Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170054 January 21, 2013
GOYA, INC., Petitioner,
vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
D E C I S I O N
PERALTA, J .:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse and
set aside the June 16, 2005 Decision
1
and October 12, 2005 Resolution
2
of the Court of Appeals in CA-
G.R. SP No. 87335, which sustained the October 26, 2004 Decision
3
of Voluntary Arbitrator Bienvenido
E. Laguesma, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor
practice in engaging the services of PESO.
The company is, however, directed to observe and comply with its commitment as it pertains to the hiring
of casual employees when necessitated by business circumstances.
4

The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the
manufacture, importation, and wholesale of top quality food products, hired contractual employees from
PESO Resources Development Corporation (PESO) to perform temporary and occasional services in its
factory in Parang, Marikina City. This prompted respondent Goya, Inc. Employees UnionFFW (Union)
to request for a grievance conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing Collective Bargaining Agreement (CBA).
5
When the
matter remained unresolved, the grievance was referred to the National Conciliation and Mediation Board
(NCMB) for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator
(VA) Bienvenido E. Laguesma that amicable settlement was no longer possible; hence, they agreed to
submit for resolution the solitary issue of "[w]hether or not the Company is guilty of unfair labor acts in
engaging the services of PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence."
6
Both parties thereafter filed their respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is not a management prerogative
and in gross violation of the CBA tantamount to unfair labor practice (ULP). It noted that the contractual
workers engaged have been assigned to work in positions previously handled by regular workers and
Union members, in effect violating Section 4, Article I of the CBA, which provides for three categories of
employees in the Company, to wit:
Section 4. Categories of Employees. The parties agree on the following categories of employees:
(a) Probationary Employee. One hired to occupy a regular rank-and-file position in the Company and is
serving a probationary period. If the probationary employee is hired or comes from outside the Company
(non-Goya, Inc. employee), he shall be required to undergo a probationary period of six (6) months,
which period, in the sole judgment of management, may be shortened if the employee has already
acquired the knowledge or skills required of the job. If the employee is hired from the casual pool and has
worked in the same position at any time during the past two (2) years, the probationary period shall be
three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his probationary period and
automatically granted regular employment status in the Company.
(c) Casual Employee, One hired by the Company to perform occasional or seasonal work directly
connected with the regular operations of the Company, or one hired for specific projects of limited
duration not connected directly with the regular operations of the Company.
It was averred that the categories of employees had been a part of the CBA since the 1970s and that due
to this provision, a pool of casual employees had been maintained by the Company from which it hired
workers who then became regular workers when urgently necessary to employ them for more than a year.
Likewise, the Company sometimes hired probationary employees who also later became regular workers
after passing the probationary period. With the hiring of contractual employees, the Union contended that
it would no longer have probationary and casual employees from which it could obtain additional Union
members; thus, rendering inutile Section 1, Article III (Union Security) of the CBA, which states:
Section 1. Condition of Employment. As a condition of continued employment in the Company, all
regular rank-and-file employees shall remain members of the Union in good standing and that new
employees covered by the appropriate bargaining unit shall automatically become regular employees of
the Company and shall remain members of the Union in good standing as a condition of continued
employment.
The Union moreover advanced that sustaining the Companys position would easily weaken and
ultimately destroy the former with the latters resort to retrenchment and/or retirement of employees and
not filling up the vacant regular positions through the hiring of contractual workers from PESO, and that a
possible scenario could also be created by the Company wherein it could "import" workers from PESO
during an actual strike.
In countering the Unions allegations, the Company argued that: (a) the law expressly allows contracting
and subcontracting arrangements through Department of Labor and Employment (DOLE) Order No. 18-
02; (b) the engagement of contractual employees did not, in any way, prejudice the Union, since not a
single employee was terminated and neither did it result in a reduction of working hours nor a reduction
or splitting of the bargaining unit; and (c) Section 4, Article I of the CBA merely provides for the
definition of the categories of employees and does not put a limitation on the Companys right to engage
the services of job contractors or its management prerogative to address temporary/occasional needs in its
operation.
On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for being purely speculative
and for lacking in factual basis, but the Company was directed to observe and comply with its
commitment under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and
indeed the agreement prescribes three (3) categories of employees in the Company and provides for the
definition, functions and duties of each. Material to the case at hand is the definition as regards the
functions of a casual employee described as follows:
Casual Employee One hired by the COMPANY to perform occasional or seasonal work directly
connected with the regular operations of the COMPANY, or one hired for specific projects of limited
duration not connected directly with the regular operations of the COMPANY.
While the foregoing agreement between the parties did eliminate managements prerogative of
outsourcing parts of its operations, it serves as a limitation on such prerogative particularly if it involves
functions or duties specified under the aforequoted agreement. It is clear that the parties agreed that in the
event that the Company needs to engage the services of additional workers who will perform "occasional
or seasonal work directly connected with the regular operations of the COMPANY," or "specific projects
of limited duration not connected directly with the regular operations of the COMPANY", the Company
can hire casual employees which is akin to contractual employees. If we note the Companys own
declaration that PESO was engaged to perform "temporary or occasional services" (See the Companys
Position Paper, at p. 1), then it should have directly hired the services of casual employees rather than do
it through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the
CBA provision in question. It must, however, be stressed that the right of management to outsource parts
of its operations is not totally eliminated but is merely limited by the CBA. Given the foregoing, the
Companys engagement of PESO for the given purpose is indubitably a violation of the CBA.
7

While the Union moved for partial reconsideration of the VA Decision,
8
the Company immediately filed a
petition for review
9
before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil
Procedure to set aside the directive to observe and comply with the CBA commitment pertaining to the
hiring of casual employees when necessitated by business circumstances. Professing that such order was
not covered by the sole issue submitted for voluntary arbitration, the Company assigned the following
errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS
EXPRESSLY GRANTED AND LIMITED BY BOTH PARTIES IN RULING THAT THE
ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.
10

THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE
ERROR IN DECLARING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE
INTENT AND SPIRIT OF THE CBA.
11

On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it held:
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the
engagement of PESO is not in keeping with the intent and spirit of the CBA." The said ruling is
interrelated and intertwined with the sole issue to be resolved that is, "Whether or not the Company is
guilty of unfair labor practice in engaging the services of PESO, a third party service provider, under
existing CBA, laws, and jurisprudence." Both issues concern the engagement of PESO by the Company
which is perceived as a violation of the CBA and which constitutes as unfair labor practice on the part of
the Company. This is easily discernible in the decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not
constitute unfair labor practice as it (sic) not characterized under the law as a gross violation of the CBA.
Violations of a CBA, except those which are gross in character, shall no longer be treated as unfair labor
practice. Gross violations of a CBA means flagrant and/or malicious refusal to comply with the economic
provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in
declaring that the engagement of PESO is not in keeping with the intent and spirit of the CBA. The
Company justified its engagement of contractual employees through PESO as a management prerogative,
which is not prohibited by law. Also, it further alleged that no provision under the CBA limits or prohibits
its right to contract out certain services in the exercise of management prerogatives.
Germane to the resolution of the above issue is the provision in their CBA with respect to the categories
of the employees:
x x x x
A careful reading of the above-enumerated categories of employees reveals that the PESO contractual
employees do not fall within the enumerated categories of employees stated in the CBA of the parties.
Following the said categories, the Company should have observed and complied with the provision of
their CBA. Since the Company had admitted that it engaged the services of PESO to perform temporary
or occasional services which is akin to those performed by casual employees, the Company should have
tapped the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a management prerogative. It
bears stressing that a management prerogative refers to the right of the employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees, supervision of their work, lay-off and discipline,
and dismissal and recall of work, presupposing the existence of employer-employee relationship. On the
basis of the foregoing definition, the Companys engagement of PESO was indeed a management
prerogative. This is in consonance with the pronouncement of the Supreme Court in the case of Manila
Electric Company vs. Quisumbing where it ruled that contracting out of services is an exercise of
business judgment or management prerogative.
This management prerogative of contracting out services, however, is not without limitation. In
contracting out services, the management must be motivated by good faith and the contracting out should
not be resorted to circumvent the law or must not have been the result of malicious arbitrary actions. In
the case at bench, the CBA of the parties has already provided for the categories of the employees in the
Companysestablishment. These categories of employees particularly with respect to casual employees
serve as limitation to the Companys prerogative to outsource parts of its operations especially when
hiring contractual employees. As stated earlier, the work to be performed by PESO was similar to that of
the casual employees. With the provision on casual employees, the hiring of PESO contractual
employees, therefore, is not in keeping with the spirit and intent of their CBA. (Citations omitted)
12

