Castillo, Sharla Louisse A. Labor Standards 2014009444Labor Arbiter Augusto Villanueva

LABOR STANDARDS CASE LISTRule-Making Power, Art. 5[G.R. No. 138051. June 10, 2004]JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.D E C I S I O NCARPIO, J.:Facts:1. In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement with the Mel and Jay Management and Development Corporation (MJMDC).2. MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.

3. ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.

4. On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider these acts of the station violative of the Agreement and the station as in breach thereof.

In this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,(Sgd.)JOSE Y. SONZAPresident and Gen. Manager[4]

5. On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan (ESOP).

6. On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.

7. Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement.

8. The Labor Arbiter denied the motion to dismiss and directed the parties to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant.

9. On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge the affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors.

10. The Labor Arbiter dismissed the complaint for lack of jurisdiction.[6] 11. NLRC rendered a Decision affirming the Labor Arbiters decision. 12. SONZA filed a motion for reconsideration, which the NLRC denied 13. the Court of Appeals rendered a Decision dismissing the case.The Rulings of the NLRC and Court of AppealsThe May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and MJMDC. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President.We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in Agreement.It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from complainant-appellants Position Paper, his claims for compensation for services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter.Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement. Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis supplied)The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.[11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion.[12] The Court of Appeals added that it could not re-examine the parties evidence and substitute the factual findings of the NLRC with its own.Issues: 1. W/N there exists an employer-employee relationship2. W/N Policy Instruction No. 40 has a force and effect of law (RULE MAKING POWER)Ruling:EMPLOYER-EMPLOYEE RELATIONSHIP; ESTABLISHMENT OF THE JURSIDICTION OF THE LABOR ARBITER OVER THE PERSONAlthough Philippine labor laws and jurisprudence define clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one of its talents. The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.Employee or Independent Contractor?The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. A party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.***SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished.[18] The last element, the so-called control test, is the most important element.[19]A. Selection and Engagement of EmployeeABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and celebrity status..Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.

B. Payment of WagesAll the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as SSS, Medicare, and 13th month pay[20] which the law automatically incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.[22]ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.C. Power of DismissalFor violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws.Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.[25]SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true that complainant was really an employee, he would merely resign, instead. SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26]However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor.D. Power of ControlSince there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR)[27] that a television program host is an independent contractor. We quote the following findings of the U.S. court:Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and instrumentalities necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR provided the equipment necessary to tape the show. Albertys argument is misplaced. The equipment necessary for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on the show. Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide the equipment required for different aspects of the collaboration. x x xThird, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired her professional services as Hostess for the Program Desde Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x[28] (Emphasis supplied)Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control test is the most important test our courts apply in distinguishing an employee from an independent contractor.[29] This test is based on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well the less control the hirer exercises, the more likely the worker is considered an independent contractor.[30]First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings. ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests. The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule for more effective programming.[34] ABS-CBNs sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZAs work.SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.[35]Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.[37]SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the Mel & Jay programs. However, the equipment, crew and airtime are not the tools and instrumentalities SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the programs.[39]***A radio broadcast specialist who works under minimal supervision is an independent contractor.[40] SONZAs work as television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs control not only [over] his manner of work but also the quality of his work.The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering talents[41] of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN.In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.[43] In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that:Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.[44]The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according to his own initiative.Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of control which ABS-CBN exercised over him.This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.[46] This practice is not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. MJMDC as Agent of SONZAThe Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who is ostensibly under the employ of the labor-only contractor; and (3) the principal who is deemed the real employer. Under this scheme, the labor-only contractor is the agent of the principal. The law makes the principal responsible to the employees of the labor-only contractor as if the principal itself directly hired or employed the employees.[48] These circumstances are not present in this case.There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the AGENT of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA.As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.[49]Policy Instruction No. 40 (RULE MAKING POWER)SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program employees.Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact.Notes:1. the case further discussed the labor tenure granted under the constitution and;2. some tax discussions

CASE DIGESTFacts: In May 1994, ABS-CBN signed an agreement with the Mel and Jay Management and Development Corporation (MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by Sonza, as President and general manager, and Tiangco as its EVP and treasurer. Referred to in the agreement as agent, MJMDC agreed to provide Sonzas services exclusively to ABS-CBN as talent for radio and television. On April 1996, Sonza wrote a letter to ABS-CBN where he irrevocably resigned in view of the recent events concerning his program and career. After the said letter, Sonza filed with the Department of Labor and Employment a complaint alleging that ABS-CBN did not pay his salaries, separation pay, service incentive pay,13th month pay, signing bonus, travel allowance and amounts under the Employees Stock Option Plan (ESOP). ABS-CBN contended that no employee-employer relationship existed between the parties. However, ABS-CBN continued to remit Sonzas monthly talent fees but opened another account for the same purpose. The Labor Arbiter dismissed the complaint and found that there is no employee-employer relationship. NLRC affirmed the decision of the Labor Arbiter. CA also affirmed the decision of NLRC.ISSUE: W/N Policy Instruction No. 40 has a force and effect of lawHELD: Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact.

