THIRD DIVISION

[G.R. No. 105963. August 22, 1996]

PAL

EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC.

(PESALA), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and ANGEL V. ESQUEJO, respondent.
DECISION

PANGANIBAN, J.:

Is an employee entitled to overtime pay for work rendered in excess of eight

hours a day, given the fact that his employment contract specifies a twelvehour workday at a fixed monthly salary rate that is above the legal minimum
wage? This is the principal question answered by this Court in resolving this
petition which challenges the validity and legality of the Decision of public
respondent National Labor Relations Commission promulgated on April 23,
1992 in NLRC NCR CA No. 002522-91 entitled Angel V. Esquejo vs. PAL
Employees Savings and Loan Association which Decision modified (slightly as
to amount) the earlier decision dated November 11, 1991 of the labor arbiter
granting private respondents claim for overtime pay.
[1]

[2]

[3]

The Facts and the Case Below

On October 10, 1990, private respondent filed with public respondent a
complaint docketed as NLRC NCR Case No. 10-05457-90 for non-payment of
overtime pay and non-payment of the P25.00 statutory minimum wage
increase mandated by Republic Act No. 6727.
Subsequently, private respondent filed a supplemental complaint for illegal
suspension with prayer for reinstatement and payment of backwages.
However, before the case was submitted for resolution, private respondent
filed a Motion to Withdraw Supplemental Complaint on the ground that a
separate action for illegal suspension, illegal dismissal, etc. had been filed and
was pending before another labor arbiter. Hence, the issue decided by public
respondent and which is under review by this Court in this petition involves
only his claim for overtime pay.
On November 26, 1990, private respondent filed his position paper with
the labor arbiter alleging the following facts constituting his cause of action:
[4]

Complainant (herein private respondent) started working with respondent

(PESALA) sometime last March 1, 1986 as a company guard and was receiving a
monthly basic salary of P1,990.00 plus an emergency allowance in the amount of
P510.00. He was required to work a (sic) twelve (12) hours a day, a (sic) xerox copies
of his appointment are hereto attached and marked as Annexes C and D of this
position paper;
That on December 10, 1986, respondent Board of Directors in its board meeting
held on November 21, 1986 approved a salary adjustment for the complainant
increasing his monthly basic salary to P2,310.00 and an emergency allowance of
P510.00, a xerox copy of the salary adjustment is hereto attached and marked as
Annex E hereof;
That on August 25, 1987, because of his impressive performance on his assigned
job, another adjustment was approved by the President of the association increasing
his monthly basic salary to P2,880.00, a xerox copy of the salary adjustment is hereto
attached and marked as Annex F hereof;
That from January 4, 1988 up to June 1990, several salary adjustments were made
by the respondent on the monthly basic salary of the complainant including a letter of
appreciation for being as (sic) one of the outstanding performers during the first half
of 1988, the latest salary prior to the filing of the complaint was P3,720.00, a (sic)
xerox copies of all the documents relative to the salary adjustments are hereto
attached and marked as annexes G, H, I, J and K of this position paper;
That during his entire period of employment with respondent, the former was
required to perform overtime work without any additional compensation from the
latter. It was also at this point wherein the respondent refused to give the P25.00
increase on the minimum wage rates as provided for by law. On October 12, 1990,
complainant was suspended for the period of thirty seven (37) days for an offense
allegedly committed by the respondent sometime last August 1989.
On December 13, 1990, petitioner PESALA filed its position paper alleging
among other things:
[5]

On 01 March, 1986, complainant was appointed in a permanent status as the

company guard of respondent. In the Appointment Memorandum dated February 24,
1986 which has the conformity of complainant, it is expressly stipulated therein that
complainant is to receive a monthly salary of P1,900.00 plus P510.00 emergency

allowance for a twelve (12) hours work per day with one (1) day off. A copy of said
appointment memorandum is hereto attached as Annex A and made an integral part
hereof.
On 01 December, 1986, the monthly salary of complainant was increased to
P2,310.00 plus P510.00 emergency allowance. Later, or on 01 January, 1988, the
monthly salary of complainant was again increased to P3,420.00. And still later, or on
01 February, 1989, complainants monthly salary was increased to P3,720.00. Copies
of the memoranda evidencing said increase are hereto attached as Annexes B, B-1 and
B-2 and are made integral parts hereof.
On 29 November, 1989, the manager of respondent in the person of Sulpicio
Jornales wrote to complainant informing the latter that the position of a guard will be
abolished effective November 30, 1989, and that complainant will be re-assigned to
the position of a ledger custodian effective December 1, 1989.
Pursuant to the above-mentioned letter-agreement of Mr. Jornales, complainant was
formally appointed by respondent as its ledger custodian on December 1, 1989. The
monthly salary of complainant as ledger custodian starting on December 1, 1989 was
P3,720.00 for forty (40) working hours a week or eight (8) working hours a day. A
copy of said Appointment memorandum is hereto attached as Annex C and made an
integral part hereof.
On 29 August, 1990, complainant was administratively charged with serious
misconduct or disobedience of the lawful orders of respondent or its officers, and
gross and habitual neglect of his duties, committed as follows:
1. Sometime in August, 1989, you (referring to complainant Esquejo) forwarded
the checks corresponding to the withdrawals of Mr. Jose Jimenez and Mr.
Anselmo dela Banda of Davao and Iloilo Station, respectively, without the
signature of the Treasurer and the President of PESALA, in violation of your
duty and function that you should see to it that the said checks should be
properly signed by the two PESALA officials before you send out said checks
of their addresses. As a result of which, there was a substantial delay in the
transmission of the checks to its owners resulting to an embarrassment on the
part of the PESALA officers and damage and injury to the receipients (sic) of
the checks since they needed the money badly.

2. Sometime in August, 1989, before you (complainant) went on your vacation,

you failed to leave or surrender the keys of the office, especially the keys to
the main and back doors which resulted to damage, injury and embarrassment
to PESALA. This is a gross violation of your assigned duties and you
disobeyed the instruction of your Superior.
xxx xxx xxx
Herein complainant was informed of the aforequoted charges against him and was
given the opportunity to be heard and present evidence in his behalf as shown by the
Notice of Hearing (Annex D hereof) sent to him. Complainant did in fact appeared
(sic) at the hearing, assisted by his counsel, Atty. Mahinardo G. Mailig, and presented
his evidence in the form of a Counter-Affidavit. A copy of said Counter-Affidavit is
hereto attached as Annex E and made an integral part hereof.
On 12 October, 1990, after due deliberation on the merits of the administrative
charges filed against herein complainant, the Investigating Officer in the person of
Capt. Rogelio Enverga resolved the same imposing a penalty of suspension of herein
complainant, thus:
PENALTY: 1. For the first offense, you (referring to complainant Esquejo) are
suspended for a period of thirty (30) working days without pay
effective October 15, 1990.
2. For the second offense, your (sic) are suspended for a period of seven (7)
working days without pay effective from the date the first
suspension will expire.
On March 7, 1991, private respondent filed a detailed and itemized
computation of his money claims totaling P107,495.90, to which petitioner
filed its comment on April 28, 1991. The computation filed on March 7, 1991
was later reduced to P65,302.80. To such revised computation, the petitioner
submitted its comment on April 28, 1991.
Thereafter, labor arbiter Cornelio L. Linsangan rendered a decision dated
November 11, 1991 granting overtime pay as follows:
WHEREFORE, judgment is hereby rendered:

1. Granting the claim for overtime pay covering the period October 10,
1987 to November 30, 1989 in the amount of P28,344.55.
2. The claim for non-payment of P25.00 salary increase pursuant to
Republic Act No. 6727 is dismissed for lack of merit.
Aggrieved by the aforesaid decision, petitioner appealed to public
respondent NLRC only to be rejected on April 23, 1992 via the herein assailed
Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the award is reduced to an amount of
TWENTY EIGHT THOUSAND SIXTY-SIX PESOS AND 45/100 (P28,066.45). In
all other respects, the Decision under review is hereby AFFIRMED and the appeal
DISMISSED for lack of merit.
No motion for reconsideration of the Decision was filed by the petitioner.