The Company moved to reconsider the CA Decision,
13
but it was denied;
14
hence, this petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation
15
informing this Court that its
stockholders and directors unanimously voted to shorten the Companys corporate existence only until
June 30, 2006, and that the three-year period allowed by law for liquidation of the Companys affairs
already expired on June 30, 2009. Referring to Gelano v. Court of Appeals,
16
Public Interest Center, Inc.
v. Elma,
17
and Atienza v. Villarosa,
18
it urged Us, however, to still resolve the case for future guidance of
the bench and the bar as the issue raised herein allegedly calls for a clarification of a legal principle,
specifically, whether the VA is empowered to rule on a matter not covered by the issue submitted for
arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event that renders this case
moot and academic
19
due to the permanent cessation of the Companys business operation on June 30,
2009, the arguments raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary
arbitration. Resultantly, the CA did not commit serious error when it sustained the ruling that the hiring of
contractual employees from PESO was not in keeping with the intent and spirit of the CBA. Indeed, the
opinion of the VA is germane to, or, in the words of the CA, "interrelated and intertwined with," the sole
issue submitted for resolution by the parties. This being said, the Companys invocation of Sections 4 and
5, Rule IV
20
and Section 5, Rule VI
21
of the Revised Procedural Guidelines in the Conduct of Voluntary
Arbitration Proceedings dated October 15, 2004 issued by the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido.
22
In
Ludo, the company was engaged in the manufacture of coconut oil, corn starch, glucose and related
products. In the course of its business operations, it engaged the arrastre services of CLAS for the loading
and unloading of its finished products at the wharf. The arrastre workers deployed by CLAS to perform
the services needed were subsequently hired, on different dates, as Ludos regular rank-and-file
employees. Thereafter, said employees joined LEU, which acted as the exclusive bargaining agent of the
rank-and-file employees. When LEU entered into a CBA with Ludo, providing for certain benefits to the
employees (the amount of which vary according to the length of service rendered), it requested to include
in its members period of service the time during which they rendered arrastre services so that they could
get higher benefits. The matter was submitted for voluntary arbitration when Ludo failed to act. Per
submission agreement executed by both parties, the sole issue for resolution was the date of regularization
of the workers. The VA Decision ruled that: (1) the subject employees were engaged in activities
necessary and desirable to the business of Ludo, and (2) CLAS is a labor-only contractor of Ludo. It then
disposed as follows: (a) the complainants were considered regular employees six months from the first
day of service at CLAS; (b) the complainants, being entitled to the CBA benefits during the regular
employment, were awarded sick leave, vacation leave, and annual wage and salary increases during such
period; (c) respondents shall pay attorneys fees of 10% of the total award; and (d) an interest of 12% per
annum or 1% per month shall be imposed on the award from the date of promulgation until fully paid.
The VA added that all separation and/or retirement benefits shall be construed from the date of
regularization subject only to the appropriate government laws and other social legislation. Ludo filed a
motion for reconsideration, but the VA denied it. On appeal, the CA affirmed in toto the assailed decision;
hence, a petition was brought before this Court raising the issue, among others, of whether a voluntary
arbitrator can award benefits not claimed in the submission agreement. In denying the petition, We ruled:
Generally, the arbitrator is expected to decide only those questions expressly delineated by the submission
agreement. Nevertheless, the arbitrator can assume that he has the necessary power to make a final
settlement since arbitration is the final resort for the adjudication of disputes. The succinct reasoning
enunciated by the CA in support of its holding, that the Voluntary Arbitrator in a labor controversy has
jurisdiction to render the questioned arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those questions expressly stated and limited in the
submission agreement. However, since arbitration is the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction and
authority to interpret the agreement to arbitrate and to determine the scope of his own authority subject
only, in a proper case, to the certiorari jurisdiction of this Court. The Arbitrator, as already indicated,
viewed his authority as embracing not merely the determination of the abstract question of whether or not
a performance bonus was to be granted but also, in the affirmative case, the amount thereof.
By the same token, the issue of regularization should be viewed as two-tiered issue. While the submission
agreement mentioned only the determination of the date or regularization, law and jurisprudence give the
voluntary arbitrator enough leeway of authority as well as adequate prerogative to accomplish the reason
for which the law on voluntary arbitration was created speedy labor justice. It bears stressing that the
underlying reason why this case arose is to settle, once and for all, the ultimate question of whether
respondent employees are entitled to higher benefits. To require them to file another action for payment
of such benefits would certainly undermine labor proceedings and contravene the constitutional mandate
providing full protection to labor.
23

Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case
reaffirms the plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to
determine the scope of his/her own authority. Subject to judicial review, the leeway of authority as well as
adequate prerogative is aimed at accomplishing the rationale of the law on voluntary arbitration speedy
labor justice. In this case, a complete and final adjudication of the dispute between the parties necessarily
called for the resolution of the related and incidental issue of whether the Company still violated the CBA
but without being guilty of ULP as, needless to state, ULP is committed only if there is gross violation of
the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of
contractual workers from PESO was a valid exercise of management prerogative. It is confused. To
emphasize, declaring that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Companys act of contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however, that such act is a valid exercise thereof. Obviously,
this is due to the recognition that the CBA provisions agreed upon by the Company and the Union delimit
the free exercise of management prerogative pertaining to the hiring of contractual employees. Indeed, the
VA opined that "the right of the management to outsource parts of its operations is not totally eliminated
but is merely limited by the CBA," while the CA held that "this management prerogative of contracting
out services, however, is not without limitation. x x x These categories of employees particularly with
respect to casual employees serve as limitation to the Companys prerogative to outsource parts of its
operations especially when hiring contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.1wphi1 As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary
to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control. x x x.
24

In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and the
Union must be read in conjunction with its Section 1, Article III (on union security). Both are
interconnected and must be given full force and effect. Also, these provisions are clear and unambiguous.
The terms are explicit and the language of the CBA is not susceptible to any other interpretation. Hence,
the literal meaning should prevail. As repeatedly held, the exercise of management prerogative is not
unlimited; it is subject to the limitations found in law, collective bargaining agreement or the general
principles of fair play and justice
25
Evidently, this case has one of the restrictions- the presence of specific
CBA provisions-unlike in San Miguel Corporation Employees Union-PTGWO v. Bersamira,
26
De
Ocampo v. NLRC,
27
Asian Alcohol Corporation v. NLRC,
28
and Serrano v. NLRC
29
cited by the
Company. To reiterate, the CBA is the norm of conduct between the parties and compliance therewith is
mandated by the express policy of the law.
30

WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12,
2005 Resolution of the Court of Appeals, which sustained the October 26, 2004 Decision of the
Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.

INTERNATIONAL MANAGEMENT
SERVICES/MARILYN C. PASCUAL,
Petitioner,



- versus -




ROEL P. LOGARTA,
Respondent.
G.R. No. 163657

Present:

VELASCO, JR., J., Chairperson,
PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.

Promulgated:

April 18, 2012

x-----------------------------------------------------------------------------------------x


D E C I S I O N


PERALTA, J .:

This is a petition for review on certiorari assailing the Decision1[1] dated January 8, 2004 of the
Court of Appeals (CA) in CA-G.R. SP No. 58739, and the Resolution2[2] dated May 12, 2004 denying
petitioners motion for reconsideration.

The factual and procedural antecedents are as follows:

Sometime in 1997, the petitioner recruitment agency, International Management Services (IMS),
a single proprietorship owned and operated by Marilyn C. Pascual, deployed respondent Roel P. Logarta
to work for Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection
with general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco).





Respondent was employed for a period of two (2) years, commencing on October 2, 1997, with a monthly
salary of eight hundred US Dollars (US$800.00). In October 1997, respondent started to work for
Petrocon as Piping Designer for works on the projects of Saudi Aramco.

Thereafter, in a letter3[3] dated December 21, 1997, Saudi Aramco informed Petrocon that for the
year 1998, the former is allotting to the latter a total work load level of 170,850 man-hours, of which
100,000 man-hours will be allotted for cross-country pipeline projects.

However, in a letter4[4] dated April 29, 1998, Saudi Aramco notified Petrocon that due to
changes in the general engineering services work forecast for 1998, the man-hours that were formerly
allotted to Petrocon is going to be reduced by 40%.

Consequently, due to the considerable decrease in the work requirements of Saudi Aramco,
Petrocon was constrained to reduce its personnel that were employed as piping designers, instrument
engineers, inside plant engineers, etc., which totaled to some 73 personnel, one of whom was respondent.

Thus, on June 1, 1998, Petrocon gave respondent a written notice5[5] informing the latter that due
to the lack of project works related to his expertise, he is given a 30-day notice of termination, and that his
last day of work with Petrocon will be on July 1, 1998. Petrocon also informed respondent that all due
benefits in accordance with the terms and conditions of his employment contract will be paid to
respondent, including his ticket back to the Philippines.

On June 23, 1998, respondent, together with his co-employees, requested Petrocon to issue them
a letter of Intent stating that the latter will issue them a No Objection Certificate once they find another







employer before they leave Saudi Arabia.6[6] On June 27, 1998, Petrocon granted the request and issued
a letter of intent to respondent.7[7]

Before his departure from Saudi Arabia, respondent received his final paycheck8[8] from
Petrocon amounting SR7,488.57.

Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National
Labor Relations Commission (NLRC), Cebu City, against petitioner as the recruitment agency which
employed him for employment abroad. In filing the complaint, respondent sought to recover his unearned
salaries covering the unexpired portion of his employment contract with Petrocon on the ground that he
was illegally dismissed.

After the parties filed their respective position papers, the Labor Arbiter rendered a Decision9[9]
in favor of the respondent, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondent Marilyn C. Pascual, doing business under the name and style International
Management Services, to pay the complainant Roel Logarta the peso equivalent of US
$5,600.00 based on the rate at the time of actual payment, as payment of his wages for
the unexpired portion of his contract of employment.

The other claims are dismissed for lack of merit.

So Ordered.10[10]












Aggrieved, petitioner filed an Appeal11[11] before the NLRC. On October 29, 1999, the NLRC,
Fourth Division, Cebu City rendered a Decision12[12] affirming the decision of the Labor Arbiter, but
reduced the amount to be paid by the petitioner, to wit:

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby
AFFIRMED with MODIFICATION reducing the award to only US $4,800.00 or its peso
equivalent at the time of payment.

SO ORDERED.13[13]


Petitioner filed a motion for reconsideration, but it was denied in the Resolution14[14] dated
April 17, 2000.

Not satisfied, petitioner sought recourse before the CA,15[15] arguing that the NLRC gravely
abused its discretion:

(a) in holding that while Petrocons retrenchment was justified, Petrocon failed to
observe the legal procedure for a valid retrenchment when, in fact, Petrocon did
observe the legal procedural requirements for a valid implementation of its
retrenchment scheme; and













(b) in making an award under Section 10 of R.A. No. 8042 which is premised on a
termination of employment without just, valid or authorized cause as defined by law
or contract, notwithstanding that NLRC itself found Petrocons retrenchment to be
justified.16[16]


On January 8, 2004, the CA rendered the assailed Decision dismissing the petition, the decretal
portion of which reads:

WHEREFORE, premises considered, the petition is DISMISSED and the
impugned Decision dated October 29, 1999 and Resolution dated April 17, 2000 are
AFFIRMED. Costs against the petitioner.

SO ORDERED.17[17]

In ruling in favor of the respondent, the CA agreed with the findings of the NLRC that
retrenchment could be a valid cause to terminate respondents employment with Petrocon. Considering
that there was a considerable reduction in Petrocons work allocation from Saudi Aramco, the reduction
of its work personnel was a valid exercise of management prerogative to reduce the number of its
personnel, particularly in those fields affected by the reduced work allocation from Saudi Aramco.
However, although there was a valid ground for retrenchment, the same was implemented without
complying with the requisites of a valid retrenchment. Also, the CA concluded that although the
respondent was given a 30-day notice of his termination, there was no showing that the Department of
Labor and Employment (DOLE) was also sent a copy of the said notice as required by law. Moreover,
the CA found that a perusal of the check payroll details would readily show that respondent was not paid
his separation pay.

Petitioner filed a motion for reconsideration, but it was denied in the Resolution18[18] dated May
12, 2004.







Hence, the petition assigning the following errors:

I.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT THE 30-DAY NOTICE TO DOLE PRIOR TO RETRENCHMENT IS NOT
APPLICABLE IN THIS CASE.

II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT RESPONDENT EMPLOYEE DID NOT CONSENT TO HIS SEPARATION
FROM THE PRINCIPAL COMPANY.

III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT JARIOL VS. IMS IS NOT APPLICABLE TO THE INSTANT CASE.

IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT RESPONDENT DID NOT RECEIVE THE SEPARATION PAY REQUIRED
BY LAW.19[19]


Petitioner argues that the 30-day notice of termination, as required in Serrano v. NLRC,20[20] is
not applicable in the case at bar, considering that respondent was in fact given the 30-day notice. More
importantly, Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipino Act of 1995
nor its Implementing Rules do not require the sending of notice to the DOLE, 30 days before the
effectivity of a retrenchment of an Overseas Filipino Worker (OFW) based on grounds under Article 283
of the Labor Code.

Petitioner maintains that respondent has consented to his termination, since he raised no objection
to his retrenchment and actually sought another employer during his 30-day notice of termination.






Respondent even requested from Petrocon a No Objection Certificate, which the latter granted to facilitate
respondents application to other Saudi Arabian employers.

Petitioner also posits that the CA should have applied the case of Jariol v. IMS21[21] even if the
said case was only decided by the NLRC, a quasi-judicial agency. The said case involved similar facts,
wherein the NLRC categorically ruled that employers of OFWs are not required to furnish the DOLE in
the Philippines a notice if they intend to terminate a Filipino employee.

Lastly, petitioner insists that respondent received his separation pay. Moreover, petitioner
contends that Section 10 of R.A. No. 8042 does not apply in the present case, since the termination of
respondent was due to a just, valid or authorized cause. At best, respondent is only entitled to separation
pay in accordance with Article 283 of the Labor Code, i.e., one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher.

On his part, respondent maintains that the CA committed no reversible error in rendering the
assailed decision.

The petition is partly meritorious.

Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to
cut down costs for operation particularly on salaries and wages.22[22] It is one of the economic grounds
to dismiss employees and is resorted by an employer primarily to avoid or minimize business
losses.23[23]








Retrenchment programs are purely business decisions within the purview of a valid and
reasonable exercise of management prerogative. It is one way of downsizing an employers workforce
and is often resorted to by the employer during periods of business recession, industrial depression, or
seasonal fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or introduction of new methods or more efficient
machinery or automation. It is a valid management prerogative, provided it is done in good faith and the
employer faithfully complies with the substantive and procedural requirements laid down by law and
jurisprudence.24[24]

In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi
Arabia, still both he and his employer are subject to the provisions of the Labor Code when applicable.
The basic policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas,
enjoy the protective mantle of Philippine labor and social legislations.25[25] In the case of Royal Crown
Internationale v. NLRC,26[26] this Court has made the policy pronouncement, thus:

x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective
mantle of Philippine labor and social legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the basic public policy of the
State to 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. x x x27[27]


Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or
overseas Filipino worker under Article 283 of the Labor Code, which provides:










Closure of establishment and reduction of personnel. - The employer may also
terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operations of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Department of Labor and Employment at least one (1) month before the intended date
thereof. 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 one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to at least 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 (6) months shall be considered as one (1) whole year.


Thus, retrenchment is a valid exercise of management prerogative subject to the strict
requirements set by jurisprudence, to wit:
(1) That the retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, are not merely de minimis, but substantial, serious, actual and
real, or if only expected, are reasonably imminent as perceived objectively and in good
faith by the employer;

(2) That the employer served written notice both to the employees and to the Department
of Labor and Employment at least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees separation pay equivalent to one
month pay or at least month pay for every year of service, whichever is higher;

(4) That the employer exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees' right to security
of tenure; and

(5) That the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status, x x x
efficiency, seniority, physical fitness, age, and financial hardship for certain
workers.28[28]


Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that
the first, fourth and fifth requirements were complied with by respondents employer. However, the
second and third requisites were absent when Petrocon terminated the services of respondent.




As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to
retrench its employees in good faith and the considerable reduction of work allotments of Petrocon by
Saudi Aramco was sufficient basis for Petrocon to reduce the number of its personnel, thus:

Moreover, from the standard form of employment contract relied upon by the
Labor Arbiter, it is clear that unilateral cancellation (sic) may be effected for legal, just
and valid cause or causes. Clearly, contrary to the Labor Arbiters perception, the
enumerated causes for employment termination by the employer in the standard form of
employment contract is not exclusive in the same manner that the listed grounds for
termination by the employer is not exclusive. As pointed out above, under Sec. 10 of RA
8042, it is clear that termination of employment may be for just, valid or authorized cause
as defined by law or contract. Retrenchment being indubitably a legal and authorized
cause may be availed of by the respondent.

From the records, it is clearly shown that there was a drastic reduction in
Petrocons 1998 work allocation from 250,000 man-hours to only 80,000 man-hours.
Under these circumstances over which respondents principal, Petrocon had no control, it
was clearly a valid exercise of management prerogative to reduce personnel particularly
those without projects to work on. To force Petrocon to continue maintaining all its
workers even those without projects is tantamount to oppression. The determination to
cease operation is a prerogative of management which the state does not usually interfere
with as no business or undertaking must be required to continue at a loss simply because
it has to maintain its employees in employment. Such an act would be tantamount to a
taking of property without due process of law. (Industrial Timber Corp. vs. NLRC, 273
SCRA 200)29[29]


As to complying with the fifth requirement, the CA was correct when it ruled that:

As to the fifth requirement, the NLRC considered the following criteria fair and
reasonable in ascertaining who would be dismissed and who would be retained among
the employees; (i) less preferred status; (ii) efficiency rating; (iii) seniority; and (iv) proof
of claimed financial losses.

The primary reason for respondents termination is lack of work project
specifically related to his expertise as piping designer. Due to the highly specialized
nature of Logartas job, we find that the availability of work and number of allocated
man-hours for pipeline projects are sufficient and reasonable criteria in determining who
would be dismissed and who would be retained among the employees. Consequently, we
find the criterion of less preferred status and efficiency rating not applicable.




The list of terminated employees submitted by Petrocon, shows that other
employees, with the same designation as Logartas (Piping Designer II), were also
dismissed. Terminated, too, were employees designated as Piping Designer I and Piping
Designer. Hence, employees whose job designation involves pipeline works were
without bias terminated.

As to seniority, at the time the notice of termination was given to him, Logartas
employment was eight (8) months, clearly, he has not accumulated sufficient years to
claim seniority.

As to proof of claimed financial losses, the NLRC itself has recognized the
drastic reduction of Petrocons work allocation, thereby necessitating the retrenchment of
some of its employees.30[30]


As for the notice requirement, however, contrary to petitioners contention, proper notice to the
DOLE within 30 days prior to the intended date of retrenchment is necessary and must be complied with
despite the fact that respondent is an overseas Filipino worker. In the present case, although respondent
was duly notified of his termination by Petrocon 30 days before its effectivity, no allegation or proof was
advanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the
respondent was terminated. Thus, this requirement of the law was not complied with.

Also, petitioners contention that respondent freely consented to his dismissal is unsupported by
substantial evidence. Respondents recourse of finding a new employer during the 30-day period prior to
the effectivity of his dismissal and eventual return to the Philippines is but logical and reasonable under
the circumstances. Faced with the eventuality of his termination from employment, it is understandable
for respondent to seize the opportunity to seek for other employment and continue working in Saudi
Arabia.

Moreover, petitioners insistence that the case of Jariol v. IMS should be applied in the present
case is untenable. Being a mere decision of the NLRC, it could not be considered as a precedent
warranting its application in the case at bar. Suffice it to state that although Article 8 of the Civil
Code31[31] recognizes judicial decisions, applying or interpreting statutes as part of the legal system of
the country, such level of recognition is not afforded to administrative decisions.32[32]





Anent the proper amount of separation pay to be paid to respondent, petitioner maintains that
respondent was paid the appropriate amount as separation pay. However, a perusal of his Payroll Check
Details,33[33] clearly reveals that what he received was his compensation for the month prior to his
departure, and hence, was justly due to him as his salary. Furthermore, the amounts which he received as
his End of Contract Benefit and Other Earning/Allowances: for July 199834[34] form part of his
wages/salary, as such, cannot be considered as constituting his separation pay.

Verily, respondent is entitled to the payment of his separation pay. However, this Court disagrees
with the conclusion of the Labor Arbiter, the NLRC and the CA, that respondent should be paid his
separation pay in accordance with the provision of Section 10 of R.A. No. 8042. A plain reading of the
said provision clearly reveals that it applies only to an illegally dismissed overseas contract worker or a
worker dismissed from overseas employment without just, valid or authorized cause, the pertinent portion
of which provides:

Sec. 10. Money Claims. x x x In case of termination of overseas employment
without just, valid or authorized cause as defined by law or contract, x x x

In the case at bar, notwithstanding the fact that respondents termination from his employment
was procedurally infirm, having not complied with the notice requirement, nevertheless the same remains
to be for a just, valid and authorized cause, i.e., retrenchment as a valid exercise of
management prerogative. To stress, despite the employers failure to comply with the one-month notice
to the DOLE prior to respondents termination, it is only a procedural infirmity which does not render the








retrenchment illegal. In Agabon v. NLRC,35[35] this Court ruled that when the dismissal is for a just
cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual.
Instead, the employer should indemnify the employee for violation of his statutory rights.36[36]

Consequently, it is Article 283 of the Labor Code and not Section 10 of R.A. No. 8042 that is
controlling. Thus, respondent is entitled to payment of separation pay equivalent to one (1) month pay, or
at least one-half (1/2) month pay for every year of service, whichever is higher. Considering that
respondent was employed by Petrocon for a period of eight (8) months, he is entitled to receive one (1)
month pay as separation pay. In addition, pursuant to current jurisprudence,37[37] for failure to fully
comply with the statutory due process of sufficient notice, respondent is entitled to nominal damages in
the amount P50,000.00.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 8,
2004 and the Resolution dated May 12, 2004 of the Court of Appeals are AFFIRMED with
MODIFICATIONS. Petitioner is ORDERED to pay Roel P. Logarta one (1) month salary as separation
pay and P50,000.00 as nominal damages.

SO ORDERED.