APPLICABILITY, ART. 6G.R. No. L-69870 November 29, 1988NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners, vs.THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRY OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.G.R. No. 70295 November 29,1988EUGENIA C. CREDO, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION AND ARTURO L. PEREZ, respondents.The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.Melchor R. Flores for petitioner Eugenia C. Credo. PADILLA, J.:1. Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic corporation which provides security guards as well as messengerial, janitorial and other similar manpower services to the Philippine National Bank (PNB) and its agencies.2. She was first employed with NASECO as a lady guard on 18 July 1975. Through the years, she was promoted to Clerk Typist, then Personnel Clerk until she became Chief of Property and Records, on 10 March 1980. 3. Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren, Manager of Finance and Special Project and Evaluation Department of NASECO, stemming from her non-compliance with Lloren's memorandum, dated 11 October 1983, regarding certain entry procedures in the company's Statement of Billings Adjustment.4. The latter alleged that Credo "did not comply with the instructions to place some corrections/additional remarks in the Statement of Billings Adjustment; and when [Credo] was called by Lloren to his office to explain further the said instructions, [Credo] showed resentment and behaved in a scandalous manner by shouting and uttering remarks of disrespect in the presence of her co-employees." 5. On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager of NASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in connection with the administrative charges filed against her. 6. After said meeting, on the same date, Credo was placed on "Forced Leave" status for 15 days, effective 8 November 1983. 7. Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint, docketed as Case No. 114944-83, with the Arbitration Branch, National Capital Region, Ministry of Labor and Employment, Manila, against NASECO for placing her on forced leave, without due process. 8. Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on Personnel Affairs deliberated and evaluated a number of past acts of misconduct or infractions attributed to her. 9. As a result of this deliberation, said committee resolved:1. That, respondent [Credo] committed the following offenses in the Code of Discipline, viz:OFFENSE vs. Company Interest & PoliciesNo. 3 Any discourteous act to customer, officer and employee of client company or officer of the Corporation.OFFENSE vs. Public MoralNo. 7 Exhibit marked discourtesy in the course of official duties or use of profane or insulting language to any superior officer.OFFENSE vs. AuthorityNo. 3 Failure to comply with any lawful order or any instructions of a superior officer.2. That, Management has already given due consideration to respondent's [Credo] scandalous actuations for several times in the past. Records also show that she was reprimanded for some offense and did not question it. Management at this juncture, has already met its maximum tolerance point so it has decided to put an end to respondent's [Credo] being an undesirable employee.

10. The committee recommended Credo's termination, with forfeiture of benefits.

11. On 1 December 1983, Credo was called age to the office of Perez to be informed that she was being charged with certain offenses.

12. In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was made to explain her side in connection with the charges filed against her; however, due to her failure to do so, she was handed a Notice of Termination, dated 24 November 1983, and made effective 1 December 1983.

13. Hence, on 6 December 1983, Credo filed a supplemental complaint for illegal dismissal in Case No. 11-4944-83, alleging absence of just or authorized cause for her dismissal and lack of opportunity to be heard.

14. The labor arbiter rendered a decision: 1) dismissing Credo's complaint, and 2) directing NASECO to pay Credo separation pay equivalent to one half month's pay for every year of service.

15. Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28 November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former position, or substantially equivalent position, with six (6) months' backwages and without loss of seniority rights and other privileges appertaining thereto, and 2) dismissing Credo's claim for attorney's fees, moral and exemplary damages.

16. As a consequence, both parties filed their respective motions for reconsideration, 12 which the NLRC denied in a resolution of 16 January 1985.