[6]

What transpired afterwards is narrated by the Solicitor General in his

memorandum, which we presume to be correct since petitioner did not
contradict the same in its memorandum:
[7]

x x x Petitioner did not appeal the Decision of respondent NLRC. When it became
final, the parties were called to a conference on June 29, 1992 to determine the
possibility of the parties voluntary compliance with the Decision (Order of Labor
Arbiter Linsangan, dated July 23, 1992).
x x x In their second conference, held on July 15, 1992, petitioner proposed to
private respondent a package compromise agreement in settlement of all pending
claims. Private respondent for his part demanded P150,000.00 as settlement of his
complaint which was turned down by petitioner as too excessive. Unfortunately, no
positive results were achieved.
As a result, a pleading was filed by petitioner captioned: Motion to Defer Execution
and Motion to Re-Compute alleged overtime pay. Petitioner states that quite recently,
the Employee Payroll Sheets pertaining to the salaries, overtime pay, vacation and
sick leave of Angel Esquejo were located.
x x x Petitioners Motion to Defer Execution and Motion to Re-Compute
respondents overtime pay was denied in an Order dated July 23, 1992.

x x x Petitioner moved to reconsider the Denial Order on July 27, 1992. Private
respondent opposed.
In the meantime, petitioner filed the instant special civil action
for certiorari before this Court on July 10, 1992. Later, on July 17, 1992, citing
as reason that x x x quite recently, the Employee Payroll Sheets which
contained the salaries and overtime pay received by respondent Esquejo
were located in the bodega of the petitioner and based on said Payroll Sheets,
it appears that substantial overtime pay have been paid to respondent
Esquejo in the amount of P24,283.22 for the period starting January 1987 up
to November 1989, petitioner asked this Court for the issuance of a temporary
restraining order or writ of preliminary injunction. On the same date of July 17,
1992, a Supplemental Petition Based On Newly Discovered Evidence was
filed by petitioner to which was attached photocopies of payroll sheets of the
aforestated period.
On July 29, 1992, this Court issued a temporary restraining order enjoining
the respondents from enforcing the Decision dated April 23, 1992 issued in
NLRC NCR CA No. 002522-91, the case below subject of the instant petition.
The Issues
For issues have been raised by the petitioner in its effort to obtain a reversal
of the assailed Decision, to wit:
I
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
WHEN IT RULED THAT PRIVATE RESPONDENT IS ENTITLED TO OVERTIME
PAY WHEN THE SAME IS A GROSS CONTRAVENTION OF THE CONTRACT
OF EMPLOYMENT BETWEEN PETITIONER AND RESPONDENT ESQUEJO
AND A PATENT VIOLATION OF ARTICLES 1305, 1306 AND 1159 OF THE
CIVIL CODE.
II
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION
IN AWARDING OVERTIME PAY OF P28,066.45 TO PRIVATE RESPONDENT
WHEN THE SAME IS A CLEAR VIOLATION OF ARTICLE 22 OF THE CIVIL
CODE ON UNJUST ENRICHMENT.

III
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSED OF DISCRETION
WHEN IT RULED THAT PRIVATE RESPONDENT WAS NOT PAID THE
OVERTIME PAY BASED ON THE COMPUTATION OF LABOR ARBITER
CORNELIO LINSANGAN WHICH WAS AFFIRMED BY SAID RESPONDENT
NLRC WHEN THE SAME IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE
AND IT, THEREFORE, VIOLATED THE CARDINAL PRIMARY RIGHTS OF
PETITIONER AS PRESCRIBED IN ANG TIBAY VS. CIR 69 PHIL. 635.
IV
WHETHER OR NOT THE PETITIONERS SUPPLEMENTAL PETITION BASED
ON NEWLY DISCOVERED EVIDENCE MAY BE ADMITTED AS PART OF ITS
EVIDENCE IT BEING VERY VITAL TO THE JUDICIOUS DETERMINATION OF
THE CASE.(Rollo, p. 367)
In essence the above issues boil down to this query: Is an employee entitled
to overtime pay for work rendered in excess of the regular eight hour day
given the fact that he entered into a contract of labor specifying a work-day of
twelve hours at a fixed monthly rate above the legislative minimum wage?
The Courts Ruling
At the outset, we would like to rectify the statement made by the Solicitor
General that the petitioner did not appeal from the Decision of (public)
respondent NLRC. The elevation of the said case by appeal is not possible.
The only remedy available from an order or decision of the NLRC is a petition
for certiorari under Rule 65 of the Rules of Court alleging lack or excess of
jurisdiction or grave abuse of discretion. The general rule now is that the
special civil action of certiorari should be instituted within a period of three
months. Hence, when the petition was filed on July 10, 1992, three months
had not yet elapsed from petitioners receipt of the assailed Decision (should
really be from receipt of the order denying the motion for reconsideration).
[8]

[9]

However, aside from failing to show clearly grave abuse of discretion on the
part of respondent NLRC, which we shall discuss shortly, the petitioner also
failed to comply with the mandatory requirement of filing a motion for
reconsideration from the Decision of the Public respondent before resorting to
the remedy of certiorari. We have previously held that:

x x x. The implementing rules of respondent NLRC are unequivocal in requiring

that a motion for reconsideration of the order, resolution, or decision of respondent
commission should be seasonably filed as a precondition for pursuing any further or
subsequent remedy, otherwise the said order, resolution, or decision shall become final
and executory after ten calendar days from receipts thereof. Obviously, the rationale
therefor is that the law intends to afford the NLRC an opportunity to rectify such
errors or mistakes it may have lapsed into before resort to the courts of justice can be
had. This merely adopts the rule that the function of a motion for reconsideration is to
point to the court the error that it may have committed and to give it a chance to
correct itself.
[10]

Additionally, the allegations in the petition clearly show that petitioner failed to file
a motion for reconsideration of the assailed Resolution before filing the instant
petition. As correctly argued by private respondent Rolando Tan, such failure
constitutes a fatal infirmity x x x. The unquestioned rule in his jurisdiction is that
certiorari will lie only if there is no appeal or any other plain, speedy and adequate
remedy in the ordinary course of law against the acts of public respondent. In the
instant case, the plain and adequate remedy expressly provided by law was a motion
for reconsideration of the assailed decision, based on palpable or patent errors, to be
made under oath and filed within ten (10) calendar days from receipt of the questioned
decision. And for failure to avail of the correct remedy expressly provided by law,
petitioner has permitted the subject Resolution to become final and executory after the
lapse of the ten day period within which to file such motion for reconsideration.
[11]

In brief, the filing of the instant petition was premature and did not toll the
running of the 3 month period. Thus, the assailed Decision became final and
executory. On this ground alone, this petition must therefore be dismissed.
However, in view of the importance of the substantial query raised in the
petition, we have resolved to decide the case on the merits also.
The First Issue: Was Overtime Pay Included?
The main disagreement between the parties centers on how the contract of
employment of the private respondent should be interpreted. The terms and
conditions thereof read as follows:
Date: February 24, 1986
NAME : ESQUEJO, ANGEL

NATURE OF ACTION : APPOINTMENT

FROM :
POSITION TITLE : COMPANY GUARD
TO :
STATUS : PERMANENT
EFFECTIVE DATE : MARCH 1, 1986
FROM : P1,990.00 per month
plus P510.00 emergency
allowance
SALARY :
TO :
-----------------------------REMARKS : To confirm permanent
appointment as company
guard who will render 12
hours a day with one (1)
day off
-----------------------------RECOMMENDED BY: APPROVED BY:
(Signed) (Signed)
SULPICIO B. JORNALES CATALINO F. BANEZ

(Signed)
ANGEL V. ESQUEJO

[12]

Petitioner faults the public respondent when it said that there was no
meeting of minds between the parties, since the employment contract
explicitly states without any equivocation that the overtime pay for work
rendered for four (4) hours in excess of the eight (8) hour regular working
period is already included in the P1,990.00 basic salary. This is very clear
from the fact that the appointment states 12 hours a day work. By its
computations, petitioner tried to illustrate that private respondent was paid
more than the legally required minimum salary then prevailing.
[13]

[14]

To prove its contention, petitioner argues that:

The legal minimum wage prescribed by our statutes, the legally computed overtime
pay and the monthly salaries being paid by petitioner to respondent Esquejo would
show that indeed, the overtime pay has always been absorbed and included in the said
agreed monthly salaries.
In 1986, the legal minimum salary of Esquejo is computed as follows (per
Appointment Memoranda dated February 4, 1986 and June 6, 1986 [Annex C and D
of Annex B of this Petition]):
54 x 314 days
12 months = P1,413.00 monthly salary
The hourly overtime pay is computed as follows:
54/8 hours = P6.75 x 4 hrs. = P27.00
P27.00 x 1.25 = P33.75 x 20 (should be 26) days = P887.50
(should be P877.50)
P1,413.00 - legal minimum wage
+ 887.50(877.50) - legal overtime pay
P2,290.50 - amount due to respondent

Esquejo under the law

P2,500.00 - gross salary of Esquejo per contract
-2,290.50
P 209.50 - Difference (Rollo, p. 371).
On the other hand, private respondent in his position paper claims that
overtime pay is not so incorporated and should be considered apart from the
P1,990.00 basic salary.
[15]

