EN BANC

[G.R. No. 117040. January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT
STORE, respondents.

DECISION

MENDOZA, J.:

This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the National Labor Relations
Commission (NLRC) which reversed the decision of the Labor Arbiter and dismissed petitioner Ruben Serranos complaint for illegal
dismissal and denied his motion for reconsideration. The facts are as follows:

Petitioner was hired by private respondent Isetann Department Store as a security checker to apprehend shoplifters and prevent
pilferage of merchandise.[1] Initially hired on October 4, 1984 on contractual basis, petitioner eventually became a regular employee
on April 4, 1985. In 1988, he became head of the Security Checkers Section of private respondent. [2]

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security section and engage the
services of an independent security agency. For this reason, it wrote petitioner the following memorandum:[3]

October 11, 1991

MR. RUBEN SERRANO

PRESENT

Dear Mr. Serrano,

......In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of your
termination as Security Section Head effective October 11, 1991.

......Please secure your clearance from this office.

Very truly yours,

[Sgd.] TERESITA A. VILLANUEVA

Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal, illegal layoff, unfair
labor practice, underpayment of wages, and nonpayment of salary and overtime pay. [4]

The parties were required to submit their position papers, on the basis of which the Labor Arbiter defined the issues as follows:[5]

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of wages, nonpayment of salaries,
13th month pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding petitioner to have been illegally
dismissed. He ruled that private respondent failed to establish that it had retrenched its security section to prevent or minimize losses
to its business; that private respondent failed to accord due process to petitioner; that private respondent failed to use reasonable
standards in selecting employees whose employment would be terminated; that private respondent had not shown that petitioner and
other employees in the security section were so inefficient so as to justify their replacement by a security agency, or that "cost-saving
devices [such as] secret video cameras (to monitor and prevent shoplifting) and secret code tags on the merchandise" could not have
been employed; instead, the day after petitioners dismissal, private respondent employed a safety and security supervisor with duties
and functions similar to those of petitioner.

Accordingly, the Labor Arbiter ordered:[6]

WHEREFORE, above premises considered, judgment is hereby decreed:

(a)......Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is

ordered to pay complainant full backwages without qualification or deduction in the amount
of P74,740.00 from the time of his dismissal until reinstatement (computed till promulgation only)
based on his monthly salary of P4,040.00/month at the time of his termination but limited to (3)
three years;

(b)......Ordering the Respondent to immediately reinstate the complainant to his former position as
security section head or to a reasonably equivalent supervisorial position in charges of security
without loss of seniority rights, privileges and benefits. This order is immediately executory even
pending appeal;

(c)......Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and
proportionate 13th month pay in the amount of P3,198.30;

(d)......Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10%
attorneys fees based on the total judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of
merit.

SO ORDERED.

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed the decision of the Labor Arbiter and
ordered petitioner to be given separation pay equivalent to one month pay for every year of service, unpaid salary, and proportionate
13th month pay. Petitioner filed a motion for reconsideration, but his motion was denied.

The NLRC held that the phase-out of private respondents security section and the hiring of an independent security agency constituted
an exercise by private respondent of "[a] legitimate business decision whose wisdom we do not intend to inquire into and for which
we cannot substitute our judgment"; that the distinction made by the Labor Arbiter between "retrenchment" and the employment of
"cost-saving devices" under Art. 283 of the Labor Code was insignificant because the company official who wrote the dismissal letter
apparently used the term "retrenchment" in its "plain and ordinary sense: to layoff or remove from ones job, regardless of the reason
therefor"; that the rule of "reasonable criteria" in the selection of the employees to be retrenched did not apply because all positions in
the security section had been abolished; and that the appointment of a safety and security supervisor referred to by petitioner to prove
bad faith on private respondents part was of no moment because the position had long been in existence and was separate from
petitioners position as head of the Security Checkers Section.

Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO

REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE
EMPLOYEES CLASSED UNDER THE LATTER? [7]

Petitioner contends that abolition of private respondents Security Checkers Section and the employment of an independent security
agency do not fall under any of the authorized causes for dismissal under Art. 283 of the Labor Code.