ISSUESRULINGS:In G.R. No. 68970, petitioners challenge as grave abuse of discretion the dispositive portion of the 28 November 1984 decision which ordered Credo's reinstatement with backwages. Petitioners contend that in arriving at said questioned order, the NLRC acted with grave abuse of discretion in finding that: 1) petitioners violated the requirements mandated by law on termination, 2) petitioners failed in the burden of proving that the termination of Credo was for a valid or authorized cause, 3) the alleged infractions committed by Credo were not proven or, even if proved, could be considered to have been condoned by petitioners, and 4) the termination of Credo was not for a valid or authorized cause. 15In G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion the dispositive portion of the 28 November 1984 decision which dismissed her claim for attorney's fees, moral and exemplary damages and limited her right to backwages to only six (6) months. 16Exercise of employers power to dismissAs guidelines for employers in the exercise of their power to dismiss employees for just causes, the law provides that:Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission constituting the grounds for his dismissal.Section 5. Answer and Hearing. The worker may answer the allegations stated against him in the notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to be heard and to defend himself with the assistance of his representative, if he so desires.Section 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a decision to dismiss him stating clearly the reasons therefor. These guidelines mandate that the employer furnish an employee sought to be dismissed two (2) written notices of dismissal before a termination of employment can be legally effected. These are the notice which apprises the employee of the particular acts or omissions for which his dismissal is sought and the subsequent notice which informs the employee of the employer's decision to dismiss him.Likewise, a reading of the guidelines in consonance with the express provisions of law on protection to labor (which encompasses the right to security of tenure) and the broader dictates of procedural due process necessarily mandate that notice of the employer's decision to dismiss an employee, with reasons therefor, can only be issued after the employer has afforded the employee concerned ample opportunity to be heard and to defend himself.Ruling as to the Procedural Due ProcessNASECO did not comply with these guidelines in effecting Credo's dismissal. Although she was apprised and "given the chance to explain her side" of the charges filed against her, this chance was given so perfunctorily, thus rendering illusory Credo's right to security of tenure. That Credo was not given ample opportunity to be heard and to defend herself is evident from the fact that the compliance with the injunction to apprise her of the charges filed against her and to afford her a chance to prepare for her defense was dispensed in only a day. The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her) was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO was already bent on terminating her services when she was informed on 1 December 1983 of the charges against her, and that any hearing which NASECO thought of affording her after 24 November 1983 would merely be pro forma or an exercise in futility.Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures in the company's Statement of Billings Adjustment did not warrant the severe penalty of dismissal of the NLRC correctly held that:Let it be noted, however, that the Report did not even describe how the so called "conduct unbecoming" or "discourteous manner" was done by complainant. Anent the "sarcastic" argument of complainant, the purported transcript 19 of the meeting held on 7 November 1983 does not indicate any sarcasm on the part of complainant. At the most, complainant may have sounded insistent or emphatic about her work being more complete than the work of Ms. de Castro, yet, the complaining officer signed the work of Ms. de Castro and did not sign hers.As to the charge of insubordination, it may be conceded, albeit unclear, that complainant failed to place same corrections/additional remarks in the Statement of Billings Adjustments as instructed. However, under the circumstances obtaining, where complainant strongly felt that she was being discriminated against by her superior in relation to other employees, we are of the considered view and so hold, that a reprimand would have sufficed for the infraction, but certainly not termination from services. As this Court has ruled:... where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. It is not only because of the law's concern for the working man. There is, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. 21Of course, in justifying Credo's termination of employment, NASECO claims as additional lawful causes for dismissal Credo's previous and repeated acts of insubordination, discourtesy and sarcasm towards her superior officers, alleged to have been committed from 1980 to July 1983. If such acts of misconduct were indeed committed by Credo, they are deemed to have been condoned by NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a scandalous manner and raised her voice" in a discussion with NASECO's Acting head of the Personnel Administration no disciplinary measure was taken or meted against her. Nor was she even reprimanded when she allegedly talked 'in a shouting or yelling manner" with the Acting Manager of NASECO's Building Maintenance and Services Department in 1980 or when she allegedly "shouted" at NASECO's Corporate Auditor "in front of his subordinates displaying arrogance and unruly behavior" in 1980, or when she allegedly shouted at NASECO's Internal Control Consultant in 1981. 25 But then, in sharp contrast to NASECO's penchant for ignoring the aforesaid acts of misconduct, when Credo committed frequent tardiness in August and September 1983, she was reprimanded. 26Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven, NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given a salary adjustment for having performed in the job "at least [satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as regards job performance, particularly in terms of quality of work, quantity of work, dependability, cooperation, resourcefulness and attendance.Considering that the acts or omissions for which Credo's employment was sought to be legally terminated were insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent the reason which gave rise to [the employee's] separation from employment, there is no intention on the part of the employer to dismiss the employee concerned." 29 And, as a result of having been wrongfully dismissed, Credo is entitled to three (3) years of backwages without deduction and qualification. 30However, while Credo's dismissal was effected without procedural fairness, an award of exemplary damages in her favor can only be justified if her dismissal was effected in a wanton, fraudulent, oppressive or malevolent manner. 31 A judicious examination of the record manifests no such conduct on the part of management. However, in view of the attendant circumstances in the case, i.e., lack of due process in effecting her dismissal, it is reasonable to award her moral damages. And, for having been compelled to litigate because of the unlawful actuations of NASECO, a reasonable award for attorney's fees in her favor is in order.