We find for the private respondent and uphold the respondent NLRCs ruling
that he is entitled to overtime pay.
Based on petitioners own computations, it appears that the basic salary
plus emergency allowance given to private respondent did not actually include
the overtime pay claimed by private respondent. Following the computations it
would appear that by adding the legal minimum monthly salary which at the
time was P1,413.00 and the legal overtime pay P877.50, the total amount due
the private respondent as basic salary should have been P2,290.50. By
adding the emergency cost of living allowance (ECOLA) of P510.00 as
provided by the employment contract, the total basic salary plus emergency
allowance should have amounted to P2,800.50. However, petitioner admitted
that it actually paid private respondent P1,990.00 as basic salary plus
P510.00 emergency allowance or a total of only P2,500.00. Undoubtedly,
private respondent was shortchanged in the amount of P300.50. Petitioners
own computations thus clearly establish that private respondents claim for
overtime pay is valid.
Side Issue: Meeting of the Minds?
The petitioner contends that the employment contract between itself and the
private respondent perfectly satisfies the requirements of Article 1305 of the
Civil Code as to the meeting of the minds such that there was a legal and
valid contract entered into by the parties. Thus, private respondent cannot be
allowed to question the said salary arrangements for the extra 4 hours
overtime pay after the lapse of 4 years and claim only now that the same is
not included in the terms of the employment contract.
[16]

We disagree. Public respondent correctly found no such agreement as to

overtime pay. In fact, the contract was definite only as to the number of hours
of work to be rendered but vague as to what is covered by the salary
stipulated. Such ambiguity was resolved by the public respondent, thus:
In resolving the issue of whether or not complainants overtime pay for the four (4)
hours of work rendered in excess of the normal eight hour work period is incorporated
in the computation of his monthly salary, respondent invokes its contract of
employment with the complainant. Said contract appears to be in the nature of a
document identifiable as an appointment memorandum which took effect on March 1,
1986 (Records, p. 56) by virtue of which complainant expressed conformity to his
appointment as company guard with a work period of twelve (12) hours a day with
one (1) day off. Attached to this post is a basic salary of P1,990.00 plus P510.00
emergency allowance. It is (a) cardinal rule in the interpretation of a contract that if
the terms thereof are clear and leave no doubt upon the intention of the contracting
parties, then the literal meaning of its stipulations shall control. (Art. 1370, Civil Code
of the Philippines). To this, respondent seeks refuge. Circumstances, however, do not
allow us to consider this rule in the light of complainants claim for overtime pay
which is an evident indication that as to this matter, it cannot be said that there was a
meeting of the minds between the parties, it appearing that respondent considered the
four (4) hours work in excess of the eight hours as overtime work and compensated by
way of complainants monthly salary while on the latters part, said work rendered is
likewise claimed as overtime work but yet unpaid in view of complainants being
given only his basic salary. Complainant claims that the basic salary could not
possibly include therein the overtime pay for his work rendered in excess of eight
hours. Hence, respondents Appointment Memorandum cannot be taken and accorded
credit as it is so worded in view of this ambiguity. We therefore proceed to determine
the issue in the light of existing law related thereto. While it is true that the
complainant received a salary rate which is higher that the minimum provided by law,
it does not however follow that any additional compensation due the complainant can
be offset by his salary in excess of the minimum, especially in the absence of an
express agreement to that effect. To consider otherwise would be in disregard of the
rule of nondiminution of benefits which are above the minimum being extended to the
employees. Furthermore, such arrangement is likewise in disregard of the manner
required by the law on how overtime compensation must be determined. There is
further the possibility that in view of subsequent increases in the minimum wage, the
existing salary for twelve (12) hours could no longer account for the increased wage
level together with the overtime rate for work rendered in excess of eight hours. This
fertile ground for a violation of a labor standards provision can be effectively thwarted

if there is a clear and definite delineation between an employees regular and overtime
compensation. It is, further noted that a reading of respondents Appointment
Memoranda issued to the complainant on different dates (Records, pp. 56-60) shows
that the salary being referred to by the respondent which allegedly included
complainants overtime pay, partakes of the nature of a basic salary and as such, does
not contemplate any other compensation above thereof including complainants
overtime pay. We therefore affirm complainants entitlement to the latter benefit.
[17]

Petitioner also insists that private respondents delay in asserting his

right/claim demonstrates his agreement to the inclusion of overtime pay in his
monthly salary rate. This argument is specious. First of all, delay cannot be
attributed to the private respondent. He was hired on March 1, 1986. His
twelve-hour work periods continued until November 30, 1989. On October 10,
1990 (just before he was suspended) he filed his money claims with the labor
arbiter. Thus, the public respondent in upholding the decision of the arbiter
computed the money claims for the three year period from the date the claims
were filed, with the computation starting as of October 10, 1987 onwards.
In connection with the foregoing, we should add that even if there had
been a meeting of the minds in the instant case, the employment contract
could not have effectively shielded petitioner from the just and valid claims of
private respondent. Generally speaking, contracts are respected as the law
between the contracting parties, and they may establish such stipulations,
clauses, terms and conditions as they may see fit; and for as long as such
agreements are not contrary to law, morals, good customs, public policy or
public order, they shall have the force of law between them. However, x x x,
while it is the inherent and inalienable right of every man to have the utmost
liberty of contracting, and agreements voluntarily and fairly made will be held
valid and enforced in the courts, the general right to contract is subject to the
limitation that the agreement must not be in violation of the Constitution, the
statute or some rule of law (12 Am. Jur. pp. 641-642). And under the Civil
Code, contracts of labor are explicitly subject to the police power of the State
because they are not ordinary contracts but are impressed with public interest.
Inasmuch as in this particular instance the contract is question would have
been deemed in violation of pertinent labor laws, the provisions of said laws
would prevail over the terms of the contract, and private respondent would still
be entitled to overtime pay.
[18]

[19]

[20]

Moreover, we cannot agree with petitioners assertion that by judging the

intention of the parties from their contemporaneous acts it would appear that
the failure of respondent Esquejo to claim such alleged overtime pay since

1986 clearly demonstrate(s) that the agreement on his gross salary as

contained in his appointment paper is conclusive on the matter of the inclusion
of overtime pay. (Rollo, pp. 13-15; also, Rollo, pp. 378-380). This is simply not
the case here. The interpretation of the provision in question having been put
in issue, the Court is constrained to determine which interpretation is more in
accord with the intent of the parties. To ascertain the intent of the parties, the
Court is bound to look at their contemporaneous and subsequent acts.
Private respondents silence and failure to claim his overtime pay since 1986
cannot be considered as proving the understanding on his part that the rate
provided in his employment contract covers overtime pay. Precisely, that is the
very question raised by private respondent with the arbiter, because contrary
to the claim of petitioner, private respondent believed that he was not paid his
overtime pay and that such pay is not covered by the rate agreed upon and
stated in his Appointment Memorandum. The subsequent act of private
respondent in filing money claims negates the theory that there was clear
agreement as to the inclusion of his overtime pay in the contracted salary
rate. When an employee fails to assert his right immediately upon violation
thereof, such failure cannot ipso facto be deemed as a waiver of the
oppression. We must recognize that the worker and his employer are not
equally situated. When a worker keeps silent inspite of flagrant violations of
his rights, it may be because he is seriously fearful of losing his job. And the
dire consequences thereof on his family and his dependents prevent him from
complaining. In short, his thoughts of sheer survival weigh heavily against
launching an attack upon his more powerful employer.
[21]

[22]

The petitioner contends that the agreed salary rate in the employment
contract should be deemed to cover overtime pay, otherwise serious
distortions in wages would result since a mere company guard will be
receiving a salary much more that the salaries of other employees who are
much higher in rank and position than him in the company. (Rollo, p. 16) We
find this argument flimsy and undeserving of consideration. How can paying
an employee the overtime pay due him cause serious distortions in salary
rates or scales? And how can other employees be aggrieved when they did
not render any overtime service?
Petitioners allegation that private respondent is guilty of laches is likewise
devoid of merit. Laches is defined as 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. It is negligence or omission to assert
a right within an unreasonable time, warranting the presumption that the party
entitled to assert it has either abandoned or declined to assert it. The
[23]

question of laches is addressed to the sound discretion of the court, and since
it is an equitable doctrine, its application is controlled by equitable
considerations. It cannot work to defeat justice or to perpetrate fraud and
injustice. Laches cannot be charged against any worker when he has not
incurred undue delay in the assertion of his rights. Private respondent filed his
complaint within the three-year reglementary period. He did not sleep on his
rights for an unreasonable length of time.
[24]

[25]

Second Issue: Unjust Enrichment?

Petitioner contends that the award of overtime pay is plain and simple unjust
and illegal enrichment. Such award in effect sanctioned and approved the
grant of payment to respondent Esquejo which will result in double payment
for the overtime work rendered by paid employee. Also, per petitioner,
(n)othing in the Labor Code nor in the Rules and Regulations issued in the
implementation thereof prohibits the manner of paying the overtime pay (by)
including the same in the salary.
[26]

[27]

This is begging the issue. To reiterate, the main question raised before the
labor tribunals is whether the provision on wages in the contract of
employment already included the overtime pay for four (4) working hours
rendered six days a week in excess of the regular eight-hour work. And we
hold that the tribunals below were correct in ruling that the stipulated pay did
not include overtime. Hence, there can be no undue enrichment in claiming
what legally belongs to private respondent.
Third Issue: Basis of NLRCs Decision?
Petitioner assails respondent NLRC for adopting that portion of the decision
of the labor arbiter, which reads as follows:
x x x Our conclusion is quite clear considering the fact that at the time of his
employment in March 1986, during which the minimum wage was P37.00 a day for 8
hours work, complainants total take-home-pay working 12 hours a day including
ECOLA, was only P2,500.00 a month. And immediately prior to his appointment as
Ledger Custodian effective December 1, 1989, with the working hours reduced to 8
hours or 40 hours a week, complainants monthly salary was P3,420.00 (instead of
P5,161.01 minimum monthly with 4 hours overtime work everyday, or a difference of
P1,741.01 a month).