G.R. No. 171118 September 10, 2012
PARK HOTEL, J's PLAYHOUSE BURGOS CORP., INC., and/or GREGG HARBUTT, General
Manager, ATTY. ROBERTO ENRIQUEZ, President, and BILL PERCY, Petitioners,
vs.
MANOLO SORIANO, LESTER GONZALES, and YOLANDA BADILLA, Respondents.
D E C I S I O N
PERALTA, J .:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set
aside the Decision
1
and the Resolution
2
of the Court of Appeals (CA) in CA-G.R. SP No. 67766.
The antecedents are as follows:
Petitioner Park Hotel
3
is a corporation engaged in the hotel business. Petitioners Gregg Harbutt
4
(Harbutt)
and Bill Percy
5
(Percy) are the General Manager and owner, respectively, of Park Hotel. Percy, Harbutt
and Atty. Roberto Enriquez are also the officers and stockholders of Burgos Corporation (Burgos),
6
a
sister company of Park Hotel.
Respondent Manolo Soriano (Soriano) was hired by Park Hotel in July 1990 as Maintenance Electrician,
and then transferred to Burgos in 1992. Respondent Lester Gonzales (Gonzales) was employed by Burgos
as Doorman, and later promoted as Supervisor. Respondent Yolanda Badilla (Badilla) was a bartender of
J's Playhouse operated by Burgos.
In October of 1997, Soriano, Gonzales and Badilla
7
were dismissed from work for allegedly stealing
company properties. As a result, respondents filed complaints for illegal dismissal, unfair labor practice,
and payment of moral and exemplary damages and attorney's fees, before the Labor Arbiter (LA). In their
complaints, respondents alleged that the real reason for their dismissal was that they were organizing a
union for the company's employees.
On the other hand, petitioners alleged that aside from the charge of theft, Soriano and Gonzales have
violated various company rules and regulations
8
contained in several memoranda issued to them. After
dismissing respondents, Burgos filed a case for qualified theft against Soriano and Gonzales before the
Makati City Prosecutor's Office, but the case was dismissed for insufficiency of evidence.
In his Affidavit,
9
Soriano claimed that on October 4, 1997, he was barred from entering the company
premises and that the following day, Harbutt shouted at him for having participated in the formation of a
union. He was later dismissed from work. For his part, Gonzales averred that he was coerced to resign by
Percy and Harbutt in the presence of their goons. Badilla
10
claimed that she was also forced by Percy and
Harbutt to sign a resignation letter, but she refused to do so because she was innocent of the charges
against her. She was nevertheless dismissed from service.
The three (3) respondents averred that they never received the memoranda containing their alleged
violation of company rules and they argued that these memoranda were fabricated to give a semblance of
cause to their termination. Soriano and Gonzales further claimed that the complaint filed against them was
only an afterthought as the same was filed after petitioners learned that a complaint for illegal dismissal
was already instituted against them.
On September 27, 1998, the LA rendered a Decision
11
finding that respondents were illegally dismissed
because the alleged violations they were charged with were not reduced in writing and were not made
known to them, thus, denying them due process. The LA found that respondents did not actually receive
the memoranda allegedly issued by petitioners, and that the same were mere afterthought to conceal the
illegal dismissal. The dispositive portion of the Decision reads:
WHEREFORE, premises all considered, respondents (petitioners herein) are hereby ordered, jointly and
severally:
a. To reinstate within ten (10) days herein complainants to their former positions without loss of
seniority rights with full backwages from actual dismissal to actual reinstatement;
b. To declare the respondents (petitioners herein) guilty of unfair labor practice for terminating
complainants due to their union activities, which is union-busting, and to pay a fine of Ten
Thousand Pesos (P 10,000.00) pursuant to Article 288 of the Labor Code, as amended, payable to
the Commission;
c. To pay the amount of One Hundred Fifty Thousand [Pesos] (P 150,000.00) each to
complainants by way of moral and exemplary damages, plus ten percent (10%) attorney's fees of
the total award, chargeable to the respondents (petitioners herein).
SO ORDERED.
12

Unsatisfied with the LA's decision, petitioners appealed to the National Labor Relations Commission
(NLRC). On August 31, 1999, the NLRC, First Division, rendered a Decision
13
remanding the case to the
arbitration branch of origin for further proceedings.
14
On August 3, 2000, the LA rendered a new
Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises all considered, respondents (petitioners herein) are hereby ORDERED, jointly
and severally:
a. to reinstate within ten (10) days herein three (3) complainants to their former positions without
loss of seniority rights with full backwages from actual dismissal to actual reinstatement; to pay
complainant Soriano his unpaid wages for seven (7) days in the amount of P 1,680.00, his five (5)
days incentive leave pay in the amount of P 1,200,00 (P 240x5), unpaid proportionate 13
th
month
pay in the amount of P 4,992.00, plus other benefits;
b. to cease and desist from committing unfair labor practice against the complainant and to pay a
fine of Ten Thousand (P 10,000.00) Pesos pursuant to Art. 288 of the Labor Code, payable to the
Commission; and
c. to pay the amount of P 150,000.00
15
each to the complainants by way of moral and exemplary
damages, plus ten percent (10%) attorney's fees of the total award, chargeable to the respondents
(petitioners herein).
SO ORDERED.
16

Discontented with the LA's decision, petitioners again appealed to the NLRC. On February 1, 2001, the
NLRC affirmed the LA's decision and dismissed the appeal for lack of merit.
17
Petitioners filed a motion
for reconsideration, but it was denied for lack of merit.
18

Undaunted, Park Hotel, Percy, and Harbutt filed a petition for certiorari with the CA ascribing grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC in holding Park
Hotel, Harbutt and Percy jointly and severally liable to respondents.
On January 24, 2005, the CA rendered a Decision
19
dismissing the petition and affirming with
modification the ruling of the NLRC, the dispositive portion of which states:
WHEREFORE, the instant Petition is DISMISSED for lack of merit and the assailed Decision dated 1
February 2001 of the 1
st
Division of the NLRC is hereby AFFIRMED with MODIFICATION in that the
award of damages is reduced to P 100,000.00 in favor of each of the Private Respondents, including 10%
of the total amount of wages to be received as attorney's fees.
SO ORDERED.
20

The CA ruled that petitioners failed to observe the mandatory requirements provided by law in the
conduct of terminating respondents, i.e., lack of due process and just cause. The CA also found that
petitioners' primary objective in terminating respondents' employment was to suppress their right to self-
organization.
Petitioners filed a Motion for Reconsideration, but was denied in the Resolution
21
dated January 13, 2006.
Hence, the instant petition assigning the following errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND
ACTED WITHOUT AUTHORITY IN FINDING PARK HOTEL, BILL PERCY AND
[GREGORY] HARBUTT, TOGETHER WITH BURGOS CORPORATION AND ITS
PRESIDENT, AS ONE AND THE SAME ENTITY.
II
THE HONORABLE COURT OF APPEALS COMMITTED ERROR WHEN IT
OVERLOOKED MATERIAL CIRCUMSTANCES AND FACTS, WHICH IF TAKEN INTO
ACCOUNT, WOULD ALTER THE RESULTS OF ITS DECISION, PARTICULARLY IN
FINDING [THAT] THE SAID ENTITIES WERE FORMED IN PURSUANCE TO THE
COMMISSION OF FRAUD.
III
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND
ACTED WITHOUT AUTHORITY IN FINDING PARK HOTEL, BILL PERCY AND
GREGORY HARBUTT, TOGETHER WITH BURGOS CORPORATION AND ITS
PRESIDENT, GUILTY OF UNFAIR LABOR PRACTICE.
22

For brevity and clarity, the issues in this case may be re-stated and simplified as follows: (1) whether the
respondents were validly dismissed; and (2) if petitioners are liable, whether Park Hotel, Percy and
Harbutt are jointly and severally liable with Burgos for the dismissal of respondents.
Park Hotel argued that it is not liable on the ground that respondents were not its employees. On the other
hand, Percy and Harbutt argued that the CA committed error in piercing the corporate veil between them
and respondent corporations, thereby making them all solidarily liable to the respondents.
To begin with, it is significant to note that the LA, the NLRC and the CA were unanimous in their
findings that respondents were dismissed without just cause and due process. They were also in
agreement that unfair labor practice was committed against respondents. We reiterate the rule that
findings of fact of the Court of Appeals, particularly where it is in absolute agreement with that of the
NLRC and the LA, as in this case, are accorded not only respect but even finality and are deemed binding
upon this Court so long as they are supported by substantial evidence.
23
The function of this Court is
limited to the review of the appellate courts alleged errors of law. It is not required to weigh all over
again the factual evidence already considered in the proceedings below.
24
In any event, we found no
compelling reason to disturb the unanimous findings and conclusions of the CA, the NLRC and the LA
with respect to the finding of illegal dismissal.
The requisites for a valid dismissal are: (a) the employee must be afforded due process, i.e., he must be
given an opportunity to be heard and defend himself; and (b) the dismissal must be for a valid cause as
provided in Article 282 of the Labor Code, or for any of the authorized causes under Articles 283 and 284
of the same Code.
25
In the case before us, both elements are completely lacking. Respondents were
dismissed without any just or authorized cause and without being given the opportunity to be heard and
defend themselves. The law mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary burden would necessarily mean
that the dismissal was not justified and, therefore, illegal. Unsubstantiated suspicions, accusations, and
conclusions of employers do not provide for legal justification for dismissing employees. In case of
doubt, such cases should be resolved in favor of labor, pursuant to the social justice policy of labor laws
and the Constitution.
26

Anent the unfair labor practice, Article 248 (a) of the Labor Code
27
considers it an unfair labor practice
when an employer interferes, restrains or coerces employees in the exercise of their right to self-
organization or the right to form an association.
28
In order to show that the employer committed unfair
labor practice under the Labor Code, substantial evidence is required to support the claim. Substantial
evidence has been defined as such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.
29
In the case at bar, respondents were indeed unceremoniously dismissed from work
by reason of their intent to form and organize a union. As found by the LA:
The immediate impulse of respondents (petitioners herein), as in the case at bar, was to terminate the
organizers. Respondents (petitioners herein) have to cripple the union at sight, to frustrate attempts of
employees from joining or supporting it, preventing them, at all cost and to frustrate the employees bid to
exercise their right to self-organization. x x x
30

Having settled that respondents were illegally dismissed and were victims of unfair labor practice, the
question that comes to fore is who are liable for the illegal dismissal and unfair labor practice?
A perusal of the records would show that Burgos is the respondents' employer at the time they were
dismissed. Notwithstanding, the CA held that despite Soriano's transfer to Burgos in 1992, he was still an
employee of Park Hotel at the time of his dismissal in 1997. The Court, however, rules that the CA's
finding is clearly contrary to the evidence presented. From the documents presented by Soriano, it appears
that Soriano's payroll passbook
31
contained withdrawals and deposits, made in 1991, and that Soriano's
payslip
32
issued by Park Hotel covered the period from September to October 1990. Hence, these
documents merely show that Soriano was employed by Park Hotel before he was transferred to Burgos in
1992. Nowhere in these documents does it state that Soriano continued to work for Park Hotel in 1992
and onwards. Clearly therefore, Park Hotel cannot be made liable for illegal dismissal as it no longer had
Soriano in its employ at the time he was dismissed from work.
As to whether Park Hotel may be held solidarily liable with Burgos, the Court rules that before a
corporation can be held accountable for the corporate liabilities of another, the veil of corporate fiction
must first be pierced.
33
Thus, before Park Hotel can be held answerable for the obligations of Burgos to its
employees, it must be sufficiently established that the two companies are actually a single corporate
entity, such that the liability of one is the liability of the other.
34