NLRC JURISDICTION; NASECO AS A GOVERNMENT CORPORATION (APPLICABILITY)In G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction to order Credo's reinstatement. NASECO claims that, as a government corporation (by virtue of its being a subsidiary of the National Investment and Development Corporation (NIDC), a subsidiary wholly owned by the Philippine National Bank (PNB), which in turn is a government owned corporation), the terms and conditions of employment of its employees are governed by the Civil Service Law, rules and regulations. In support of this argument, NASECO cites National Housing Corporation vs. JUCO, 33 where this Court held that "There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the civil service law and civil service rifles and regulations."It would appear that, in the interest of justice, the holding in said case should not be given retroactive effect, that is, to cases that arose before its promulgation on 17 January 1985. To do otherwise would be oppressive to Credo and other employees similarly situated, because under the same 1973 Constitution, but prior to the ruling in National Housing Corporation vs. Juco, this Court had recognized the applicability of the Labor Code to, and the authority of the NLRC to exercise jurisdiction over, disputes involving terms and conditions of employment in government owned or controlled corporations, among them, the National Service Corporation (NASECOFurthermore, in the matter of coverage by the civil service of government-owned or controlled corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon which National Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was provided that:The civil service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporation. ... 35On the other hand, the 1987 Constitution provides that:The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charter. 36(Emphasis supplied)Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in the National Housing . Corporation case in the following manner The infirmity of the respondents' position lies in its permitting a circumvention or emasculation of Section 1, Article XII-B of the constitution. It would be possible for a regular ministry of government to create a host of subsidiary corporations under the Corporation Code funded by a willing legislature. A government-owned corporation could create several subsidiary corporations. These subsidiary corporations would enjoy the best of two worlds. Their officials and employees would be privileged individuals, free from the strict accountability required by the Civil Service Decree and the regulations of the Commission on Audit. Their incomes would not be subject to the competitive restrains of the open market nor to the terms and conditions of civil service employment. Conceivably, all government-owned or controlled corporations could be created, no longer by special charters, but through incorporations under the general law. The Constitutional amendment including such corporations in the embrace of the civil service would cease to have application. Certainly, such a situation cannot be allowed to exist. 37appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Service embraces government-owned or controlled corporations with original charter; and, therefore, by clear implication, the Civil Service does not include government-owned or controlled corporations which are organized as subsidiaries of government-owned or controlled corporations under the general corporation law.The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent and meaning in the use of the phrase "with original charter." ThusTHE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is recognized.MR. ROMULO. I beg the indulgence of the Committee. I was reading the wrong provision.I refer to Section 1, subparagraph I which reads:The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled corporations.My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the Commissioner please state his previous question?MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1, under the Civil Service Commission, says: "including government-owned or controlled corporations.' Does that include a corporation, like the Philippine Airlines which is government-owned or controlled?MR. FOZ. I would like to throw a question to the Commissioner. Is the Philippine Airlines controlled by the government in the sense that the majority of stocks are owned by the government?MR. ROMULO. It is owned by the GSIS. So, this is what we might call a tertiary corporation. The GSIS is owned by the government. Would this be covered because the provision says "including government-owned or controlled corporations."MR. FOZ. The Philippine Airlines was established as a private corporation. Later on, the government, through the GSIS, acquired the controlling stocks. Is that not the correct situation?MR. ROMULO. That is true as Commissioner Ople is about to explain. There was apparently a Supreme Court decision that destroyed that distinction between a government-owned corporation created under the Corporation Law and a government-owned corporation created by its own charter.MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA vs. Juco to the effect that all government corporations irrespective of the manner of creation, whether by special charter or by the private Corporation Law, are deemed to be covered by the civil service because of the wide-embracing definition made in this section of the existing 1973 Constitution. But we recall the response to the question of Commissioner Ople that our intendment in this provision is just to give a general description of the civil service. We are not here to make any declaration as to whether employees of government-owned or controlled corporations are barred from the operation of laws, such as the Labor Code of the Philippines.MR. ROMULO. Yes.MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name has been mentioned by both sides.MR. ROMULO. I yield part of my time.THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is recognized.MR. OPLE. In connection with the coverage of the Civil Service Law in Section 1 (1), may I volunteer some information that may be helpful both to the interpellator and to the Committee. Following the proclamation of martial law on September 21, 1972, this issue of the coverage of the Labor Code of the Philippines and of the Civil Service Law almost immediately arose. I am, in particular, referring to the period following the coming into force and effect of the Constitution of 1973, where the Article on the Civil Service was supposed to take immediate force and effect. In the case of LUZTEVECO, there was a strike at the time. This was a government-controlled and government-owned corporation. I think it was owned by the PNOC with just the minuscule private shares left. So, the Secretary of Justice at that time, Secretary Abad Santos, and myself sat down, and the result of that meeting was an opinion of the Secretary of Justice which 9 became binding immediately on the government that government corporations with original charters, such as the GSIS, were covered by the Civil Service Law and corporations spun off from the GSIS, which we called second generation corporations functioning as private subsidiaries, were covered by the Labor Code. Samples of such second generation corporations were the Philippine Airlines, the ManilaHotel and the Hyatt. And that demarcation worked very well. In fact, all of these companies I have mentioned as examples, except for the Manila Hotel, had collective bargaining agreements. In the Philippine Airlines, there were, in fact, three collective bargaining agreements; one, for the ground people or the PALIA one, for the flight attendants or the PASAC and one for the pilots of the ALPAC How then could a corporation like that be covered by the Civil Service law? But, as the Chairman of the Committee pointed out, the Supreme Court decision in the case of NHA vs. Juco unrobed the whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt are now considered under that decision covered by the Civil Service Law. I also recall that in the emergency meeting of the Cabinet convened for this purpose at the initiative of the Chairman of the Reorganization Commission, Armand Fabella, they agreed to allow the CBA's to lapse before applying the full force and effect of the Supreme Court decision. So, we were in the awkward situation when the new government took over. I can agree with Commissioner Romulo when he said that this is a problem which I am not exactly sure we should address in the deliberations on the Civil Service Law or whether we should be content with what the Chairman said that Section 1 (1) of the Article on the Civil Service is just a general description of the coverage of the Civil Service and no more.Thank you, Mr. Presiding Officer.MR. ROMULO. Mr. Presiding Officer, for the moment, I would be satisfied if the Committee puts on records that it is not their intent by this provision and the phrase "including government-owned or controlled corporations" to cover such companies as the Philippine Airlines.MR. FOZ. Personally, that is my view. As a matter of fact, when this draft was made, my proposal was really to eliminate, to drop from the provision, the phrase "including government- owned or controlled corporations."MR. ROMULO. Would the Committee indicate that is the intent of this provision?MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can make such a statement in the face of an absolute exclusion of government-owned or controlled corporations. However, this does not preclude the Civil Service Law to prescribe different rules and procedures, including emoluments for employees of proprietary corporations, taking into consideration the nature of their operations. So, it is a general coverage but it does not preclude a distinction of the rules between the two types of enterprises.MR. FOZ. In other words, it is something that should be left to the legislature to decide. As I said before, this is just a general description and we are not making any declaration whatsoever.MR. MONSOD. Perhaps if Commissioner Romulo would like a definitive understanding of the coverage and the Gentleman wants to exclude government-owned or controlled corporations like Philippine Airlines, then the recourse is to offer an amendment as to the coverage, if the Commissioner does not accept the explanation that there could be a distinction of the rules, including salaries and emoluments.MR. ROMULO. So as not to delay the proceedings, I will reserve my right to submit such an amendment.xxx xxx xxxTHE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is recognized.MR. ROMULO. On page 2, line 5, I suggest the following amendment after "corporations": Add a comma (,) and the phrase EXCEPT THOSE EXERCISING PROPRIETARY FUNCTIONS.THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?SUSPENSION OF SESSIONMR. MONSOD. May we have a suspension of the session?THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.It was 7:16 p.m.RESUMPTION OF SESSIONAt 7:21 p.m., the session was resumed.THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.Commissioner Romulo is recognized.MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment to now read as follows: "including government-owned or controlled corporations WITH ORIGINAL CHARTERS." The purpose of this amendment is to indicate that government corporations such as the GSIS and SSS, which have original charters, fall within the ambit of the civil service. However, corporations which are subsidiaries of these chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt are excluded from the coverage of the civil service.THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original charters," what exactly do we mean?MR. ROMULO. We mean that they were created by law, by an act of Congress, or by special law.MR. FOZ. And not under the general corporation law.MR. ROMULO. That is correct. Mr. Presiding Officer.MR. FOZ. With that understanding and clarification, the Committee accepts the amendment.MR. NATIVIDAD. Mr. Presiding officer, so those created by the general corporation law are out.MR. ROMULO. That is correct: 38On the premise that it is the 1987 Constitution that governs the instant case because it is the Constitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the NASECO is a government-owned or controlled corporation without original charter.Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also published in 78 Phil. 221) on the effectivity of the principle of social justice embodied in the 1935 Constitution, said:Certainly, this principle of social justice in our Constitution as generously conceived and so tersely phrased, was not included in the fundamental law as a mere popular gesture. It was meant to (be) a vital, articulate, compelling principle of public policy. It should be observed in the interpretation not only of future legislation, but also of all laws already existing on November 15, 1935. It was intended to change the spirit of our laws, present and future. Thus, all the laws which on the great historic event when the Commonwealth of the Philippines was born, were susceptible of two interpretations strict or liberal, against or in favor of social justice, now have to be construed broadly in order to promote and achieve social justice. This may seem novel to our friends, the advocates of legalism but it is the only way to give life and significance to the above-quoted principle of the Constitution. If it was not designed to apply to these existing laws, then it would be necessary to wait for generations until all our codes and all our statutes shall have been completely charred by removing every provision inimical to social justice, before the policy of social justice can become really effective. That would be an absurd conclusion. It is more reasonable to hold that this constitutional principle applies to all legislation in force on November 15, 1935, and all laws thereafter passed.WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, are ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her termination, or if such reinstatement is not possible, to place her in a substantially equivalent position, with three (3) years backwages, from 1 December 1983, without qualification or deduction, and without loss of seniority rights and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for moral damages and P5,000.00 for attorney's fees.If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo, in addition to her backwages and damages as above described, separation pay equivalent to one-half month's salary for every year of service, to be computed on her monthly salary at the time of her termination on 1 December 1983.SO ORDERED.