Accordingly, the claim for overtime pay reckoned from October 10, 1987 up to
November 30, 1989 should be, as it is hereby, granted. (Rollo, p. 201).
[28]

Petitioner believes that by adopting the above-quoted portion of the arbiters

decision, respondent NLRC violated the cardinal rule that its decisions must
be supported by substantial evidence. In doing so, petitioner claims that
the NLRC violated its primary rights as enunciated in the case of Ang Tibay
vs. CIR. In other words, petitioner holds the view that the arbiters decision
failed to explain how the amount of P5,161.01 was arrived at.
[29]

[30]

Petitioner is in error. The public respondent did not adopt in toto the
aforequoted portion of the arbiters decision. It made its own computations and
arrived at a slightly different amount, with a difference of P278.10 from the
award granted by the labor arbiter. To refute petitioners claim, public
respondent attached (as Annexes 1, 1-A 1-B and 1-C) to its Comment, the
computations made by the labor arbiter in arriving at the sum of
P5,161.00. On the other hand, public respondent made its own computation in
its assailed Decision and arrived at a slightly different figure from that
computed by the labor arbiter:
Respondent claims that the award of P28,344.55 is bereft of any factual basis.
Records show that as per computation of the office of the Fiscal Examiner, (Records,
p. 116) the said amount was arrived at.The computation was however based on the
assumption that the complainant regularly reported for work. Records however show
that the complainant absented himself from work for one day in August 1989.
(Records, p. 63) For this unworked day, no overtime pay must be due. As to the rest of
his period of employment subject to the three year limitation rule which dates from
October 10, 1987 up to his appointment as Ledger Custodian on December 1, 1989
after which is regular work period was already reduced to eight hours, there being no
showing that the complainant absented himself from work, and he being then required
to work for a period of twelve hours daily, We therefore rule on complainants
entitlement to overtime compensation for the duration of the aforesaid period in
excess of one working day.Consequently, complainants overtime pay shall be
computed as follows:
OVERTIME PAY: (4 HRS/DAY)
October 10, 1987 December 13, 1987 = 2.10 mos.
P54/8 hrs. = P6.75 x 4 hrs. = P27.00

P27 x 1.25 = P33.75 x 26 x 2.10 mos. = P1,842.75

December 14, 1987 June 30, 1989 = 18.53 mos.
P64/8 hrs. = P8 x 4 hrs. = P32.00
P32 x 1.25 = P40 x 26 x 18.53 = P19,271.20
July 1, 1989 November 30, 1989 = 5 mos.
P89/8 hrs. = P11.12 x 4 hrs. = P44.50
P44.50 x 1.25 = P55.62 x 25 x 5 mos. = P6,952.50(P6,953.125)
TOTAL OVERTIME PAY
P28,066.45(P28,067.075) (Rollo, pp. 210-212).
Prescinding therefrom, it is evident that petitioner had no basis to argue that
respondent NLRC committed any grave abuse of discretion in quoting the
questioned portion of the labor arbiters holding.
Fourth Issue: Newly Discovered Evidence?
In its Supplemental Petition filed on July 17, 1996, petitioner alleges in part:
2. That only recently, the petitioner was able to locate the Employees Payroll Sheets
which contained the salaries, overtime pay, vacation and sick leaves of respondent
Esquejo which pertains to the period starting from January 1, 1987 up to November
1989. Therefore, said total amount of overtime pay paid to and received by respondent
Esquejo should be deducted from the computed amount of P28,066.45 based on the
questioned decision. (Rollo, p. 220).
Contrary to petitioners claim however, said documents consisting of payroll
sheets, cannot be considered as newly-discovered evidence since said
papers were in its custody and possession all along, petitioner being the
employer of private respondent.
Furthermore, petitioner offers no satisfactory explanation why these
documents were unavailable at the time the case was being heard by the
labor arbiter. In its Memorandum, petitioner excused itself for its failure to

present such evidence before the labor arbiter and respondent NLRC by
saying that petitioner(s office) appeared to be in disorder or in a state of
confusion since the then officers (of petitioner) were disqualified by the
Monetary Board on grounds of misappropriation of funds of the association
and other serious irregularities. There was no formal turn-over of the
documents from the disqualified set of officers to the new officers of petitioner.
We find such excuse weak and unacceptable, the same not being
substantiated by any evidence on record. Moreover, payroll records are
normally not in the direct custody and possession of corporate officers but of
their subordinates, i.e., payroll clerks and the like. In the normal course of
business, such payroll sheets are not the subject of formal turnovers by
outgoing officers to their successors in office. And if indeed it is true that
petitioner had been looking for such records or documents during the
pendency of the case with the labor arbiter and with public respondent,
petitioner never alleged such search before the said labor tribunalsa
quo. Hence, such bare allegations of facts cannot now be fairly appreciated in
this petition for certiorari, which is concerned only with grave abuse of
discretion or lack (or excess) of jurisdiction.
[31]

The Solicitor General quotes with approval a portion of private respondents

Opposition to petitioners motion for reconsideration thus:
It is clear from the payroll, although the substantial pages thereof do not show that
the net amount indicated therein have been received or duly acknowledged to have
been received by the complainant, THAT OVERTIME PAYMENTS THAT WERE
MADE REFER TO WORK RENDERED DURING COMPLAINANTS OFF
DAYS. What has been rightfully claimed by the complainant and awarded by this
Honorable Office is the overtime works (sic) rendered by the complainant daily for six
(6) days a week computed at four (4) hours per day. This computation is based on the
evidence thus submitted by the parties. All appointments issued by the respondent
carries (sic) with it (sic) that the basic salary of the complainant is equivalent to 12
hours work everyday for six (6) days a week, hence, the four (4) hours overtime daily
was not considered and therefore not paid by the respondent. (Rollo, p. 327).
It has been consistently held that factual issues are not proper subjects of a
petition for certiorari, as the power of the Supreme Court to review labor cases
is limited to questions of jurisdiction and grave abuse of discretion. The
introduction in this petition of so-called newly discovered evidence is
unwarranted. This Court is not a trier of facts and it is not its function to
examine and evaluate the evidence the evidence presented (or which ought to
have been presented) in the tribunals below.
[32]

[33]

WHEREFORE, in view of the foregoing considerations, the Petition

is DISMISSED, the temporary restraining order issued on July 30,
1992 LIFTED, and the assailed decision of the public respondent AFFIRMED.
Costs against petitioner.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., Melo and Francisco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 80887 September 30, 1994

BLISS DEVELOPMENT CORPORATION EMPLOYEES UNION (BDCEU)-SENTRO NG
DEMOKRATIKONG MANGGAGAWA (SDM), petitioner,
vs.
HON. PURA FERRER CALLEJA and BLISS DEVELOPMENT CORPORATION, respondents.
Capulong, Magpantay, Ladrido, Canilao and Malabanan for private respondent.

KAPUNAN, J.:
The focal issue in the case at bench is whether or not Bliss Development Corporation (BDC) is a
government-owned controlled corporation subject to Civil Service Laws, rules and regulations.
Corollary to this issue is the question of whether or not petitioner is covered by Executive Order No.
180 and must register under Section 7 thereof as a precondition for filing a petition for certification
election.
The antecedents of the case are:
On October 10, 1986, petitioner, a duly registered labor union, filed with the Department of Labor,
National Capital Region, a petition for certification election of private respondent Bliss Development
Corporation (BDC).
Based on the position papers submitted by the parties, Med-Arbiter Napoleon V. Fernando, in an
order dated January 26, 1987, dismissed the petition for lack of jurisdiction stating that the majority