Petitioner Laid Off for Cause

Petitioners contention has no merit. Art. 283 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.

In De Ocampo v. National Labor Relations Commission,[8] this Court upheld the termination of employment of three mechanics in a
transportation company and their replacement by a company rendering maintenance and repair services. It held:

In contracting the services of Gemac Machineries, as part of the companys cost-saving program, the services
rendered by the mechanics became redundant and superfluous, and therefore properly terminable. The company
merely exercised its business judgment or management prerogative. And in the absence of any proof that the
management abused its discretion or acted in a malicious or arbitrary manner, the court will not interfere with the
exercise of such prerogative.[9]

In Asian Alcohol Corporation v. National Labor Relations Commission, [10] the Court likewise upheld the termination of employment
of water pump tenders and their replacement by independent contractors. It ruled that an employers good faith in implementing a
redundancy program is not necessarily put in doubt by the availment of the services of an independent contractor to replace the
services of the terminated employees to promote economy and efficiency.

Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of promoting efficiency and
attaining economy by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services
should be performed by its personnel or contracted to outside agencies . . . [While there] should be mutual consultation, eventually
deference is to be paid to what management decides." [11] Consequently, absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer. [12]

In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private respondents real purpose
was to avoid payment to the security checkers of the wage increases provided in the collective bargaining agreement approved in
1990.[13] Such an assertion is not a sufficient basis for concluding that the termination of petitioners employment was not a bona
fide decision of management to obtain reasonable return from its investment, which is a right guaranteed to employers under the
Constitution.[14] Indeed, that the phase-out of the security section constituted a "legitimate business decision" is a factual finding of an
administrative agency which must be accorded respect and even finality by this Court since nothing can be found in the record which
fairly detracts from such finding.[15]

Accordingly, we hold that the termination of petitioners services was for an authorized cause, i.e., redundancy. Hence, pursuant to Art.
283 of the Labor Code, petitioner should be given separation pay at the rate of one month pay for every year of service.

Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the employer must serve "a
written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof."
In the case at bar, petitioner was given a notice of termination on October 11, 1991. On the same day, his services were terminated. He
was thus denied his right to be given written notice before the termination of his employment, and the question is the appropriate
sanction for the violation of petitioners right.

To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC,[16] workers in a garment factory were temporarily
laid off due to the cancellation of orders and a garment embargo. The Labor Arbiter found that the workers had been illegally
dismissed and ordered the company to pay separation pay and backwages. The NLRC, on the other hand, found that this was a case of
retrenchment due to business losses and ordered the payment of separation pay without backwages. This Court sustained the NLRCs
finding. However, as the company did not comply with the 30-day written notice in Art. 283 of the Labor Code, the Court ordered the
employer to pay the workers P2,000.00 each as indemnity.

The decision followed the ruling in several cases involving dismissals which, although based on any of the just causes under Art.
282,[17] were effected without notice and hearing to the employee as required by the implementing rules. [18] As this Court said: "It is
now settled that where the dismissal of one employee is in fact for a just and valid cause and is so proven to be but he is not accorded
his right to due process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the dismissal shall be
upheld but the employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due process." [19]
The rule reversed a long standing policy theretofore followed that even though the dismissal is based on a just cause or the termination
of employment is for an authorized cause, the dismissal or termination is illegal if effected without notice to the employee. The shift in
doctrine took place in 1989 in Wenphil Corp. v. NLRC.[20] In announcing the change, this Court said:[21]

The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority
and the payment of his wages during the period of his separation until his actual reinstatement but not exceeding
three (3) years without qualification or deduction, when it appears he was not afforded due process, although his
dismissal was found to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and
Employment, should be re-examined. It will be highly prejudicial to the interests of the employer to impose on him
the services of an employee who has been shown to be guilty of the charges that warranted his dismissal from
employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remains in the
service.

....

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to
an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee
must be for just or authorized cause and after due process. Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation
as required by law before dismissing petitioner from employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.