CASE DIGESTDoctrine: The civil service does not include Government owned or controlledcorporations (GOCC) which are organized as subsidiaries of GOCC under the general corporation law.FACTS: Eugenio Credo was an employee of the National Service Corporation. She claims she was illegally dismissed. NLRC ruled ordering her reinstatement. NASECO argues that NLRC has no jurisdiction to order her reinstatement. NASECO as a government corporation by virtue of its being a subsidiary of the NIDC, which is wholly owned by the Phil. National Bank which is in turn a GOCC, the terms and conditions of employment of its employees are governed by the Civil Service Law citing National Housing v Juco.ISSUE: W/N employees of NASECO, a GOCC without original charter, are governed by the Civil Service Law.HELD: NO. The holding in NHC v Juco should not be given retroactive effect, that is to cases that arose before its promulgation of Jan 17, 1985. To do otherwise would be oppressive to Credo and other employees similarly situated because under the 1973 Constitution prior to the ruling in NHC v Juco, this court recognized the applicability of the Labor jurisdiction over disputes involving terms and conditions of employment in GOCC's, among them NASECO. In the matter of coverage by the civil service of GOCC, the 1987 Constitution starkly differs from the 1973 constitution where NHC v Juco was based. It provides that the "civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government owned or controlled corporation with original charter." Therefore by clear implication, the civil service does not include GOCC which are organized as subsidiaries of GOCC under the general corporation law.