of BDC's stocks is owned by the Human Settlement Development Corporation (HSDC), a whollyowned government corporation. Therefore, BDC is subject to Civil Service law, rules and regulations.
The pertinent portion of said Order reads:
It may not be amised (sic) to further state that the Supreme Court in its Decision in
the case of National Housing Corporation versus Benjamin Juco and the National
Labor Relations Commission G-R 63313 promulgated on January 17, 1985 has
pronounced that:
There should no longer be any question at this time that employees
of government owned or controlled corporations are governed by the
Civil Service Rules and Regulations.
Corollary to the issue of whether or not employees of BDC may form or join labor
organizations therefore is the issue of whether or not BDC is a government owned
corporation.
The pertinent law on the matter is P.D. No. 2029 which provides that:
Section 2 Definition A government-owned or controlled
corporation is a stock or non-stock corporation whether performing
government or proprietary functions, which is directly chartered by
special law or if organized under the general corporation law is
owned or controlled by the government or subsidiary corporation, to
the extent of at least a majority of its outstanding capital stock or of its
outstanding voting stock.
In the case at bar, it is not disputed that majority of the stocks of BDC are owned by
Human Settlement Development Corporation, a wholly government owned
corporation, hence, this Office cannot, but otherwise conclude that Bliss
Development Corporation is a government owned corporation whose employees are
governed not by the Labor Code but by the Civil Service law, rules, and regulations.
Its employees therefore, are prohibited to join or form labor organization. Further, this
Office is without authority to entertain the present petition for obvious lack of
jurisdiction.
Indeed, Opinion No. 94, series of 1985, the Minister of Justice has declared:
In determining whether a corporation created under the Corporation
Code is government owned or controlled or not, this ministry has
consistently applied theownership test whereby a corporation will be
deemed owned by the government if the majority of its voting stocks
are owned by the government.
It appearing that Human Settlement Development Corporation (HSDC), which is a
wholly-owned government corporation, owns a majority of the stocks of Bliss
Development Corporation (BDC), our conclusion is that BDC is a government-owned
corporation subject to the coverage of the Civil Service law, rules and regulations as
pronounced by the Supreme Court in the case of NHA versus Juco. 1

Petitioner then filed an appeal with the Bureau of Labor Relations.

In the meantime, or on June 1, 1987 Executive Order No. 180 was issued the then President
Corazon C. Aquino extending to government employees the right to organize and bargain
collectively. Sections 1 and 7 of said Order provide:
Sec. 1. This Executive Order applies to all employees of all branches, subdivisions,
instrumentalities, and agencies of the government, including government-owned or
controlled corporations with original charters. . . . (Emphasis supplied)
Sec. 7. Government employees' organizations shall register with the Civil Service
Commission and the Department of Labor and Employment. The application shall be
filed with the Bureau of Labor Relations of the Department which shall process the
same in accordance with the provisions of the Labor Code of the Philippines, as
amended. Applications may also be filed with the Regional Offices of the Department
of Labor and Employment which shall immediately transmit the said applications to
the Bureau of Labor Relations within three (3) days from receipt hereof.
On August 7, 1987, Director Pura Ferrer-Calleja of the Bureau of Labor Relations issued an Order
dismissing the appeal. Said Order is reproduced hereunder:
For disposition is an appeal of the Bliss Development Corporation Employees Union
Sentro ng Demokratikong Manggagawa (BDCEU-SDM) from the Order of the MedArbiter dismissing its petition for direct certification/certification election dated
January 26, 1987.
On January 26, 1987, the Med-Arbiter issued an Order dismissing the petition filed
by BDCEU-SDM. He ruled that the Bliss Development Corporation which is under
the then Ministry of Human Settlement, is a government Corporation where the
workers are prohibited from organizing and joining labor unions. The Med-Arbiter
cited Opinion No. 94 series of 1985, of the Minister of Justice which is hereunder
quoted as follows:
In determining whether a corporation created under the Corporation
Code is government-owned or a controlled or not, this Ministry has
consistently applied the ownership test whereby a corporation will be
deemed owned by the government if all or a majority of its stocks are
owned by the government, and it will be deemed controlled by the
government, if the majority of its voting stocks are owned by the
government.
It appearing that HSDC, which is a wholly-owned government
corporation, owns a majority of the stocks of BDC, our conclusion is
that BDC is a government-owned corporation subject to the coverage
of the Civil Service Law and rules as pronounced by the Supreme
Court in the case of NHA vs. Juco.
But circumstances have changed. With the issuance of Executive Order No. 180
dated June 1, 1987, government employees are now given the right to organize and

bargain collectively. This, therefore, renders academic the order subject of the
appeal.
xxx xxx xxx
Consequently, this Bureau hereby enjoins the Petitioner to register in accordance
with the aforecited provision. Meantime, the petition is dismissed without prejudice to
its refiling after petitioner is granted registration to avoid legal complications.
WHEREFORE, in view of the foregoing, the case is hereby dismissed without
prejudice.
SO ORDERED. 2
Taking exception to the Director's Order, petitioner brought the instant petition to annul the same on
the following grounds:
I
THE DIRECTOR GRAVELY ABUSED HER DISCRETION AMOUNTING TO LACK
OF JURISDICTION WHEN SHE ORDERED PETITIONER TO REGISTER UNDER
SECTION 7 OF EXECUTIVE ORDER NO. 180 WHICH DOES NOT COVER
PETITIONER;
II
THE DIRECTOR GRAVELY ABUSED HER DISCRETION WHEN SHE INSISTED
ON ENFORCING AN OPINION OF THE MINISTER OF JUSTICE WHICH
RESPONDENT BDC ITSELF HAS CONSISTENTLY IGNORED AND CONTINUES
TO IGNORE AND WHICH THE ENTIRE GOVERNMENT DOES NOT CARE TO
ENFORCE. 3
In a resolution dated May 29, 1989 the Court gave due course to the petition and required the
parties to file their respective memoranda which was complied with. The Solicitor General begged
leave to be relieved from filing a comment on the petition and a memorandum, averring that he could
not sustain the position of respondent Director.
The petition is impressed with merit.
Section 1 of Executive Order No. 180 expressly limits its application to only government-owned or
controlled corporations with original charters. Hence, public respondent's order dated August 7, 1987
requiring petitioner to register in accordance with Section 7 of executive Order No. 180 is without
legal basis.
Without categorically saying so, public respondent sustained the Med-Arbiter's invocation of the case
of National Housing Corporation v. Juco, 4 which rules that the inclusion of "government-owned or
controlled corporations" within the embrace of the civil service shows a deliberate effort of the framers of
the 1973 Constitution to plug an earlier loophole which allowed government-owned or controlled

corporations to avoid the full consequences of the all encompassing coverage of the civil service system.
In said case, we stressed that:

Section 1 of Article XII-B, Constitution uses the word "every" to modify the phrase
"government-owned or controlled corporation."
Every means each one of a group, without exception. It means all possible and all,
taken one by one. Of course, our decision in this case refers to a corporation created
as a government-owned or controlled
entity. . . . . 5
However, our ruling in NHC v. Juco 6 case, which was decided under the 1973 Constitution, lost its
applicability with the advent of the 1987 Constitution. Thus, in National Service Corporation v. NLRC, 7 we
held that:
. . . (I)n the matter of coverage by the civil service of government-owned or controlled
corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon
which National Housing Corporation vs. Juco is based. Under the 1973 Constitution,
it was provided that:
The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every governmentowned or controlled corporation. . . . [Constitution, 1973, Art. II-B,
Sec. I(1)]
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charter.
(Emphasis supplied) [Constitution (1987), Art. IX-B, Sec. 2(1).
Thus the situations sought to be avoided by the 1973 Constitution and expressed by
the Court in theNational Housing Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a
circumvention or emasculation of Section 1, Article XII-B of the
Constitution. It would be possible for a regulate ministry of
government to create a host of subsidiary corporations under the
Corporation Code funded by a willing legislature. A governmentowned corporation could create several subsidiary corporations.
These subsidiary corporations would enjoy the best of two worlds.
Their officials and employees would be privileged individuals, free
from the strict accountability required by the Civil Service Decree and
the regulations of the Commission on Audit. Their incomes would not
be subject to the competitive restrains of the open market nor to the
terms and conditions of civil service employment. Conceivably, all
government-owned or controlled corporations could be created, no
longer by special charters, but through incorporations under the

general law. The Constitutional amendment including such

corporations in the embrace of the civil service would cease to have
application. Certainly, such a situation cannot be allowed to exist.
[134 SCRA 182-183]
appear relegated to relative insignificance by the 1987 Constitutional provision that
the Civil Service embraces government-owned or controlled corporations with
original charter; and, therefore, by clear implication, the Civil Service does not
include government-owned or controlled corporations which are organized as
subsidiaries of government-owned or controlled corporations under the general
corporation law. 8
A corporation is created by operation of law. It acquires a judicial personality either by special law or
a general law. The general law under which a private corporation may be formed or organized is the
Corporation Code, the requirements of which must be complied with by those wishing to incorporate.
Only upon such compliance will the corporation come into being and acquire a juridical personality,
thus giving rise to is right to exist and act as a legal entity. On the other hand, a government
corporation is normally created by special law, referred to often as a charter. 9
BDC is a government-owned corporation created under the Corporation Law. It is without a charter,
governed by the Labor Code and not by the Civil Service Law hence, Executive Order No. 180 does
not apply to it.
Consequently, public respondent committed grave abuse of discretion in ordering petition to register
under Section 7, of Executive Order No. 180 as a precondition for filing a petition for certification
election.
WHEREFORE, the instant petition is hereby GRANTED. The order of public respondent dated
August 7, 1987 is SET ASIDE and the Director of Labor Relations is hereby directed to give due
course of petitioner's application for certification election.
SO ORDERED.
Cruz, Davide, Jr., Bellosillo and Quiason, JJ., concur.