A corporation is an artificial being invested by law with a personality separate and distinct from that of its
stockholders and from that of other corporations to which it may be connected.
35
While a corporation may
exist for any lawful purpose, the law will regard it as an association of persons or, in case of two
corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality.
This is the doctrine of piercing the veil of corporate fiction. The doctrine applies only when such
corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or
when it is made as a shield to confuse the legitimate issues, or where a corporation is the mere alter ego or
business conduit of a person, or where the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
36
To
disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly
and convincingly. It cannot be presumed.
37

In the case at bar, respondents utterly failed to prove by competent evidence that Park Hotel was a mere
instrumentality, agency, conduit or adjunct of Burgos, or that its separate corporate veil had been used to
cover any fraud or illegality committed by Burgos against the respondents. Accordingly, Park Hotel and
Burgos cannot be considered as one and the same entity, and Park Hotel cannot be held solidary liable
with Burgos.
Nonetheless, although the corporate veil between Park Hotel and Burgos cannot be pierced, it does not
necessarily mean that Percy and Harbutt are exempt from liability towards respondents. Verily, a
corporation, being a juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, while acting as corporate agents, are not their personal liability but the
direct accountability of the corporation they represent.
38
However, corporate officers may be deemed
solidarily liable with the corporation for the termination of employees if they acted with malice or bad
faith.
39
In the present case, the lower tribunals unanimously found that Percy and Harbutt, in their
capacity as corporate officers of Burgos, acted maliciously in terminating the services of respondents
without any valid ground and in order to suppress their right to self-organization.
Section 31
40
of the Corporation Code makes a director personally liable for corporate debts if he willfully
and knowingly votes for or assents to patently unlawful acts of the corporation. It also makes a director
personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the
corporation.1wphi1 Thus, Percy and Harbutt, having acted in bad faith in directing the affairs of Burgos,
are jointly and severally liable with the latter for respondents' dismissal.
In cases when an employee is unjustly dismissed from work, he shall be entitled to reinstatement without
loss of seniority rights and other privileges, inclusive of allowances, and other benefits or their monetary
equivalent from the time the compensation was withheld up to the time of actual reinstatement.
41

In the case at bar, the Court finds that it would be best to award separation pay instead of reinstatement, in
view of the passage of a long period of time since respondents' dismissal. In St. Luke's Medical Center,
Inc. v. Notario,
42
the Court held that if reinstatement proves impracticable, and hardly in the best interest
of the parties, due to the lapse of time since the employee's dismissal, the latter should be awarded
separation pay in lieu of reinstatement.
In view of the foregoing, respondents are entitled to the payment of full backwages, inclusive of
allowances, and other benefits or their monetary equivalent, and separation pay in lieu of reinstatement
equivalent to one month salary for every year of service.
43
The awards of separation pay and backwages
are not mutually exclusive, and both may be given to respondents.
44

The awards of moral and exemplary damages
45
in favor of respondents are also in order. Moral damages
may be recovered where the dismissal of the employee was tainted by bad faith or fraud, or where it
constituted an act oppressive to labor, and done in a manner contrary to morals, good customs or public
policy, while exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive,
or malevolent manner.
46
The grant of attorney's fees is likewise proper. Attorney's fees may likewise be
awarded to respondents who were illegally dismissed in bad faith and were compelled to litigate or incur
expenses to protect their rights by reason of the oppressive acts
47
of petitioners. The unjustified act of
petitioners had obviously compelled respondents to institute an action primarily to protect their rights and
interests which warrants the granting of the award.
WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67766, dated
January 24, 2005 and January 13, 2006, respectively, are AFFIRMED with the following
MODIFICATIONS: (a) Petitioner Park Hotel is exonerated from any liability to respondents; and (b)
The award of reinstatement is deleted, and in lieu thereof, respondents are awarded separation pay.
The case is REMANDED to the Labor Arbiter for the purpose of computing respondents' full backwages,
inclusive of allowances, and other benefits or their monetary equivalent, computed from the date of their
dismissal up to the finality of the decision, and separation pay in lieu of reinstatement equivalent to one
month salary for every year of service, computed from the time of their engagement up to the finality of
this Decision.
SO ORDERED:

NISSAN MOTORS PHILS., INC.,
Petitioner,




- versus




VICTORINO ANGELO,
Respondent.
G.R. No. 164181

Present:

VELASCO, JR., J., Chairperson,
PERALTA,
ABAD,
MENDOZA, and
SERENO,* JJ.

Promulgated:

September 14, 2011
x-----------------------------------------------------------------------------------------x


DECISION

PERALTA, J .:





This is to resolve the Petition for Review38[1] dated July 10, 2004 of petitioner Nissan Motors
Phils., Inc. (Nissan) assailing the Decision39[2] dated March 24, 2004 of the Court of Appeals (CA) and
the latter's Resolution40[3] dated June 9, 2004.

The records contain the following antecedent facts:

Respondent Victorino Angelo was employed by Nissan on March 11, 1989 as one of its payroll
staff. On April 7 to 17, 2000, respondent was on sick leave, thus, he was not able to prepare the payroll
for the said period. Again, on April 27 and 28, 2000, respondent was on an approved vacation leave
which again resulted in the non-preparation of the payroll for that particular period.

On May 8, 2000, respondent received a Memorandum41[4] from the petitioner containing the
following:

This is to inform you that the Company is considering your dismissal from
employment on the grounds of serious misconduct, willful disobedience and gross
neglect of duties.










It appears that on April 10, 2000, Monday, which was the supposed cut-off date
for payroll purposes for the April 15 payroll, you went home early without finishing your
work and requested for a referral letter from the company clinic to E. Delos Santos
Hospital claiming that you are not feeling well.

On April 11, Tuesday, you did not report for work, without any notice to the
company or to any of your immediate superior section head, department head and
division head. A phone call was made to your home, but the company could not make
any contact.

On April 12, Wednesday, you reported for work but went home early claiming
that you were again not feeling well. You were reminded of the coming payday on
Friday, April 14, and you said you will be able to finish it on time and that you will just
continue/finish your work the following day.

On April 13, Thursday, you again did not report for work without any notice to
the company just like what you did last Tuesday. Your immediate superior, sensing that
you did not finish your task, tried to contact you but to no avail, as you were residing in
Novaliches and your home phone was not in order. So we decided to open your
computer thru the help of our IT people to access the payroll program.

On April 14, Friday (payday), we were still doing the payroll thru IT because we
could not contact you. Later in the day, the Company decided to release the payroll of
employees the following day as we already ran out of time and the Company just based
the net pay of the employees on their March 15 payroll. Naturally, the amount released to
the employees were not accurate as some got more than (sic), while some got less than
what they were supposed to receive.

Consequently, many employees got angry, as the Company paid on a Saturday,
(in practice we do not release salary on a Saturday as it is always done in advance, i.e.,
Friday) and majority got lesser amount than what they were supposed to receive. In
addition, the employees were not given their payslip where they can base the net pay they
received.

When you reported for work on Tuesday, April 18, we had a meeting and you
were advised to transfer your payroll task to your immediate superior, which you agreed.
The time table agreement was 2 payroll period, meaning April 30 and May 15 payroll.

Still on April 18, Tuesday, you filed an application for vacation leave due to your
son's graduation on April 27 and 28. Because it is again payroll time, we advised that
your leave will be approved on the condition that you will ensure that the payroll is
finished on time and [you] will make a proper turn over to your immediate superior
before your leave. You agreed and your leave was approved.

On April 24, Monday, you were reminded you should start on your payroll task
because you will be on leave starting April 27, Thursday, you said yes.

On April 25, Tuesday, you were again reminded on finishing the payroll and the
turn over again and you said yes.

On April 26, Wednesday, you were again reminded on the same matter and, in
fact, Mr. AA del Rosario reminded you also on the matter about 5:30 p.m. And you
promised him that the task will be finished by tomorrow (sic) and will just leave the
diskette in your open drawer. You were left in the office until 6:00 p.m.

On April 27, Thursday, you were already on leave and your superior, Mr. M.
Panela, found out that the diskette only contained the amount and name of employees, but
not the account number. Likewise, the deductions from salaries was not finished, the
salaries of contractuals, apprentices were also not finished. Since the bank only reads
account numbers of employees, we experienced delay in the payroll processing. You
even promised to call the office i.e., M Panela to give additional instructions not later
than 12:00 noon on the same day, but you did not do so. In fact, the direct phone line of
Mr. AA del Rosario was given to you by your officemate so you can call the office
directly and not thru long distance.

On April 28, Friday, after exhaustive joint efforts done by Welfare Management
Section and IT Division, we were able to finally release the payroll thru the bank, but
many employees got lower amount than what they have expected, as in fact at least 43
employees out of 360 got salaries below P1,000.00, among them about 10 people got no
salary primarily due to wrong deduction and computation done by you. Again, many
people got angry to the management's inefficient handling of their payroll.

On May 2, Tuesday, you did not report for work, again you said you are not
feeling well, but the information to us came very late at about noon time.

On May 3, Wednesday, you reported for work, and was instructed to finish the payslips
for the payroll periods April 15 and April 30. You said yes, and you promised not to go
home on that day without finishing the payslips. Later, you decided on your own to just
compute the payslip on a monthly basis instead of the usual semi-monthly basis as is the
customary thing to do. As a result thereof, an error in the tax withholding happened and
again resulted in another confusion and anger among employees, as in fact for two (2)
consecutive days, May 3 and May 4, the plant workers refused to render overtime.

As a consequence of all these, the manufacturing employees, numbering about
350 people or about 65% of [Nissan's total population], since April 16, have started to
decline rendering overtime work, saying after their 15 days of work they received only
less than P200 while some even received only P80.

The manufacturing operation was hampered completely in the month of April
and the first week of May because of these several incidents. In sum, the company has
suffered massive loss of opportunity to sell because of failure to produce in the
production area due to non-availability of workers rendering overtime, high absenteeism
rate among plant direct workers primarily due to the payroll problem. It came at a time
when NMPI sales [are] just starting to pick up due to the introduction of the new model
Sentra Exalta. The loss is simply too overwhelming.

Accordingly, you are hereby given a period of three (3) days from receipt hereof to
submit your written answer.

In the meantime, you are hereby placed on preventive suspension effective immediately.

A hearing will be conducted by Mr. AA del Rosario, on May 13, 2000 at 9:00 a.m. at the
Company's conference room (Fairlady).