[G.R. No. 98107. August 18, 1997]BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING CORPORATION, respondents.D E C I S I O NHERMOSISIMA, JR., J.:1. Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing Corporation (NHC) from November 16, 1970 to May 14, 1975.2. On May 14, 1975, he was separated from the service for having been implicated in a crime of theft and/or malversation of public funds.3. On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the Department of Labor.4. On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the ground that the NLRC had no jurisdiction over the case.5. Petitioner then elevated the case to the NLRC which rendered a decision on December 28, 1982, reversing the decision of the Labor Arbiter6. Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on January 17, 1985, we rendered a decision, the dispositive portion thereof reads as follows: WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National Labor Relations Commission is SET ASIDE. The decision of the Labor Arbiter dismissing the case before it for lack of jurisdiction is REINSTATED.7. On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal dismissal, with preliminary mandatory injunction.8. On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the ground that the Civil Service Commission has no jurisdiction over the case.9. On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of jurisdiction. It ratiocinated that:The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that NHC is a government corporation without an original charter but organized/created under the Corporate Code.

Article IX, Section 2 (1) of the 1987 Constitution provides:

The civil service embraces all branches, subdivisions, instrumentalities and agencies of the government, including government owned and controlled corporations with original charters. (underscoring supplied)

From the aforequoted constitutional provision, it is clear that respondent NHC is not within the scope of the civil service and is therefore beyond the jurisdiction of this board. Moreover, it is pertinent to state that the 1987 Constitution was ratified and became effective on February 2, 1987.10. WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed.[6]11. On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal with preliminary mandatory injunction against respondent NHC.12. On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was illegally dismissed from his employment by respondent as there was evidence in the record that the criminal case against him was purely fabricated, prompting the trial court to dismiss the charges against him. Hence, he concluded that the dismissal was illegal as it was devoid of basis, legal or factual.

He further ruled that the complaint is not barred by prescription considering that the period from which to reckon the reglementary period of four years should be from the date of the receipt of the decision of the Civil Service Commission promulgated on April 11, 1989.He also ratiocinated that:It appears x x x complainant filed the complaint for illegal dismissal with the Civil Service Commission on January 6, 1989 and the same was dismissed on April 11, 1989 after which on April 28, 1989, this case was filed by the complainant. Prior to that, this case was ruled upon by the Supreme Court on January 17, 1985 which enjoined the complainant to go to the Civil Service Commission which in fact, complainant did. Under the circumstances, there is merit on the contention that the running of the reglementary period of four (4) years was suspended with the filing of the complaint with the said Commission. Verily, it was not the fault of the respondent for failing to file the complaint as alleged by the respondent but due to, in the words of the complainant, a legal knot that has to be untangled.13. Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:"Premises considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal and ordering the respondent to immediately reinstate him to his former position without loss of seniority rights with full back wages inclusive of allowance and to his other benefits or equivalent computed from the time it is withheld from him when he was dismissed on March 27, 1977, until actually reinstated.

14. On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991, the NLRC promulgated a decision which reversed the decision of Labor Arbiter Manuel R. Caday on the ground of lack of jurisdiction.ISSUE: Whether or not that petitioner is governed by the Labor Code.Under the laws then in force, employees of government-owned and /or controlled corporations were governed by the Civil Service Law and not by the Labor Code. Hence,Article 277 of the Labor Code (PD 442) then provided:"The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations shall be governed by the Civil Service Law, rules and regulations x x x.The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:The Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including government-owned or controlled corporations.Although we had earlier ruled in National Housing Corporation v. Juco, that employees of government-owned and/or controlled corporations, whether created by special law or formed as subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the Labor Code, this ruling has been supplanted by the 1987 Constitution. Thus, the said Constitution now provides:The civil service embraces all branches, subdivision, instrumentalities, and agencies of the Government, including government owned or controlled corporations with original charter. (Article IX-B, Section 2[1])In National Service Corporation (NASECO) v. National Labor Relations Commission,[12] we had the occasion to apply the present Constitution in deciding whether or not the employees of NASECO are covered by the Civil Service Law or the Labor Code notwithstanding that the case arose at the time when the 1973 Constitution was still in effect. We ruled that the NLRC has jurisdiction over the employees of NASECO on the ground that it is the 1987 Constitution that governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled that the new phrase with original charter means that government-owned and controlled corporations refer to corporations chartered by special law as distinguished from corporations organized under the Corporation Code. Thus, NASECO which had been organized under the general incorporation stature and a subsidiary of the National Investment Development Corporation, which in turn was a subsidiary of the Philippine National Bank, is excluded from the purview of the Civil Service Commission.We see no cogent reason to depart from the ruling in the aforesaid case.In the case at bench, the National Housing Corporation is a government owned corporation organized in 1959 in accordance with Executive Order No. 399, otherwise known as the Uniform Charter of Government Corporation, dated January 1, 1959. Its shares of stock are and have been one hundred percent (100%) owned by the Government from its incorporation under Act 1459, the former corporation law. The government entities that own its shares of stock are the Government Service Insurance System, the Social Security System, the Development Bank of the Philippines, the National Investment and Development Corporation and the Peoples Homesite and Housing Corporation.[13] Considering the fact that the NHA had been incorporated under act 1459, the former corporation law, it is but correct to say that it is a government-owned or controlled corporation whose employees are subject to the provisions of the Labor Code. This observation is reiterated in recent case of Trade Union of the Philippines and Allied Services (TUPAS) v. National Housing Corporation,[14] where we held that the NHA is now within the jurisdiction of the Department of Labor and Employment, it being a government-owned and/or controlled corporation without an original charter. Furthermore, we also held that the workers or employees of the NHC (now NHA) undoubtedly have the right to form unions or employees organization and that there is no impediment to the holding of a certification election among them as they are covered by the Labor Code.Thus, the NLRC erred in dismissing petitioners complaint for lack of jurisdiction because the rule now is that the Civil Service now covers only government-owned or controlled corporations with original charters.[15] Having been incorporated under the Corporation Law, its relations with its personnel are governed by the Labor Code and come under the jurisdiction of the National Labor Relations Commission.One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal case. It is but apt that we put an end to his dilemma in the interest of justice.WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is hereby REVERSED and the Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.SO ORDERED.