SECOND DIVISION
BERNARDINO
LABAYOG,
CRESENCIO GRANZORE,
JEANETTE
GONZALES, NOEME DADIZ, GEMMA
PANGANIBAN, DALISAY BUENVIAJE,
VICTORIANA RUEDAS, MA. VICTORIA
CABALONG,
AMALIA
SALVARRI,

G.R. No. 148102

Present:
PANGANIBAN, J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA and

ROWENA
FERNANDEZ,
DELIA GARCIA, JJ.
LOZARES, LUNINGNING ANGELES,
ROSEMARIE
SALES,
VIVIAN
VERZOSA, MARILYN JOSE, ROSANNA
ROLDAN, HERMINIO CARANTO, ANITA
SALVADOR,
JORGE
SALAMAT,
ROBERTO
ODIAMAR,
EFREN
LACAMPUINGAN,
NOEL
TAGALOG,
MARCOS DE LA CRUZ, ELIAS BELO,
DARIUS EROLES, HELEN BARAYUGA,
[1]
CRISTOPHER
HILARIO,
JOEL
ESGUERRA,
BERNABE
DUCUT,
JOSEPH TANAUY, EDWIN CEA, NOEL
VILLASCA,
ERNESTO
ALFONSO,
FERNANDO CEBU and REYNALDO
SESBRENO,

[2]

Petitioners,

-versusM.Y. SAN BISCUITS, INC. and

MEW WAH LIM,
Respondents. Promulgated:
July 11, 2006

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

DECISION
CORONA, J.:

The subject of this petition for review on certiorari is the

resolution[3] of the Court of Appeals (CA) dated January 31, 2001 in
CA-G.R. SP No. 51390, the dispositive portion of which read:
WHEREFORE,
private
respondents
motion
for
reconsideration is GRANTED. The decision of this court,
promulgated [on] September 12, 2000, is REVERSED and SET
ASIDE. The decision of the National Labor Relations Commission
dated August 22, 1997 and its resolution dated November 24,
1997 are hereby AFFIRMED. No costs.

At the outset, this petition should have been denied for lack of
proper verification and certification of non-forum shopping. Of the
35 petitioners, only Bernardino Labayog, Luningning Angeles and
Rosanna Roldan signed.[4] But

even

if,

in

the

exercise

of

its

discretion and in the interest of substantial justice, this Court

grants a liberal interpretation of the rules on verification and
certification

of

non-forum

shopping,

this

petition

should

nonetheless fail for lack of merit.

The facts follow.
On various dates in 1992, petitioners entered into contracts of
employment with respondent company as mixers, packers and
machine operators for a fixed term. On the expiration of their
contracts, their services were terminated. Forthwith, they each
executed a quitclaim.

On April 15, 1993, petitioners filed complaints for illegal dismissal,

underpayment of wages, non-payment of overtime, night differential
and 13thmonth pay, damages and attorneys fees. The labor arbiter
ruled their dismissal to be illegal[5] on the ground that they had
become regular employees who performed duties necessary and
desirable in respondent companys business. The labor arbiter
ordered the reinstatement of petitioners with award of backwages,
13th month pay and service incentive leave pay. The claim for moral
and exemplary damages was denied for failure to establish bad faith
on the part of respondents. All other claims were likewise denied.
On appeal to the National Labor Relations Commission (NLRC), the
decision of the labor arbiter was set aside. [6] Having entered into
their employment contracts freely and voluntarily, they knew that
their employment was only for a fixed period and would end on the
prescribed expiration date. Petitioners motion for reconsideration
was denied.[7]
In a petition for certiorari filed by petitioners, the CA set aside
the NLRC decision and reinstated the decision of the labor arbiter.
However, on respondents motion for reconsideration, the CA

[8]

reversed itself. The CA reasoned that, while petitioners performed

tasks which were necessary and desirable in the usual business of
respondent company, their employment contracts providing for a
fixed term remained valid. No force, duress, intimidation or moral
dominance was exerted on them. Respondents dealt with petitioners
in good faith and within the valid parameters of management

prerogatives.[9] Petitioners motion for reconsideration was denied.

[10]

Hence, this recourse.

The petition is denied for lack of merit.
The Labor Code states:
Art. 280. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business of the employer, except where the
employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the
employment is for the duration of the season.

Where the duties of the employee consist of activities which

are necessary or desirable in the usual business of the employer,
the parties are not prohibited from agreeing on the duration of
employment. Article 280 does not proscribe or prohibit an
employment contract with a fixed period [11] provided it is not
intended to circumvent the security of tenure.
Two criteria validate a contract of employment with a fixed
period: (1) the fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force, duress or
improper pressure being brought to bear on the employee and
without any circumstances vitiating consent or, (2) it satisfactorily

appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being
exercised by the former on the latter. [12] Against these criteria,
petitioners contracts of employment with a fixed period were valid.
Each contract provided for an expiration date. Petitioners knew
from the beginning that the employment offered to them was not
permanent but only for a certain fixed period. [13] They were free to
accept or to refuse the offer. When they expressed their acceptance,
they bound themselves to the contract.
In this case, there was no allegation of vitiated consent.
Respondents did not exercise moral dominance over petitioners. The
contracts were mutually advantageous to the parties. While
respondents were able to augment increased demand in production
by hiring petitioners on an as-needed basis, petitioners found
gainful employment if only for a few months.
Simply put, petitioners were not regular employees. While their
employment as mixers, packers and machine operators was
necessary and desirable in the usual business of respondent
company, they were employed temporarily only, during periods
when there was heightened demand for production. Consequently,
there could have been no illegal dismissal when their services were
terminated on expiration of their contracts. There was even no need
for notice of termination because they knew exactly when their

contracts would end. Contracts of employment for a fixed period

terminate on their own at the end of such period. [14]
Contracts

of

employment

for

fixed

period

are

not

unlawful. What is objectionable is the practice of some scrupulous

employers who try to circumvent the law protecting workers from
the capricious termination of employment. Employers have the right
and prerogative to choose their workers. The law, while protecting
the rights of the employees, authorizes neither the oppression nor
destruction of the employer. When the law angles the scales of
justice in favor of labor, the scale should never be so tilted if the
result is an injustice to the employer.[15]
WHEREFORE, the petition is hereby DENIED. The resolution
of the Court of Appeals dated January 31, 2001 is AFFIRMED.
No costs.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
PEDY CASERES and ANDITO G.R.NO. 159343

PAEL,
Petitioners,
Present:
YNARES-SANTIAGO, J.
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
UNIVERSAL ROBINA SUGAR
MILLING CORPORATION
(URSUMCO) and/or RESIDENT
MANAGER RENE CABATE, Promulgated:
Respondents. September 28, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION
AUSTRIA-MARTINEZ, J.:

Universal Robina Sugar Milling Corporation (respondent) is a corporation engaged

in the cane sugar milling business. Pedy Caseres (petitioner Caseres) started
working for respondent in 1989, while Andito Pael (petitioner Pael) in 1993. At the
start of their respective employments, they were made to sign a Contract of
Employment for Specific Project or Undertaking. Petitioners' contracts were
renewed from time to time, until May 1999 when they were informed that their
contracts will not be renewed anymore.
Petitioners filed a complaint for illegal dismissal, regularization, incentive leave
pay, 13th month pay, damages and attorneys fees.

In a Decision[1] dated August 24, 1999, the Labor Arbiter (LA) dismissed the
complaint for not being substantiated with clear and convincing evidence.
The National Labor Relations Commission (NLRC) affirmed the LA's dismissal,
[2]
and the Court of Appeals (CA)[3] dismissed the petition filed before it.[4]
Hence, herein Petition for Review on Certiorari under Rule 45 of the Rules of
Court with the issues set forth as follows:
I. WHETHER
OR
NOT
THE
PETITIONERS
ARE
SEASONAL/PROJECT/TERM EMPLOYEES NOT REGULAR
EMPLOYEES OF RESPONDENTS;
II. WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY
DISMISSED AND ARE ENTITLED TO BACKWAGES AND OTHER
MONETARY BENEFITS PRAYED FOR IN THE COMPLAINT.[5]

The petition is without merit.

The rule is clear that a petition for review on certiorari under Rule 45 of the Rules
of Court should raise only questions of law, subject to certain exceptions.
[6]
Whether or not respondents were project employees or regular employees is a
question of fact.[7]
The LA, the NLRC and the CA are one in ruling that petitioners were not illegally
dismissed as they were not regular, but contractual or project
employees. Consequently, the finding of the LA, the NLRC, and the CA that
petitioners were project employees binds this Court.[8]
The Court finds no cogent reason to depart from their ruling.
Article 280 of the Labor Code provides:

ART. 280. Regular and Casual Employees. The provision of written

agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such
actually exists.