The fines imposed for violations of the notice requirement have varied
from P1,000.00[22] to P2,000.00[23] to P5,000.00[24] to P10,000.00.[25]

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice requirement in light of our experience
during the last decade or so with the Wenphil doctrine. The number of cases involving dismissals without the requisite notice to the
employee, although effected for just or authorized causes, suggests that the imposition of fine for violation of the notice requirement
has not been effective in deterring violations of the notice requirement. Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late." On the other hand, Justice Puno says there has in effect been fostered a
policy of "dismiss now, pay later" which moneyed employers find more convenient to comply with than the requirement to serve a 30-
day written notice (in the case of termination of employment for an authorized cause under Arts. 283-284) or to give notice and
hearing (in the case of dismissals for just causes under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even though there are just or
authorized causes for such dismissal or layoff. Consequently, in their view, the employee concerned should be reinstated and paid
backwages.

Validity of Petitioners Layoff Not Affected by Lack of Notice

We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the sanction of fine for an employers
disregard of the notice requirement. We do not agree, however, that disregard of this requirement by an employer renders the
dismissal or termination of employment null and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of
ordering an employee to be reinstated and paid backwages when it is shown that he has not been given notice and hearing although his
dismissal or layoff is later found to be for a just or authorized cause. Such rule was abandoned in Wenphil because it is really unjust to
require an employer to keep in his service one who is guilty, for example, of an attempt on the life of the employer or the latters
family, or when the employer is precisely retrenching in order to prevent losses.

The need is for a rule which, while recognizing the employees right to notice before he is dismissed or laid off, at the same time
acknowledges the right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to terminate employment for
any of the authorized causes mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is found to have
dismissed an employee for cause without prior notice is deemed ineffective in deterring employer violations of the notice requirement,
the remedy is not to declare the dismissal void if there are just or valid grounds for such dismissal or if the termination is for an
authorized cause. That would be to uphold the right of the employee but deny the right of the employer to dismiss for cause. Rather,
the remedy is to order the payment to the employee of full backwages from the time of his dismissal until the court finds that the
dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be reinstated. This is because his
dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-saving device, but the
employer did not give him and the DOLE a 30-day written notice of termination in advance, then the termination of his employment
should be considered ineffectual and he should be paid backwages. However, the termination of his employment should not be
considered void but he should simply be paid separation pay as provided in Art. 283 in addition to backwages.

Justice Puno argues that an employers failure to comply with the notice requirement constitutes a denial of the employees right to due
process. Prescinding from this premise, he quotes the statement of Chief Justice Concepcion in Vda. de Cuaycong v. Vda. de
Sengbengco[26] that "acts of Congress, as well as of the Executive, can deny due process only under the pain of nullity, and judicial
proceedings suffering from the same flaw are subject to the same sanction, any statutory provision to the contrary notwithstanding."
Justice Puno concludes that the dismissal of an employee without notice and hearing, even if for a just cause, as provided in Art. 282,
or for an authorized cause, as provided in Arts. 283-284, is a nullity. Hence, even if just or authorized causes exist, the employee
should be reinstated with full back pay. On the other hand, Justice Panganiban quotes from the statement in People v. Bocar[27] that
"[w]here the denial of the fundamental right of due process is apparent, a decision rendered in disregard of that right is void for lack of
jurisdiction."

Violation of Notice Requirement Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the State, which is not the case
here. There are three reasons why, on the other hand, violation by the employer of the notice requirement cannot be considered a
denial of due process resulting in the nullity of the employees dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to the exercise of
private power, such as the termination of employment under the Labor Code. This is plain from the text of Art. III, 1 of the
Constitution, viz.: "No person shall be deprived of life, liberty, or property without due process of law. . . ." The reason is simple: Only
the State has authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that
the exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the power of organized society are
brought to bear upon the individual. This is obviously not the case of termination of employment under Art. 283. Here the employee is
not faced with an aspect of the adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is
not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose rather is to give him time to
prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist justifying the
termination of his employment.