Respondent filed a Complaint42[5] for illegal suspension with the Department of Labor and
Employment (DOLE) on May 12, 2000.

Petitioner conducted an investigation on May 13, 2000, and concluded that respondent's
explanation was untrue and insufficient. Thus, on June 13, 2000, petitioner issued a Notice of
Termination.43[6]

Respondent amended his previous complaint against petitioner on June 22, 2000, to include the
charge of illegal dismissal.44[7] On September 29, 2000, the Labor Arbiter rendered a Decision45[8]
dismissing respondent's complaint for lack of merit. Undaunted, respondent brought the case to the
National Labor Relations Commission (NLRC), which eventually rendered a Resolution46[9] dated











February 14, 2002 dismissing the appeal and affirming the Labor Arbiter's Decision. Respondent's
motion for reconsideration of the NLRC resolution was subsequently denied on May 13, 2002.47[10]

Aggrieved, respondent filed a petition for certiorari48[11] under Rule 65 of the Rules of Court
with the CA and the latter granted the same petition in its Decision dated March 24, 2004, the dispositive
portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed resolutions dated February 14,
2002 and May 13, 2002 are REVERSED and SET ASIDE. The petitioner is hereby
reinstated and the private respondents are ordered to pay him backwages from the time of
his illegal dismissal.

SO ORDERED.


Unsatisfied with the decision of the CA, Nissan filed a motion for reconsideration, which was
denied by the same court in a Resolution dated June 9, 2004.

Thus, the present petition, to which the petitioner cites the following grounds:


A
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT
OVERTURNED THE FACTUAL FINDINGS OF BOTH THE LABOR ARBITER AND
THE NLRC WHICH ARE BASED ON SUBSTANTIAL EVIDENCE.






B
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN IT
DISREGARDED PRIVATE RESPONDENT'S SERIOUS MISCONDUCT AND
INSUBORDINATION, AND DECIDED THE CASE ONLY ON THE CHARGE OF
GROSS AND HABITUAL NEGLIGENCE.

C
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN
IGNORING PRIVATE RESPONDENT'S MISCONDUCT WHICH, IF EVER IT DOES
NOT JUSTIFY DISMISSAL BECAUSE OF HIS 11-YEAR SERVICE NONETHELESS
LIMITS THE AWARD OF BACKWAGES.49[12]
The petition is meritorious.

Petitioner argues that the factual findings of the Labor Arbiter and the NLRC should have been
accorded respect by the CA as they are based on substantial evidence. However, factual findings of
administrative agencies are not infallible and will be set aside if they fail the test of arbitrariness.50[13]
In the present case, the findings of the CA differ from those of the Labor Arbiter and the NLRC. The
Court, in the exercise of its equity jurisdiction, may look into the records of the case and re-examine the
questioned findings.51[14]

The Labor Code provides that an employer may terminate the services of an employee for a just
cause.52[15] Petitioner, the employer in the present case, dismissed respondent based on allegations of
serious miscounduct, willful disobedience and gross neglect.









One of the just causes enumerated in the Labor Code is serious misconduct. Misconduct is
improper or wrong conduct.53[16] It is the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment.54[17] Such misconduct, however serious, must nevertheless be in connection with the
employee's work to constitute just cause for his separation.55[18] Thus, for misconduct or improper
behavior to be a just cause for dismissal, (a) it must be serious; (b) it must relate to the performance of the
employees duties; and (c) it must show that the employee has become unfit to continue working for the
employer.56[19]

Going through the records, this Court found evidence to support the allegation of serious
misconduct or insubordination. Petitioner claims that the language used by respondent in his Letter-
Explanation is akin to a manifest refusal to cooperate with company officers, and resorted to conduct
which smacks of outright disrespect and willful defiance of authority or insubordination. The misconduct
to be serious within the meaning of the Labor Code must be of such a grave and aggravated character and
not merely trivial or unimportant.57[20] The Letter-Explanation58[21] partly reads:













Again, it's not negligence on my part and I'm not alone to be blamed. It's
negligence on your part [Perla Go] and A.A. Del Rosario kasi, noong pang April 1999
ay alam ninyo na hindi ako ang dapat may responsibilidad ng payroll kundi ang Section
Head eh bakit hindi ninyo pinahawak sa Section Head noon pa. Pati kaming dalawa sa
payroll, kasama ko si Thelma. Tinanggal nyo si Thelma. Hindi nyo ba naisip na
kailangan dalawa ang tao sa payroll para pag absent ang isa ay may gagawa. Dapat
noon nyo pa naisip iyan. Ang tagal kong gumawa ng trabahong hindi ko naman dapat
ginagawa.


This Court finds the above to be grossly discourteous in content and tenor. The most appropriate
thing he could have done was simply to state his facts without resorting to such strong language. Past
decisions of this Court have been one in ruling that accusatory and inflammatory language used by an
employee to the employer or superior can be a ground for dismissal or termination.59[22]

Another just cause cited by the petitioner is willful disobedience. One of the fundamental duties
of an employee is to obey all reasonable rules, orders and instructions of the employer. Disobedience, to
be a just cause for termination, must be willful or intentional, willfulness being characterized by a
wrongful and perverse mental attitude rendering the employees act inconsistent with proper
subordination. A willful or intentional disobedience of such rule, order or instruction justifies dismissal
only where such rule, order or instruction is (1) reasonable and lawful, (2) sufficiently known to the
employee, and (3) connected with the duties which the employee has been engaged to discharge.60[23]
This allegation of willful disobedience can still be adduced and proven from the same Letter-Explanation
cited earlier.








Petitioner also dismissed respondent because of gross or habitual negligence. Neglect of duty, to
be a ground for dismissal, must be both gross and habitual.61[24] In finding that petitioner was able to
adduce evidence that would justify its dismissal of respondent, the NLRC correctly ruled that the latter's
failure to turn over his functions to someone capable of performing the vital tasks which he could not
effectively perform or undertake because of his heart ailment or condition constitutes gross neglect. It
stated that:

x x x Be it mentioned and emphasized that complainant cannot be faulted for his
absences incurred on 10, 11, 13, 14, 17, 27 and 28 of April 2000 as he went on official
leave on said dates. Except for the last two dates mentioned (27 and 28 April 2000),
health problem compelled complainant to be on sick leave of absence on the foregoing
dates. It is not the complainant's liking, in other words, to be afflicted with any form of
heart ailment which actually caused him to incur such leave of absences. Complainant's
pellucid fault, however, lies on his failure to effect the much-needed turn over of
functions to someone capable of performing the vital task(s) which he could not
effectively perform or undertake because of his heart ailment or condition. Indeed, the
trouble(s) felt by management and the employees concerned on the payday of 15 April
2000 may seem justified under the circumstances as complainant indeed has gotten ill
and in fact went on sick leave of absence prior to said payday. The same, however,
certainly does not hold true as to the trouble(s) and chaos felt and which occurred on the
payday of 30 April 2000 as diligence and prudence logically and equitably required
complainant to have effected the necessary turn over of his functions to someone capable
of taking over his assigned task(s) even perhaps on a merely temporary basis. The
preparation of payroll, especially that of a big business entity such as herein respondent
company, certainly involves serious, diligent, and meticulous attention of the employee
tasked of performing such function and a company definitely could not let either
negligence or absence of the employee concerned get in the way of the performance of
the undertaking of such, otherwise, serious repercussion(s) would be the logical and
unavoidable consequences; such is what befell the respondents. Be it mentioned at this
juncture that under the circumstances herein then prevailing, it would seem just logical
and in keeping with the natural reflexes, so to speak, of a business entity, to require an
incapable employee tasked to perform a vital function, to effect the necessary turn over of
functions of such employee to someone capable. Be it further emphasized, however, that
even assuming that no formal directive was given by the company to the employee
concerned for the turn over of the latter's functions, said employee should have taken the
initiative of so doing considering the importance of the task(s) he is performing. Hence,
failure to do so would clearly be tantamount to serious neglect of duty, a valid ground in
terminating employment relations.62[25]





Gross negligence connotes want of care in the performance of one's duties. Habitual neglect
implies repeated failure to perform one's duties for a period of time, depending upon the circumstances.
On the other hand, fraud and willful neglect of duties imply bad faith on the part of the employee in
failing to perform his job to the detriment of the employer and the latter's business.63[26]

It must be emphasized at this point that the onus probandi to prove the lawfulness of the
dismissal rests with the employer. In termination cases, the burden of proof rests upon the employer to
show that the dismissal is for just and valid cause. Failure to do so would necessarily mean that the
dismissal was not justified and, therefore, was illegal.64[27] In this case, both the Labor Arbiter and the
NLRC were not amiss in finding that the dismissal of respondent was legal or for a just cause based on
substantial evidence presented by petitioner. Substantial evidence, which is the quantum of proof
required in labor cases, is that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.65[28]

However, although the dismissal was legal, respondent is still entitled to a separation pay as a
measure of financial assistance, considering his length of service and his poor physical condition which
was one of the reasons he filed a leave of absence. As a general rule, an employee who has been
dismissed for any of the just causes enumerated under Article 28266[29] of the Labor Code is not entitled









to separation pay.67[30] Although by way of exception, the grant of separation pay or some other
financial assistance may be allowed to an employee dismissed for just causes on the basis of
equity.68[31] This concept has been thoroughly discussed in Solidbank Corporation v. NLRC,69[32]
thus:
The reason that the law does not statutorily grant separation pay or financial
assistance in instances of termination due to a just cause is precisely because the cause for
termination is due to the acts of the employee. In such instances, however, this Court,
inspired by compassionate and social justice, has in the past awarded financial
assistance to dismissed employees when circumstances warranted such an award.

In Central Philippines Bandag Retreaders, Inc. v. Diasnes,70[33] this Court
discussed the parameters of awarding separation pay to dismissed employees as a
measure of financial assistance, viz:

To reiterate our ruling in Toyota, labor adjudicatory officials and
the CA 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. They must be most judicious and
circumspect in awarding separation pay or financial assistance as the
constitutional policy to provide full protection to labor is not meant to be
an instrument to oppress the employers. The commitment of the Court to
the cause of labor should not embarrass us from sustaining the employers
when they are right, as here. In fine, we should be more cautious in










awarding financial assistance to the undeserving and those who are
unworthy of the liberality of the law.71[34]

Thus, in Philippine Commercial International Bank v. Abad,72[35] this Court,
having considered the circumstances present therein and as a measure of social justice,
awarded separation pay to a dismissed employee for a just cause under Article 282. The
same concession was given by this Court in Aparente, Sr. v. National Labor Relations
Commission73[36] and Tanala v. National Labor Relations Commission.74[37]


WHEREFORE, the Petition for Review dated July 10, 2004 of petitioner Nissan Motors Phils.,
Inc. is hereby GRANTED. Consequently, the Decision dated March 24, 2004 of the Court of Appeals
and the latter's Resolution dated June 9, 2004 are hereby REVERSED AND SET ASIDE and the
Decision dated September 29, 2000 of the Labor Arbiter and its Resolution dated February 14, 2002 are
hereby REINSTATED with the MODIFICATION that petitioner shall award respondent his separation
pay, the computation of which shall be based on the prevailing pertinent laws on the matter.