The foregoing provision provides for three kinds of employees:

(a) regular employees or those who have been engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the employer;
(b) project employees or those whose employment has been fixed for a specific
project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the
duration of the season; and (c) casual employees or those who are neither regular
nor project employees.[9]
The principal test for determining whether an employee is a project employee or
a regular employee is whether the employment has been fixed for a specific project
or undertaking, the completion or termination of which has been determined at the
time of the engagement of the employee.[10] A project employee is one whose
employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of

the employee or where the work or service to be performed is seasonal in nature

and the employment is for the duration of the season. [11] A true project employee
should be assigned to a project which begins and ends at determined or
determinable times, and be informed thereof at the time of hiring.[12]
Petitioners contend that respondent's repeated hiring of their services qualifies
them to the status of regular employees. On this score, the LA ruled:
This is further buttress[ed] by the fact that the relationship between
complainants and the respondent URSUMCO, would clearly reveal that
the very nature of the terms and conditions of their hiring would show
that complainants were required to perform phases of special projects
which are not related to the main operation of the respondent for a
definite period, after which their services are available to any farm
owner.[13]
The NLRC, agreeing with the LA, further ruled that:
In the case at bar, We note that complainants never bothered to deny that
they voluntarily, knowingly and willfully executed the contracts of
employment. Neither was there any showing thatrespondents exercised
moral dominance on the complainants, x x x it is clear that the contracts
of employment are valid and binding on the complainants.
The execution of these contracts in the case at bar is necessitated by the
peculiar nature of the work in the sugar industry which has an off milling
season. The very nature of the terms and conditions of complainants'
hiring reveals that they were required to perform phases of special
projects for a definite period after, their services are available to other
farm owners. This is so because the planting of sugar does not entail a
whole year operation, and utility works are comparatively small during
the off-milling season. x x x[14]

Finally, the CA noted:

Petitioner Pedy Caseres first
applied
with
private
respondent
URSUMCO on January 9, 1989 as a worker assisting the crane operator
at the transloading station. Upon application, Caseres was interviewed

and made to understand that his employment would be co-terminus with

the phase of work to which he would be then assigned, that is
until February 5, 1989 and thereafter he would be free to seek
employment elsewhere. Caseres agreed and signed the contract of
employment for specific project or undertaking. After an absence of
more than five (5) months, Caseresre-applied with respondent as a
seasonal
project
worker
assisting
in
the
general underchassis reconditioning to transport units on July 17,
1989. Like his first assignment, Caseres was made to understand that his
services would be co-terminus with the work to which he would be then
assigned that is from July 17, 1989 to July 20, 1989 and that thereafter
he is free to seek employment elsewhere to which Caseres agreed and
readily signed the contract of employment for specific project or
undertaking issued to him. Thereafter Caseres voluntarily signed several
other employment contracts for various undertakings with a
determinable period. As in the first contract, Caseres' services were coterminus with the work to which he was assigned, and that thereafter, he
was free to seek employment with other sugar millers or elsewhere.
The nature and terms and conditions of employment of
petitioner Andito Pael were the same as that of his co-petitioner Caseres.
xxx
It must be noted that there were intervals in petitioners' respective
employment contracts, and that their work depended on the availability
of such contracts or projects. Consequently, the employment
of URSUMCO's work force was not permanent but co-terminous with
the projects to which the employees were assigned and from whose
payrolls they were paid (Palomares vs. NLRC, 277 SCRA 439).
Petitioners' repeated and successive re-employment on the basis of a
contract of employment for more than one year cannot and does not
make them regular employees. Length of service is not the controlling
determinant of the employment tenure of a project employee (Rada vs.
NLRC, 205 SCRA 69). x x x[15]

It should be stressed that contracts for project employment are valid under the
law. In Villa v. National Labor Relations Commission,[16] the Court stated that:

x x x by entering into such contract, an employee is deemed to

understand that his employment is coterminous with the project. He may
not expect to be employed continuously beyond the completion of
the project. It is of judicial notice that project employees engaged for
manual services or those for special skills like those of carpenters or
masons, are, as a rule, unschooled. However, this fact alone is not a valid
reason for bestowing special treatment on them or for invalidating
a contract of employment. Project employment contracts are not lopsided
agreements in favor of only one party thereto. The employers interest is
equally important as that of the employees for theirs is the interest that
propels economic activity. While it may be true that it is the employer
who drafts project employment contracts with its business interest as
overriding consideration, such contracts do not, of necessity, prejudice
the employee. Neither is the employee left helpless by a prejudicial
employment contract. After all, under the law, the interest of the worker
is paramount.[17]

The fact that petitioners were constantly re-hired does not ipso facto establish that
they became regular employees. Their respective contracts with respondent show
that there were intervals in their employment. In petitioner Caseres's case, while
his employment lasted from August 1989 to May 1999, the duration of his
employment ranged from one day to several months at a time, and such successive
employments were not continuous. With regard to petitioner Pael, his employment
never lasted for more than a month at a time. These support the conclusion that
they were indeed project employees, and since their work depended on the
availability of such contracts or projects, necessarily the employment of
respondents work force was not permanent but co-terminous with the projects to
which they were assigned and from whose payrolls they were paid. As ruled
inPalomares v. National Labor Relations Commission,[18] it would be extremely
burdensome for their employer to retain them as permanent employees and pay
them wages even if there were no projects to work on.

Moreover, even if petitioners were repeatedly and successively re-hired, still it did
not qualify them as regular employees, as length of service is not the controlling
determinant of the employment tenure of a project employee,[19] but whether the
employment has been fixed for a specific project or undertaking, its completion has
been determined at the time of the engagement of the employee. [20] Further, the
proviso in Article 280, stating that an employee who has rendered service for at
least one (1) year shall be considered aregular employee, pertains to
casual employees and not to project employees.[21]

Accordingly, petitioners cannot complain of illegal dismissal inasmuch as the

completion of the contract or phase thereof for which they have been engaged
automatically terminates their employment.
WHEREFORE, the petition is DENIED.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
RAYCOR AIRCONTROL G.R. NO. 158132
SYSTEMS, INC.,
Petitioner,
Present:
YNARES-SANTIAGO, J.,

Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.
MARIO SAN PEDRO and
NATIONAL LABOR RELATIONS
COMMISSION, Promulgated:
Respondents. July 4, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION
AUSTRIA-MARTINEZ, J.:

Assailed in the Petition for Review[1] before this Court are the August 24,
2001 Decision[2] and April 30, 2003 Resolution[3] of the Court of Appeals (CA) in
CA-G.R. SP No. 63403.[4]
The facts are as stated by the CA.
Raycor Aircontrol Systems, Inc. (petitioner) hired Mario San Pedro
(respondent) as tinsmith operator subject to the condition that his employment shall
commence on August 24, 1995 and shall be effective only for the duration of the
contract at Uniwide Las Pias after completion of which on November 18, 1995, it
automatically terminates without necessity of further notice. [5] As
the Uniwide Las Pias project (first project) lasted for one year, petitioner extended
respondent's contract beyond November 18, 1995. When this first project was
finally completed, petitioner again extended respondent's employment by assigning
him to its Olivarez Plaza, Bian, Laguna project (second project) until December
1996. Subsequently, petitioner rehired respondent as ducting man and assigned him
to its Cabuyao, Laguna project (third project) until April 1997. Thereafter,
petitioner transferred respondent to its Llanas, Alabang project (fourth project) and
later, to its Uniwide Coastal project in Baclaran, Paranaque (fifth project).

[6]

Petitioner did not anymore issue new contracts to respondent each time his
employment was extended.
In a Memorandum[7] dated October 30, 1997, petitioner
contract of employment of respondent was set to expire
1997, the same to take effect on November 3, 1997. Thus,
reported for work on November 3, 1997, he was informed
timekeeper that he had been terminated.

declared that the

on November 1,
when respondent
by the company

Respondent filed a Complaint[8] for illegal dismissal with damages. The

Labor Arbiter (LA) rendered a Decision dated July 15, 1999 in favor of respondent,
thus:
WHEREFORE, premises considered, this Office finds and so rule that
the complainant was illegally dismissed by the respondent without
just cuase and without due process of law onNovember 3, 1997. As such
he is entitled to reinstatement without loss of seniority rights and other
benefits; and payment of full backwages from the time of his dismissal
up to the time of his actual reinstatement which up to this date is in the
amount of P105,534.00 (P198.00/day x 26 days x 20.5 mos.).
Other claims are dismissed for lack of merit.
SO ORDERED.[9]

On appeal by petitioner, the National Labor Relations Commission (NLRC)

issued a Resolution[10] dated September 18, 2000, affirming the July 15, 1999 LA
Decision, and a Resolution[11] dated December 15, 2000, denying petitioner's
Motion for Reconsideration.
Petitioner filed a Petition for Certiorari which the CA denied in the August
24, 2001 Decision impugned herein. Its Motion for Reconsideration was also
denied by the CA in a Resolution dated April 30, 2003.
Hence, the present recourse of petitioner on the sole issue:
Whether or not the Court of Appeals committed grave error in ruling that
private respondent was illegally dismissed. [12]

The Court denies the petition for lack of merit.

