filed a complaint for illegal dismissal with the labor

arbiter[12] praying for payment of separation pay, backwages and attorney’s fees. Respondent argued that the allegations of Azucena, founded on mere speculations,

presumptions and conclusions, do not establish a case for loss of trust and confidence.          

The labor arbiter found respondent’s dismissal for cause in accordance with the law.  It was established that respondent had approved withdrawals which were later proven to be forged.[13]

 On appeal, the NLRC sustained the dismissal but ordered the payment of

separation pay. 

WHEREFORE, premises considered, and in the interest of justice and equity, judgment is hereby rendered PARTIALLY GRANTING the appeal and, in conformity therewith, MODIFYING the assailed Decision dated 10 November 2003 insofar as AWARDING herein complainant-appellant separation pay/severance pay/financial assistance equivalent to one-month pay inclusive of allowances and other like benefits for every year of service counted from 20 April 1972 up to 17 January 2003, plus attorney’s fees equivalent to 10% of the total amount of the herein award and, finally, DIRECTING respondents-appellees banks to forthwith pay the said award. [14] 

            The NLRC observed that respondent failed to address the charges of 46 instances of forgeries cited in the labor arbiter’s decision.  The NLRC did not accept respondent’s invocation of good faith in affixing her signatures on the withdrawal slips and held that these numerous lapses indicate failure on her part as branch manager to oversee and ensure the implementation of an effective system of check and balances in the processing, disposition and monitoring of deposits and withdrawals, among others.  However, the NLRC believed that BPI failed to prove that respondent affixed her signatures on the deposit slips with malice or bad faith.  Hence, in the interest of justice and equity, separation pay was granted.            Petitioner filed a motion for partial reconsideration of the NLRC decision and argued that respondent’s misdeeds constitute serious misconduct and reflect upon her moral character.  Petitioner advanced that, therefore, respondent should not be given separation pay.[15]  The NLRC denied it for lack of merit.[16]

           Thereupon, petitioner filed a petition for certiorari with the Court of Appeals.  The appellate court, finding no grave abuse of discretion on the part of the NLRC, affirmed its decision and order. 

 

While upholding respondent’s dismissal for loss of trust and confidence as lawful, the appellate court declared that petitioners failed to prove by the requisite quantum of evidence that respondent was motivated by bad faith or with unlawful intent to gain, when she affixed her signatures on the withdrawal slips.  Considering that her dismissal was not based on serious misconduct or that which negatively reflected on her moral character, the appellate court justified the granting of separation pay.[17]

         In the instant petition, BPI essentially questions the award of separation pay.  It

argues that the very existence of respondent’s signature on the forged withdrawal slips in such frequency and involving huge amounts of money, transacted beyond banking hours, and without the presence of the clients, should be sufficient to hold respondent liable for fraud, thus negating the finding of good faith.[18]  BPI urges this Court to give more weight to the explanations made by its witnesses against the blanket denial of respondent.[19] BPI stresses that under the principle of command responsibility, respondent should be held liable for failure to detect the fraudulent activities and irregularities in her branch. Respondents’ omissions, as claimed by BPI, cannot be considered as simple negligence or misconduct.  Thus, BPI insists that respondents’ acts should have been properly considered in the disposition of the case.[20]           Respondent concedes that there is a legal ground to terminate her for loss of trust and confidence on account of simple neglect of duty and misconduct in not being able to properly implement and follow bank policies and procedure.  However, she justifies her entitlement to separation pay in that her dismissal was not based on serious misconduct, gross and habitual neglect of duty, nor did her conduct reflect on her moral character.[21] She claims that the allegations, issues and arguments raised in the petition have already been exhaustively discussed and resolved by the Court of Appeals.  Respondent dismisses the issues submitted by petitioner as factual.[22]

           Respondent does not contest her dismissal but insists on her entitlement to separation pay.  Therefore, the issue boils down to whether or not respondent should be awarded separation pay.                   We find the petition meritorious.           While 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 separation pay, the Court has allowed in numerous cases the grant of separation pay or some other financial assistance to an employee dismissed for just causes on the basis of equity.                   In the leading case of Philippine Long Distance Telephone Co. v. NLRC,[23] the Court stated that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.[24]  In granting separation pay to respondent, the NLRC and Court of Appeals both adhered to this jurisprudential precept and cleared respondent of bad faith. 

However, the succeeding case of Toyota Motor Phils. Corp. Workers Association v. NLRC[25] reaffirmed the general rule that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct, willful disobedience, gross and habitual

neglect of duty, fraud or willful breach of trust, commission of a crime against the employer or his family, or those reflecting on his moral character.  These five grounds are just causes for dismissal as provided in Article 282 of the Labor Code. 

 Verily, it may not be amiss to emphasize that if an employee has been dismissed

for a just cause under Article 282 of the Labor Code, he is not entitled to separation pay.            In the instant case, respondent was dismissed on the ground of loss of trust and confidence.            It is significant to stress that for there to be a valid dismissal based on loss of trust and confidence, the breach of trust must be willful, meaning it must be done intentionally, knowingly, and purposely, without justifiable excuse.  The basic premise for dismissal on the ground of loss of confidence is that the employees concerned hold a position of trust and confidence.  It is the breach of this trust that results in the employer’s loss of confidence in the employee.[26]            Respondent, in affixing her signatures on the withdrawal slips which were later found to have been accomplished through forgery, clearly failed to monitor these 46 instances of unauthorized withdrawals.  While the evidence presented by BPI fell short of proving respondent’s complicity in the forging of these withdrawal slips, her omission, coupled with unusual accommodation extended to certain bank clients in violation of the bank’s standard operating procedures, cost her job.  In fact, the validity of her dismissal for loss of trust and confidence was no longer disputed by respondent.                    In the recent case of Reno Foods v. NLM,[27] this Court reiterated the Toyota ruling and maintained that labor adjudicatory officials and the Court of Appeals must demur the award of separation pay based on social justice when an employee’s dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a crime against the person of the employer or his immediate family – grounds under Art. 282 of the Labor Code that sanction dismissals of employees.[28]

           The case of Aromin v. NLRC[29] is in all fours.  In said case, Aromin was the assistant vice-president of BPI when he was validly dismissed for loss of trust and confidence. Invoking the pronouncement in Toyota, the Court disallowed the payment of separation pay on the ground that Aromin was found guilty of willful betrayal of trust, a serious offense akin to dishonesty.[30]

 Therefore, applying the doctrine laid down in Toyota, respondent should be denied

of separation pay.                            WHEREFORE, the instant petition is hereby GRANTED.  The Decision of the Court of Appeals dated 3 July 2007, insofar as it orders BPI to pay respondent separation pay, is REVERSED AND SET ASIDE.  No costs. 

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other proofs, such as  the names of  other employees who did not fully serve for one year and thus were given prorated benefits.  Experientially, a perfect

attendance in the workplace is always the goal but it is seldom achieved. There must have been other employees who had reported for work less than a full year and who, as a consequence received only  prorated benefits.  This could have easily bolstered petitioner’s theory of mistake/error, but sadly, no evidence to that effect was presented.           IN VIEW HEREOF, the petition is DENIED.  The Decision of the Court of Appeals in CA-G.R. SP No. 85089  dated  29 September 2005 is  and its Resolution dated 9 December 2005 are hereby AFFIRMED.