CASE DIGESTFACTS: Juco was hired as project engineer of NHC from Nov16, 1970 to May 14, 75. On May 14, he was separated from the service for having been implicated in a crime of theft and/or malversation of public funds. On March25, 1977, Juco filed a complaint for illegal dismissal against NHC with the Department of Labor. Labor Arbiter rendered a decision dismissing complaint on the ground that NLRC had no jurisdiction over thecase. Juco then elevated the case to NLRC which rendered a decision reversing decision of Labor Arbiter. NHC appealed before this SC. On Jan6, 1989, Juco filed with CSC a complaint for illegal dismissal. NHC moved for dismissal of complaint on the ground that CSC has no jurisdiction over case. So, having no jurisdiction, CSC dismissed the case. Subsequently Juco also filed with NLRC complaint for illegal dismissal. Labor Arbiter Caday rendered adecision declaring that Jucos dismissal was illegal. NHC appealed before NLRC and later on, NLRC reversed the decision of Labor Arbiter Caday on the ground of lack of jurisdiction.ISSUE: Whether NLRC or CSC has jurisdiction over Jucos caseHELD: Although SC ruled in National Housing Corporation v. Juco, that employees of government-owned and/or controlled corporations, whether created by special law or formed as subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the Labor Code, this ruling has been supplanted by the 1987 Constitution. Thus, the said Constitution now provides:The civil service embraces all branches, subdivision, instrumentalities, and agencies of the Government, including government owned or controlled corporations with original charter. (Article IX-B, Section 2[1])Reiterating the case of Trade Union of the Philippines and Allied Services (TUPAS) v. National Housing Corporation, the SC held that the NHA is now within the jurisdiction of the Department of Labor and Employment, it being a government-owned and/or controlled corporation without an original charter. Furthermore, it also held that the workers or employees of the NHC (now NHA) undoubtedly have the right to form unions or employees organization and that there is no impediment to the holding of a certification election among them as they are covered by the Labor Code.