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with Due Process
Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak of notice and hearing as
the essence of procedural due process. Thus, compliance by the employer with the notice requirement before he dismisses an
employee does not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any decision
taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations Commission."

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact that Art. 283 had its
origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the employer-employee relationship the right
to terminate their relationship by giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month.[28] This provision was repealed by Art. 2270 of the Civil Code, which
took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted
reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving of advance notice or the
payment of compensation at the rate of one-half month for every year of service.[29]

The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which was to give the
employer the opportunity to find a replacement or substitute, and the employee the equal opportunity to look for another job or source
of employment. Where the termination of employment was for a just cause, no notice was required to be given to the employee. [30] It
was only on September 4, 1981 that notice was required to be given even where the dismissal or termination of an employee was for
cause. This was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which amended
the Labor Code. And it was still much later when the notice requirement was embodied in the law with the amendment of Art. 277(b)
by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee. Otherwise, there should
now likewise be a rule that, in case an employee leaves his job without cause and without prior notice to his employer, his act should
be void instead of simply making him liable for damages.
The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process Clause is that the
employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of
employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful orders of
the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the
employer or the latters immediate family or duly authorized representatives, or other analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won by employees before the
grievance committees manned by impartial judges of the company." The grievance machinery is, however, different because it is
established by agreement of the employer and the employees and composed of representatives from both sides. That is why,
in Batangas Laguna Tayabas Bus Co. v. Court of Appeals,[31] which Justice Puno cites, it was held that "Since the right of [an
employee] to his labor is in itself a property and that the labor agreement between him and [his employer] is the law between the
parties, his summary and arbitrary dismissal amounted to deprivation of his property without due process of law." But here we are
dealing with dismissals and layoffs by employers alone, without the intervention of any grievance machinery. Accordingly
in Montemayor v. Araneta University Foundation,[32] although a professor was dismissed without a hearing by his university, his
dismissal for having made homosexual advances on a student was sustained, it appearing that in the NLRC, the employee was fully
heard in his defense.

Lack of Notice Only Makes Termination Ineffectual

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be followed before a right granted
to a party can be exercised. Others are simply an application of the Justinian precept, embodied in the Civil Code, [33] to act with
justice, give everyone his due, and observe honesty and good faith toward ones fellowmen. Such is the notice requirement in Arts.
282-283. The consequence of the failure either of the employer or the employee to live up to this precept is to make him liable in
damages, not to render his act (dismissal or resignation, as the case may be) void. The measure of damages is the amount of wages the
employee should have received were it not for the termination of his employment without prior notice. If warranted, nominal and
moral damages may also be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employers failure to comply with the notice requirement does
not constitute a denial of due process but a mere failure to observe a procedure for the termination of employment which makes the
termination of employment merely ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art.
1191, of the Civil Code[34] in rescinding a contract for the sale of immovable property. Under these provisions, while the power of a
party to rescind a contract is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property, the
vendor cannot exercise this power even though the vendee defaults in the payment of the price, except by bringing an action in court
or giving notice of rescission by means of a notarial demand. [35] Consequently, a notice of rescission given in the letter of an attorney
has no legal effect, and the vendee can make payment even after the due date since no valid notice of rescission has been given.[36]

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make the dismissal of an
employee illegal. This is clear from Art. 279 which provides:

Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. [37]

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and, therefore, the employee
should be reinstated and paid backwages. To contend, as Justices Puno and Panganiban do, that even if the termination is for a just or
authorized cause the employee concerned should be reinstated and paid backwages would be to amend Art. 279 by adding another
ground for considering a dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the employee who fails to
give a written notice to the employer that he is leaving the service of the latter, at least one month in advance, his failure to comply
with the legal requirement does not result in making his resignation void but only in making him liable for damages. [38] This disparity
in legal treatment, which would result from the adoption of the theory of the minority cannot simply be explained by invoking
President Ramon Magsaysays motto that "he who has less in life should have more in law." That would be a misapplication of this
noble phrase originally from Professor Thomas Reed Powell of the Harvard Law School.

Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,[39] in support of his view that an illegal dismissal results not only from
want of legal cause but also from the failure to observe "due process." The Pepsi-Cola case actually involved a dismissal for an
alleged loss of trust and confidence which, as found by the Court, was not proven. The dismissal was, therefore, illegal, not because
there was a denial of due process, but because the dismissal was without cause. The statement that the failure of management to
comply with the notice requirement "taints the dismissal with illegality" was merely a dictum thrown in as additional grounds for
holding the dismissal to be illegal.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the payment of backwages for the
period when the employee is considered not to have been effectively dismissed or his employment terminated. The sanction is not the
payment alone of nominal damages as Justice Vitug contends.

Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either for an authorized or
just cause can result in an injustice to the employer. For not giving notice and hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt against the life of the employer, an employer will be forced to keep in his employ
such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force."[40] But so does it declare that it "recognizes the
indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investment."[41] The
Constitution bids the State to "afford full protection to labor." [42] But it is equally true that "the law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer."[43] And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is not economically in his interest to
do so.

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

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

If the employees separation is without cause, instead of being given separation pay, he should be reinstated. In either case, whether he
is reinstated or only granted separation pay, he should be paid full backwages if he has been laid off without written notice at least 30
days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any of the
just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstated. However, he must be paid
backwages from the time his employment was terminated until it is determined that the termination of employment is for a just cause
because the failure to hear him before he is dismissed renders the termination of his employment without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED by
ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1) month pay for every
year of service, his unpaid salary, and his proportionate 13th month pay and, in addition, full backwages from the time his
employment was terminated on October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is
REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary awards to petitioner.

SO ORDERED.
 DISSENTING OPINION

PUNO, J.:

The rule of audi alteram partem - - - hear the other side, is the essence of procedural due process. That a "party is not to suffer in
person or in purse without an opportunity of being heard" is the oldestestablished principle in administrative law.[1] Today, the
majority is ruling that the all important right of an employee to be notified before he is dismissed for a just or authorized
cause is not a requirement of due process. This is a blow on the breadbasket of our lowly employees, a considerable erosion of their
constitutional right to security of tenure, hence this humble dissenting opinion.

A review of our law on dismissal is in order.

I. DISMISSAL DUE TO JUST CAUSE

The law allowing dismissal of an employee due to a just cause is provided in Article 282 of the Labor Code:

"ART. 282. Termination by employer. An employer may terminate an employment for any of the following causes:

(a)......Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;

(b)......Gross and habitual neglect by the employee of his duties;

(c)......Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d)......Commission of the crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and

(e)......Other causes analogous to the foregoing."

The long established jurisprudence[2] is that to justify dismissal of an employee for a just cause, he must be given two kinds of
notice by his employer, viz: (1) notice to apprise the employee of the particular acts or omissions for which the dismissal is sought,
and (2) subsequent notice to inform him of the employers decision to dismiss him. Similarly, deeply ingrained is our ruling that these
pre and post notice requirements are not mere technicalities but are requirements of due process. [3]

Then came the case of Wenphil Corporation vs. NLRC and Mallare in 1989.[4] It is the majority view that Wenphil reversed the long
standing policy of this Court on dismissal. This is too broad a reading of Wenphil. A careful statement of the facts of Wenphil and
the ruling of this Court is thus proper.

First, the facts. The private respondent Roberto Mallare is the assistant head of the backroom department of petitioner Wenphil
Corporation. At about 2:30 pm on May 20, 1985, Mallare had an altercation with his co-employee, Job Barrameda, about tending the
Salad Bar. He slapped Barramedas cap, stepped on his foot, picked up an ice scooper and brandished it against the latter. He refused to
be pacified by another employee who reported the incident to Delilah Hermosura, assistant manager. Hermosura summoned Mallare
but the latter refused to see the former. It took a security guard to bring Mallare to Hermosura. Instead of making an explanation,
Mallare shouted profane words against Hermosura. He declared that their altercation should only be settled by him and Barrameda.