SO ORDERED.










G.R. No. 191475 December 11, 2013
PHILIPPINE CARPET MANUFACTURING CORPORATION, PACIFIC CARPET
MANUFACTURING CORPORATION, MR. PATRICIO LIM and MR. DAVID LIM, Petitioners,
vs.
IGNACIO B. TAGYAMON,PABLITO L. LUNA, FE B. BADA YOS, GRACE B. MARCOS,
ROGELIO C. NEMIS, ROBERTO B. ILAO, ANICIA D. DELA CRUZ and CYNTHIA L.
COMANDAO, Respondents.
D E C I S I O N
PERALTA, J .:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of
Appeals (CA) Decision1 dated July 7, 2009 and Resolution2 dated February 26, 2010 in CA-G.R. SP No.
105236. The assailed decision granted the petition for certiorari filed by respondents Ignacio B.
Tagyamon (Tagyamon), Pablito I. Luna (Luna), Fe B. Badayos (Badayos), Grace B. Marcos (Marcos),
Rogelio C. Nemis (Nemis), Roberto B. Ilao (Ilao), Anicia D. Dela Cruz (Dela Cruz), and Cynthia L.
Comandao (Comandao), the dispositive portion of which reads:
WHEREFORE, the petition is GRANTED. The private respondent is hereby ordered to reinstate the
petitioners with full backwages less the amounts they received as separation pays. In case reinstatement
would no longer be feasible because the positions previously held no longer exist, the private respondent
shall pay them backwages plus, in lieu of reinstatement, separation pays equal to one (1) month pay, or
one-half (1/2) month pay for every year of service, whichever is higher. In addition, the private
respondent is hereby ordered to pay the petitioners moral damages in the amount of P20,000.00 each.
SO ORDERED.3
The Facts
Petitioner Philippine Carpet Manufacturing Corporation (PCMC) is a corporation registered in the
Philippines engaged in the business of manufacturing wool and yarn carpets and rugs.4 Respondents were
its regular and permanent employees, but were affected by petitioners retrenchment and voluntary
retirement programs.
On March 15, 2004, Tagyamon,5 Luna,6 Badayos,7 Dela Cruz,8 and Comandao9 received a uniformly
worded Memorandum of dismissal, to wit:
This is to inform you that in view of a slump in the market demand for our products due to the un-
competitiveness of our price, the company is constrained to reduce the number of its workforce. The long-
term effects of September 11 and the war in the Middle East have greatly affected the viability of our
business and we are left with no recourse but to reorganize and downsize our organizational structure.
We wish to inform you that we are implementing a retrenchment program in accordance with Article 283
of the Labor Code of the Philippines, as amended, and its implementing rules and regulations.
In this connection, we regret to advise you that you are one of those affected by the said exercise, and
your employment shall be terminated effective at the close of working hours on April 15, 2004.
Accordingly, you shall be paid your separation pay as mandated by law. You will no longer be required to
report for work during the 30-day notice period in order to give you more time to look for alternative
employment. However, you will be paid the salary corresponding to the said period. We shall process
your clearance and other documents and you may claim the payables due you on March 31, 2004.
Thank you for your services and good luck to your future endeavors.10
As to Marcos, Ilao, and Nemis, they claimed that they were dismissed effective March 31, 2004, together
with fifteen (15) other employees on the ground of lack of market/slump in demand.11 PCMC, however,
claimed that they availed of the companys voluntary retirement program and, in fact, voluntarily
executed their respective Deeds of Release, Waiver, and Quitclaim.12
Claiming that they were aggrieved by PCMCs decision to terminate their employment, respondents filed
separate complaints for illegal dismissal against PCMC, Pacific Carpet Manufacturing Corporation, Mr.
Patricio Lim and Mr. David Lim. These cases were later consolidated. Respondents primarily relied on
the Supreme Courts decision in Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto.
Tomas (Philcea case),13 as to the validity of the companys retrenchment program. They further
explained that PCMC did not, in fact, suffer losses shown by its acts prior to and subsequent to their
termination.14 They also insisted that their acceptance of separation pay and signing of quitclaim is not a
bar to the pursuit of illegal dismissal case.15
PCMC, for its part, defended its decision to terminate the services of respondents being a necessary
management prerogative. It pointed out that as an employer, it had no obligation to keep in its employ
more workers than are necessary for the operation of his business. Thus, there was an authorized cause for
dismissal. Petitioners also stressed that respondents belatedly filed their complaint as they allowed almost
three years to pass making the principle of laches applicable. Considering that respondents accepted their
separation pay and voluntarily executed deeds of release, waiver and quitclaim, PCMC invoked the
principle of estoppel on the part of respondents to question their separation from the service. Finally, as to
Marcos, Ilao and Nemis, PCMC emphasized that they were not dismissed from employment, but in fact
they voluntarily retired from employment to take advantage of the companys program.16
On August 23, 2007, Labor Arbiter (LA) Donato G. Quinto, Jr. rendered a Decision dismissing the
complaint for lack of merit.17 The LA found no flaw in respondents termination as they voluntarily
opted to retire and were subsequently re-employed on a contractual basis then regularized, terminated
from employment and were paid separation benefits.18 In view of respondents belated filing of the
complaint, the LA concluded that such action is a mere afterthought designed primarily for respondents to
collect more money, taking advantage of the 2006 Supreme Court decision.19
On appeal, the National Labor Relations Commission (NLRC) sustained the LA decision.20 In addition to
the LA ratiocination, the NLRC emphasized the application of the principle of laches for respondents
inaction for an unreasonable period.
Still undaunted, respondents elevated the matter to the CA in a petition for certiorari. In reversing the
earlier decisions of the LA and the NLRC, the CA refused to apply the principle of laches, because the
case was instituted prior to the expiration of the prescriptive period set by law which is four years. It
stressed that said principle cannot be invoked earlier than the expiration of the prescriptive period.21
Citing the Courts decision in the Philcea case, the CA applied the doctrine of stare decisis, in view of the
similar factual circumstances of the cases. As to Ilao, Nemis and Marcos, while acknowledging their
voluntary resignation, the CA found the same not a bar to the illegal dismissal case because they did so on
the mistaken belief that PCMC was losing money.22 With the foregoing findings, the CA ordered that
respondents be reinstated with full backwages less the amounts they received as separation pay. In case of
impossibility of reinstatement, the CA ordered PCMC to pay respondents backwages and in lieu of
reinstatement, separation pay equal to one month pay or month pay for every year of service whichever
is higher, plus moral damages.23
The Issues
Aggrieved, petitioners come before the Court in this petition for review on certiorari based on this
ground, to wit:
IN RENDERING ITS DISPUTED DECISION AND RESOLUTION, THE COURT A QUO HAS
DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR
ESTABLISHED JURISPRUDENCE.
a) Res Judicata should not be followed if to follow it is to perpetuate error (Philippine Trust Co., and
Smith Bell & Co. vs. Mitchell, 59 Phil. 30, 36 (1933). The (Supreme) Court is not precluded from
rectifying errors of judgment if blind and stubborn adherence to the doctrine of immutability of final
judgments would involve the sacrifice of justice for technicality (Heirs of Maura So vs. Obliosca, G.R.
No. 147082, January 28, 2008, 542 SCRA 406)
b) Not all waivers and quitclaims are invalid as against public policy. Waivers that represent a voluntary
and reasonable settlement of the laborers claims are legitimate and should be respected by the Court as
the law between the parties (Gamogamo vs. PNOC Shipping and Transport Corp., G.R. No. 141707, May
2, 2002; Alcasero vs. NLRC, 288 SCRA 129) Where the persons making the waiver has done so
voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as valid and binding undertaking (Periquet vs. NLRC, 186
SCRA 724 [1990]; Magsalin vs. Coca Cola Bottlers Phils., Inc. vs. National Organization of Working
Men (N.O.W.M.], G.R. No. 148492, May 2, 2003).24
Petitioners contend that the Philcea case decided by this Court and relied upon by the CA in the assailed
decision was based on erroneous factual findings, inapplicable financial statement, as well as erroneous
analysis of such financial statements.25 They, thus, implore the Court to revisit the cited case in order to
dispense with substantial justice.26 They explain that the Court made conclusions based on erroneous
information. Petitioners also insist that the doctrines of res judicata and law of the case are not applicable,
considering that this case does not involve the same parties as the Philcea case.27 They likewise point out
that not all respondents were involuntarily separated on the ground of redundancy as some of them
voluntarily availed of the companys Voluntary Separation Program.28 They further contend that
respondents are guilty not only of laches but also of estoppel in view of their inaction for an unreasonable
length of time to assail the alleged illegal dismissal and in voluntarily executing a release, quitclaim and
waiver.29
The Courts Ruling
Laches
Laches has been defined as the failure or neglect for an unreasonable and unexplained length of time to do
that which by exercising due diligence, could or should have been done earlier, thus, giving rise to a
presumption that the party entitled to assert it either has abandoned or declined to assert it.30 It has been
repeatedly31 held by the Court that:
x x x Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of
law not courts of equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal
right. x x x Courts exercising equity jurisdiction are bound by rules of law and have no arbitrary
discretion to disregard them. In Zabat Jr. v. Court of Appeals x x x, this Court was more emphatic in
upholding the rules of procedure. We said therein:
As for equity which has been aptly described as a "justice outside legality," this is applied only in the
absence of, and never against, statutory law or, as in this case, judicial rules of procedure. Aequetas
nunguam contravenit legis. The pertinent positive rules being present here, they should preempt and
prevail over all abstract arguments based only on equity.
Thus, where the claim was filed within the [four-year] statutory period, recovery therefore cannot be
barred by laches. Courts should never apply the doctrine of laches earlier than the expiration of time
limited for the commencement of actions at law."32
An action for reinstatement by reason of illegal dismissal is one based on an injury to the complainants
rights which should be brought within four years from the time of their dismissal pursuant to Article
114633 of the Civil Code. Respondents complaint filed almost 3 years after their alleged illegal dismissal
was still well within the prescriptive period. Laches cannot, therefore, be invoked yet.34 To be sure,
laches may be applied only upon the most convincing evidence of deliberate inaction, for the rights of
laborers are protected under the social justice provisions of the Constitution and under the Civil Code.35
Stare Decisis
The main issue sought to be determined in this case is the validity of respondents dismissal from
employment. Petitioners contend that they either voluntarily retired from the service or terminated from
employment based on an authorized cause. The LA and the NLRC are one in saying that the dismissal
was legal. The CA, however, no longer discussed the validity of the ground of termination. Rather, it
applied the Courts decision in the Philcea case where the same ground was thoroughly discussed. In
other words, the appellate court applied the doctrine of stare decisis and reached the same conclusion as
the earlier case.
Under the doctrine of stare decisis, when a court has laid down a principle of law as applicable to a
certain state of facts, it will adhere to that principle and apply it to all future cases in which the facts are
substantially the same, even though the parties may be different.36 Where the facts are essentially
different, however, stare decisis does not apply, for a perfectly sound principle as applied to one set of