The CA, as well as the NLRC and LA, considered respondent a regular employee
of petitioner because of the existence of a reasonable connection between
the former's regular activity in relation to the latter's business. They based this
finding on the uncontroverted fact that petitioner repeatedly rehired respondent in
five successive projects for 23 continuous months - nine months in the first
project, four months in the second, four months in the third, four months in the
fourth, and two months in the fifth - which repeated rehiring is indicative of the
desirability and indispensability of the activity performed by respondent to the
usual business or trade of petitioner. They held that, being a regular employee
entitled to security of tenure, respondent's dismissal was illegal for lack of a just or
authorized cause and due process. [13]
Petitioner denies that it dismissed respondent, insisting that the latters services
were terminated for he was a mere project employee whose employment contract
expired when the fifth project to which he was assigned was scrapped due to nonpayment by the project owner, Uniwide Holdings, Inc. (Uniwide).[14] It argues that
the rehiring of respondent for 23 months did not make him a regular employee,
given the following nature of its business:
Petitioner is engaged in the installation of air conditioning units in high
and low rise building[s]. Petitioner gets business from
architects/engineers who invite petitioner to participate in a public
bidding on a certain project. If the project is awarded to it, that will only
be the time when it mobilizes and engages the services of workers to
install the air conditioning units in the building.Petititioner is not a
manufacturing or trading company. Workers are hired according to their
skills. It is for this reason that private respondent was hired as tinsmith
operator.[15]

The concurrent findings of the CA and the labor tribunals on the existence of an
employer-employee relationship between the parties in the present case are factual
in nature and are accorded due deference[16] for being well-founded.

The issue of regularization of employees had already beset petitioner, as early as

the year 1996, in Raycor Aircontrol Systems, Inc. v. National Labor Relations
Commission.[17]In said case, the Court resolved the issue whether several
individuals it hired and rehired to work as tinsmith, leadman, aircon mechanic,
installer, welder, and painter in its various projects became regular employees after
rendering service for more than one year, with some of them serving for two to six
years. The Court recognized that petitioner was engaged in a peculiar business
which constrained it not to maintain a regular work force. The Court observed:
It is not so much that this Court cannot appreciate petitioner's
contentions about the nature of its business and its inability to maintain a
large workforce on its permanent payroll. Private respondents have
admitted that petitioner is engaged only in the installation (not
manufacture) of aircon systems or units in buildings, and since such a
line of business would obviously be highly (if not wholly) dependent on
the availability of buildings or projects requiring such installation
services, which factor no businessman, no matter how savvy, can
accurately forecast from year to year, it can be easily surmised that
petitioner, aware that its revenues and income would be unpredictable,
would always try to keep its overhead costs to a minimum, and would
naturally want to engage workers on a per-project or per-building
basis only, retaining very few employees (if any) on its permanent
payroll. It would also have been more than glad if its employees found
other employment elsewhere, in between projects. To our mind, it
appears rather unlikely that petitioner would keep private respondents
-- all fifteen of them -- continuously on its permanent payroll for, say,
ten or twelve years, knowing fully well that there would be periods (of
uncertain duration) when no project can be had. To illustrate, let us
assume that private respondents (who were each making about P118.00
to P119.50 per day in 1991) were paid only P100.00 per day. If the
fifteen were, as they claimed, regular employees entitled to their wages
regardless of whether or not they were assigned to work on any project,
the overhead for their salaries alone -- computed at P100.00/day for 30
days in a month -- would come to no less than P45,000.00 a month,
or P540,000.00 a year, not counting 13th month pay, Christmas bonus,
SSS/Medicare premium payments, sick leaves and service incentives
leaves, and so forth. Even if petitioner may have been able to afford such
overhead costs, it certainly does not make business sense for it or anyone
else to do so, and is in every sense contrary to human nature, not to

mention common business practice. On this score alone, we believe that

petitioner could have made out a strong case. x x x (Emphasis ours)[18]

Nonetheless, the Court ruled against petitioner because the latter failed
to adduce clear and convincing evidence that the projects to which its workers
were assigned were of limited scope and duration and that, at the time of hiring,
said workers knowingly accepted the restrictions on their employment, thus:
For that matter, it seems self-evident to this Court that, even if the
contracts presented by petitioner had been signed by the employees
concerned, still, they would not constitute conclusive proof of
petitioner's claim. After all, in the usual scheme of things, contract terms
are normally dictated by the employer and simply acceded to and
accepted by the employee, who may be desperate for work and therefore
in no position to bargain freely or negotiate terms to his liking.
In any event, petitioner in this case undoubtedly could have presented
additional evidence to buttress its claim. For instance, petitioner could
have presented copies of its contracts with its clients, to show the time,
duration and scope of past installation projects. The data from these
contracts could then have been correlated to the data which could be
found in petitioner's payroll records for, let us say, the past three years
or so, to show that private respondents had been working
intermittently as and when they were assigned to said projects, and
that their compensation had been computed on the basis of such
work. But petitioner did not produce such additional evidence, and we
find that it failed to discharge its burden of proof.[19](Emphasis ours)

The same fate befalls petitioner once again.

Other than the 1995 employment contract it issued to respondent, which contract
we have held to be insufficient evidence of project employment,
[20]
petitioner utterly failed to adduce additional evidence which would have
convinced us that: 1) each time it hired and rehired respondent, it intended for him
to accomplish specific tasks in the particular project to which he was assigned; 2) it
intended for respondent to carry out these specific tasks in accordance with the
project plan it had drawn out and within the limited time it had to complete the

same; and 3) it made such restrictions on each engagement known to respondent,

and the same were freely accepted by him. Petitioner's failure to present such
evidence is inexcusable, given its access to such documents as project contracts,
payment remittances, employment records and payslips.[21] Such lapse is
dismaying, considering that in Raycor v. National Labor Relations
Commission, the Court had signalled to petitioner that, given the peculiar nature of
its business, it had a strong case against the regularization of some of its workers.
The Court even enumerated the kind of evidence petitioner should present to
establish the project employment of its workers.
Evidently, petitioner did not heed the Courts observations in Raycor v. National
Labor Relations Commission, leaving us no option but to declare that it failed, yet
again, to discharge its burden of proving that respondent was a project employee.
Consequently, the Court affirms the finding of the CA and the labor tribunals that
respondent became a regular employee after 23 months of rehiring.
The next question then is whether respondent was validly dismissed on November
3, 1997.
Petitioner claims that respondent was laid off due to adverse business conditions it
suffered at that time, attributing these to the Asian currency crisis, in general, and
to the rehabilitation of Uniwide, in particular.[22]
The CA rejected such pretext and held:
In the instant case, Raycor merely alleged that its business was affected
by the Asian currency. It could not also rely on the financial reverses
suffered by its client, Uniwide Holdings, Inc. without adducing sufficient
and convincing proof that by reason of such economic reverses, it
suffered imminent substantial losses and retrenchment was the most
reasonable and effective recourse to prevent the expected losses. In
short, Raycor could not establish exculpation from liability in the illegal
dismissal of San Pedro by invoking another company's economic
reverses.[23]

The CA is correct.
To justify termination of employment under Article 283[24] of the Labor Code, the
employer must prove compliance with the following requirements: (a) a written
notice must be served on the employees, and the Department of Labor and
Employment (DOLE) at least one month before the intended cessation of business;
[25]
and (b) the cessation of business must be bona fide in character.[26]
It is readily apparent that petitioner did not comply with any of the foregoing
requirements. There is no evidence that it complied with the one-month notice
requirement. While petitioner claims that it issued to respondent an October 30,
1997 Memorandum of termination of employment, it failed to prove that such
document was ever served upon respondent and the DOLE. Moreover, the notice is
less than one month, for the memorandum states that respondents contract of
employment is to expire on November 3, 1997, or only three days later from the
date of the Memorandum.
Worse, there is no evidence at all that petitioner dismissed respondent because it
actually ceased or suspended business operations, or it resorted to the dismissal of
respondent and other employees to stave off cessation or suspension of its
business. The best evidence of reversal of fortune is audited financial and income
statements which detail the extent and pattern of business losses suffered by the
employer.[27] Petitioner did not present any such document where it could have
demonstrated how the 1997 Asian financial currency crisis or the rehabilitation
of Uniwide adversely and significantly affected the viability of its business.
Again, for failure of petitioner to discharge its burden of proving business reverses
as a ground for the lay-off of respondent, we uphold the CA in ruling that the
latter's dismissal was illegal.
WHEREFORE, the petition is DENIED.
Costs against petitioner.
SO ORDERED.