PASTOR DIONISIO V. AUSTRIA, petitioner, vs. HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTIST, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PROFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, respondents.KAPUNAN, J.:1. Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (hereinafter referred to as the SDA) is a religious corporation duly organized and existing under Philippine law and is represented in this case by the other private respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his services were terminated.2. Petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from 1963 to 1991. He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of the SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several times. 3. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission of the SDA. In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and the provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. 4. In January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October 1991.5. On various occasions from August up to October, 1991, petitioner received several communications from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the same to the Negros Mission.6. In his written explanation dated 11 October 1991, petitioner reasoned out that he should not be made accountable for the unremitted collections since it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he was very sick to do the collecting at that time.7. Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee for the purpose of settling the dispute between him and the private respondent, Pastor David Rodrigo. 8. The dispute between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for the repair of the latters motor vehicle which he failed to pay to Diamada.9. Due to the assistance of petitioner in collecting Pastor Rodrigos debt, the latter harbored ill-feelings against petitioner. 10. When news reached petitioner that Pastor Rodrigo was about to file a complaint against him with the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned and asked the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner since some committee members were out of town and there was no quorum. 11. Thereafter, the two exchanged heated arguments. Petitioner then left the office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, Pastor daw inisog na ina iya (Pastor you are talking tough). Irked by such remark, petitioner returned to the office of Pastor Buhat, and tried to overturn the latters table, though unsuccessfully, since it was heavy.12. Thereafter, petitioner banged the attache case of Pastor Buhat on the table, scattered the books in his office, and threw the phone.[7] Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat and petitioner.13. On 17 October 1991, petitioner received a letter inviting him and his wife to attend the Executive Committee meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the meeting were the non-remittance of church collection and the events that transpired on 16 October 1991. 14. A fact-finding committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding committee conducted an investigation of petitioner. Sensing that the result of the investigation might be one-sided, petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding committee, requesting that certain members of the fact-finding committee be excluded in the investigation and resolution of the case. Out of the six (6) members requested to inhibit themselves from the investigation and decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo.15. Subsequently, on 29 October 1991, petitioner received a letter of dismissal citing misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employers duly authorized representative, as grounds for the termination of his services.16. Reacting against the adverse decision of the SDA, petitioner filed a complaint[11] on 14 November 1991, before the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages and benefits, moral and exemplary damages and other labor law benefits.17. On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner (petitioner reinstated)18. The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Relations Commission, Fourth Division, Cebu City.19. In a decision, dated 26 August 1994, the NLRC vacated the findings of the Labor Arbiter which favored the SDA20. Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the NLRC issued a Resolution reversing its original decision. 21. In view of the reversal of the original decision of the NLRC, the SDA filed a motion for reconsideration of the above resolution22. The NLRC granted the instant motion for reconsideration and held that the case is hereby DISMISSED for lack of jurisdiction.ISSUES:1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner against the SDA;2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as such, involves the separation of church and state; and3) Whether or not such termination is valid.The first two issues shall be resolved jointly, since they are related.Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since the matter at bar allegedly involves the discipline of a religious minister, it is to be considered a purely ecclesiastical affair to which the State has no right to interfere.The principle of separation of church and state finds no application in this case.The rationale of the principle of the separation of church and state is summed up in the familiar saying, Strong fences make good neighbors.The idea advocated by this principle is to delineate the boundaries between the two institutions and thus avoid encroachments by one against the other because of a misunderstanding of the limits of their respective exclusive jurisdictions. The demarcation line calls on the entities to render therefore unto Ceasar the things that are Ceasars and unto God the things that are Gods.[19] While the State is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters.[20]The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking cognizance of the same. An ecclesiastical affair is one that concerns doctrine, creed, or form or worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership.Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities with which attached religious significance. The case at bar does not even remotely concern any of the abovecited examples. While the matter at hand relates to the church and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is involved here is the relationship of the church as an employer and the minister as an employee. It is purely secular and has no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case, petitioner was not excommunicated or expelled from the membership of the SDA but was terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of expelling a member from the religious congregation.As pointed out by the OSG in its memorandum, the grounds invoked for petitioners dismissal, namely: misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties and commission of an offense against the person of his employers duly authorize representative, are all based on Article 282 of the Labor Code which enumerates the just causes for termination of employment.[22] By this alone, it is palpable that the reason for petitioners dismissal from the service is not religious in nature. Coupled with this is the act of the SDA in furnishing NLRC with a copy of petitioners letter of termination. As aptly stated by the OSG, this again is an eloquent admission by private respondents that NLRC has jurisdiction over the case. Aside from these, SDA admitted in a certification[23] issued by its officer, Mr. Ibesate, that petitioner has been its employee for twenty-eight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee. As a matter of fact, the workers records of petitioner have been submitted by private respondents as part of their exhibits. From all of these it is clear that when the SDA terminated the services of petitioner, it was merely exercising its management prerogative to fire an employee which it believes to be unfit for the job. As such, the State, through the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to determine whether the SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is in consonance with the mandate of the Constitution to afford full protection to labor.Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit:Section 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and its political subdivisions including government-owned or controlled corporations.[24]With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code.Notes: 1. The court further decided on procedural matters and;2. The legality of dismissalCASE DIGESTFacts: The Seventh Day Adventists(SDA) is a religious corporation under Philippine law. The petitioner was a pastor of the SDA for 28 years from 1963 until 1991, when his services were terminated.On various occasions from August to October 1991, Austria received several communications form Ibesate, the treasurer of the Negros Mission, asking him to admit accountability and responsibility for the church tithes and offerings collected by his wife, Thelma Austria, in his district and to remit the same to the Negros Mission.The petitioner answered saying that he should not be made accountable since it was Pastor Buhat and Ibesate who authorized his wife to collect the tithes and offerings since he was very ill to be able to do the collecting.A fact-finding committee was created to investigate. The petitioner received a letter of dismissal citing:1) Misappropriation of denominational funds;2) Willful breach of trust;3) Serious misconduct;4) Gross and habitual neglect of duties; and5) Commission of an offense against the person of employer's duly authorized representative as grounds for the termination of his services.Petitioner filed a complaint with the Labor Arbiter for illegal dismissal, and sued the SDA for reinstatement and backwages plus damages. Decision was rendered in favor of petitioner.SDA appealed to the NLRC. Decision was rendered in favor of respondent.ISSUE: W/N the NLRC has no jurisdiction over the case in view of the constitutional provision regarding the separation of the Church and StateHELD:An ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities with which attached religious significance. The case does not even remotely concern any of the above cited examples. While the matter at hand relates to the church and its religious minister it does not ipso facto give the case a religious significance.In this case, petitioner was not excommunicated or expelled from the membership of the SDA but was terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of expelling a member from the religious congregation.Furthermore, SDA admitted in a certification[23] issued by its officer, Mr. Ibesate, that petitioner has been its employee for twenty-eight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee. As a matter of fact, the workers records of petitioner have been submitted by private respondents as part of their exhibits. From all of these it is clear that when the SDA terminated the services of petitioner, it was merely exercising its management prerogative to fire an employee which it believes to be unfit for the job. As such, the State, through the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to determine whether the SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is in consonance with the mandate of the Constitution to afford full protection to labor.More so, Article 278 of the Labor Code on post-employment states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit:Section 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and its political subdivisions including government-owned or controlled corporations.[24]With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code.

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