facts might be entirely inappropriate when a factual variant is introduced.37
The question, therefore, is whether the factual circumstances of this present case are substantially the
same as the Philcea case.
We answer in the affirmative.
This case and the Philcea case involve the same period which is March to April 2004; the issuance of
Memorandum to employees informing them of the implementation of the cost reduction program; the
implementation of the voluntary retirement program and retrenchment program, except that this case
involves different employees; the execution of deeds of release, waiver, and quitclaim, and the acceptance
of separation pay by the affected employees.
The illegality of the basis of the implementation of both voluntary retirement and retrenchment programs
of petitioners had been thoroughly ruled upon by the Court in the Philcea case. It discussed the requisites
of both retrenchment and redundancy as authorized causes of termination and that petitioners failed to
substantiate them. In ascertaining the bases of the termination of employees, it took into consideration
petitioners claim of business losses; the purchase of machinery and equipment after the termination, the
declaration of cash dividends to stockholders, the hiring of 100 new employees after the retrenchment,
and the authorization of full blast overtime work for six hours daily. These, said the Court, are
inconsistent with petitioners claim that there was a slump in the demand for its products which
compelled them to implement the termination programs. In arriving at its conclusions, the Court took note
of petitioners net sales, gross and net profits, as well as net income. The Court, thus, reached the
conclusion that the retrenchment effected by PCMC is invalid due to a substantive defect. We quote
hereunder the Courts pronouncement in the Philcea case, to wit:
Respondents failed to adduce clear and convincing evidence to prove the confluence of the essential
requisites for a valid retrenchment of its employees. We believe that respondents acted in bad faith in
terminating the employment of the members of petitioner Union.
Contrary to the claim of respondents that the Corporation was experiencing business losses, respondent
Corporation, in fact, amassed substantial earnings from 1999 to 2003. It found no need to appropriate its
retained earnings except on March 23, 2001, when it appropriated P60,000,000.00 to increase production
capacity. x x x
x x x x
The evidence on record belies the P22,820,151.00 net income loss in 2004 as projected by the SOLE. On
March 29, 2004, the Board of Directors approved the appropriation of P20,000,000.00 to purchase
machinery to improve its facilities, and declared cash dividends to stockholders at P30.00 per share. x x x
x x x x
It bears stressing that the appropriation of P20,000,000.00 by the respondent Corporation on September
16, 2004 was made barely five months after the 77 Union members were dismissed on the ground that
respondent Corporation was suffering from "chronic depression." Cash dividends were likewise declared
on March 29, 2004, barely two weeks after it implemented its "retrenchment program."
If respondent Corporation were to be believed that it had to retrench employees due to the debilitating
slump in demand for its products resulting in severe losses, how could it justify the purchase of
P20,000,000.00 worth of machinery and equipment? There is likewise no justification for the hiring of
more than 100 new employees, more than the number of those who were retrenched, as well as the order
authorizing full blast overtime work for six hours daily. All these are inconsistent with the intransigent
claim that respondent Corporation was impelled to retrench its employees precisely because of low
demand for its products and other external causes.
x x x x
That respondents acted in bad faith in retrenching the 77 members of petitioner is buttressed by the fact
that Diaz issued his Memorandum announcing the cost-reduction program on March 9, 2004, after receipt
of the February 10, 2004 letter of the Union president which included the proposal for additional benefits
and wage increases to be incorporated in the CBA for the ensuing year. Petitioner and its members had no
inkling, before February 10, 2004, that respondent Corporation would terminate their employment.
Moreover, respondent Corporation failed to exhaust all other means to avoid further losses without
retrenching its employees, such as utilizing the latter's respective forced vacation leaves. Respondents
also failed to use fair and reasonable criteria in implementing the retrenchment program, and instead
chose to retrench 77 of the members of petitioner out of the dismissed 88 employees. Worse, respondent
Corporation hired new employees and even rehired the others who had been "retrenched."
As shown by the SGV & Co. Audit Report, as of year end December 31, 2003, respondent Corporation
increased its net sales by more than P8,000,000.00. Respondents failed to prove that there was a drastic or
severe decrease in the product sales or that it suffered severe business losses within an interval of three (3)
months from January 2004 to March 9, 2004 when Diaz issued said Memorandum. Such claim of a
depressed market as of March 9, 2004 was only a pretext to retaliate against petitioner Union and thereby
frustrate its demands for more monetary benefits and, at the same time, justify the dismissal of the 77
Union members.
x x x x
In contrast, in this case, the retrenchment effected by respondent Corporation is invalid due to a
substantive defect, non-compliance with the substantial requirements to effect a valid retrenchment; it
necessarily follows that the termination of the employment of petitioner Union's members on such ground
is, likewise, illegal. As such, they (petitioner Union's members) are entitled to reinstatement with full
backwages.38
We find no reason to depart from the above conclusions which are based on the Courts examination of
the evidence presented by the parties therein. As the respondents here were similarly situated as the union
members in the Philcea case, and considering that the questioned dismissal from the service was based on
the same grounds under the same circumstances, there is no need to relitigate the issues presented herein.
In short, we adopt the Courts earlier findings that there was no valid ground to terminate the employees.
A closer look at petitioners arguments would show that they want the Court to re-examine our decision
in the Philcea case allegedly on the ground that the conclusions therein were based on erroneous
interpretation of the evidence presented.
Indeed, in Abaria v. National Labor Relations Commission,39 although the Court was confronted with the
same issue of the legality of a strike that has already been determined in a previous case, the Court
refused to apply the doctrine of stare decisis insofar as the award of backwages was concerned because of
the clear erroneous application of the law. We held therein that the Court abandons or overrules
precedents whenever it realizes that it erred in the prior decision.40 The Courts pronouncement in that
case is instructive:
The doctrine though is not cast in stone for upon a showing that circumstances attendant in a particular
case override the great benefits derived by our judicial system from the doctrine of stare decisis, the Court
is justified in setting it aside. For the Court, as the highest court of the land, may be guided but is not
controlled by precedent. Thus, the Court, especially with a new membership, is not obliged to follow
blindly a particular decision that it determines, after re-examination, to call for a rectification.41
The Abaria case, however, is not applicable in this case.1wphi1 There is no reason to abandon the
Courts ruling in the Philcea case.
Do we apply the aforesaid decision to all the respondents herein? Again, we answer in the affirmative.
Just like the union members in the Philcea case, respondents Tagyamon, Luna, Badayos, Dela Cruz, and
Comandao received similarly worded memorandum of dismissal effective April 15, 2004 based on the
same ground of slump in the market demand for the companys products. As such, they are similarly
situated in all aspects as the union members. With respect to respondents Marcos, Nemis and Ilao,
although they applied for voluntary retirement, the same was not accepted by petitioner. Instead, it issued
notice of termination dated March 6, 2004 to these same employees.42 And while it is true that petitioner
paid them separation pay, the payment was in the nature of separation and not retirement pay. In other
words, payment was made because of the implementation of the retrenchment program and not because of
retirement.43 As their application for availing of the companys voluntary retirement program was based
on the wrong premise, the intent to retire was not clearly established, or rather that the retirement is
involuntary. Thus, they shall be considered discharged from employment.44 Consequently, they shall be
treated as if they are in the same footing as the other respondents herein and the union members in the
Philcea case.
Waivers, Releases and Quitclaims
"As a rule, deeds of release and quitclaim cannot bar employees from demanding benefits to which they
are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits
would not amount to estoppel."45 To excuse respondents from complying with the terms of their waivers,
they must locate their case within any of three narrow grounds: (1) the employer used fraud or deceit in
obtaining the waivers; (2) the consideration the employer paid is incredible and unreasonable; or (3) the
terms of the waiver are contrary to law, public order, public policy, morals, or good customs or
prejudicial to a third person with a right recognized by law.46 The instant case falls under the first
situation.
As the ground for termination of employment was illegal, the quitclaims are deemed illegal as the
employees consent had been vitiated by mistake or fraud. The law looks with disfavor upon quitclaims
and releases by employees pressured into signing by unscrupulous employers minded to evade legal
responsibilities.47 The circumstances show that petitioners misrepresentation led its employees,
specifically respondents herein, to believe that the company was suffering losses which necessitated the
implementation of the voluntary retirement and retrenchment programs, and eventually the execution of
the deeds of release, waiver and quitclaim.48
It can safely be concluded that economic necessity constrained respondents to accept petitioners
monetary offer and sign the deeds of release, waiver and quitclaim. That respondents are supervisors and
not rank-and-file employees does not make them less susceptible to financial offers, faced as they were
with the prospect of unemployment. The Court has allowed supervisory employees to seek payment of
benefits and a manager to sue for illegal dismissal even though, for a consideration, they executed deeds
of quitclaims releasing their employers from liability.49
x x x There is no nexus between intelligence, or even the position which the employee held in the
company when it concerns the pressure which the employer may exert upon the free will of the employee
who is asked to sign a release and quitclaim. A lowly employee or a sales manager, as in the present case,
who is confronted with the same dilemma of whether [to sign] a release and quitclaim and accept what the
company offers them, or [to refuse] to sign and walk out without receiving anything, may do succumb to
the same pressure, being very well aware that it is going to take quite a while before he can recover
whatever he is entitled to, because it is only after a protracted legal battle starting from the labor arbiter
level, all the way to this Court, can he receive anything at all. The Court understands that such a risk of
not receiving anything whatsoever, coupled with the probability of not immediately getting any gainful
employment or means of livelihood in the meantime, constitutes enough pressure upon anyone who is
asked to sign a release and quitclaim in exchange of some amount of money which may be way below
what he may be entitled to based on company practice and policy or by law.50
The amounts already received by respondents as consideration for signing the releases and quitclaims
should be deducted from their respective monetary awards.51
WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals Decision
dated July 7, 2009 and Resolution dated February 26, 2010 in CA-G.R. SP No. 105236 are AFFIRMED.
SO ORDERED.