The following morning, Mallare was suspended. In the afternoon, he was dismissed from the service. He received an official notice of
his dismissal four (4) days later.

Mallare filed with the Labor Arbiter a complaint for illegal suspension, illegal dismissal and unfair labor practice. No hearing was
conducted in view of the repeated absence of the counsel of Mallare. The parties submitted their respective position papers. On
December 3, 1986, the Arbiter denied the complaint as he found Mallare guilty of grave misconduct and insubordination, which are
just causes for dismissal. The Arbiter also ruled that Mallare was not denied due process. On appeal, the NLRC reversed. It held that
Mallare was denied due process before he was dismissed. It ordered Mallares reinstatement and the payment of his one (1) year
backwages.
On certiorari to this Court, we reversed the NLRC and reinstated the decision of the Arbiter with the modification that petitioner
should pay to Mallare an indemnity of P1,000.00 for dismissing Mallare without any notice and hearing. We held:

"Petitioner insists that private respondent was afforded due process but he refused to avail of his right to the same;
that when the matter was brought to the labor arbiter he was able to submit his position paper although the hearing
cannot proceed due to the non-appearance of his counsel; and that the private respondent is guilty of serious
misconduct in threatening or coercing a co-employee which is a ground for dismissal under Article 283 of the Labor
Code.

The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed
constitutes an infringement of his constitutional right to due process of law and equal protection of the laws.
The standards of due process in judicial as well as administrative proceedings have long been established. In
its bare minimum due process of law simply means giving notice and opportunity to be heard before
judgment is rendered.

The claim of petitioner that a formal investigation was not necessary because the incident, which gave rise to the
termination of private respondent, was witnessed by his co-employees and supervisors, is without merit. The basic
requirement of due process is that which hears before it condemns, which proceeds upon inquiry and renders
judgment only after trial.

However, it is a matter of fact that when the private respondent filed a complaint against petitioner, he was afforded
the right to an investigation by the labor arbiter. He presented his position paper as did the petitioner. If no hearing
was had, it was the fault of private respondent as his counsel failed to appear at the scheduled hearings. The labor
arbiter concluded that the dismissal of private respondent was for just cause. He was found guilty of grave
misconduct and insubordination. This is borne by the sworn statements of witnesses. The Court is bound by this
finding of the labor arbiter.

By the same token, the conclusion of the public respondent NLRC on appeal that private respondent was not
afforded due process before he was dismissed is binding on this Court. Indeed, it is well taken and supported
by the records. However, it can not justify a ruling that private respondent should be reinstated with back
wages as the public respondent NLRC so decreed. Although belatedly, private respondent was afforded due
process before the labor arbiter wherein the just cause of his dismissal had been established. With such
finding, it would be arbitrary and unfair to order his reinstatement with back wages."

Three members of the Court filed concurring and dissenting opinions. Madam Justice Herrera opined that: (a) Mallare was
dismissed for cause, hence, he is not entitled to reinstatement and backwages; (b) he was not denied due process; and (c) he has no
right to any indemnity but to separation pay to cushion the impact of his loss of employment Mr. Justice Padilla took the view that: (1)
Mallare was not entitled to reinstatement and backwages as he was guilty of grave misconduct and insubordination; (2) he was denied
administrative due process; and (3) for making such denial, Wenphil should pay "separation pay (instead of indemnity) in the sum
of P1,000.00." Madam Justice Cortes held that: (1) Mallare was not illegally dismissed; (2) he was not denied due process; (3) he was
not entitled to indemnity; and (4) if P1,000.00 was to be imposed on Wenphil as an administrative sanction, it should form part of the
public fund of the government.

I shall discuss later that Wenphil did not change our ruling that violation of the pre-dismissal notice requirement is an
infringement of due process.

II. DISMISSAL DUE TO AUTHORIZED CAUSE

The applicable law on dismissal due to authorized cause is Article 283 of the Labor Code which provides:

ART. 283. 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 operation 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 his 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 closures or cessation of operations of establishment
or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one
 (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year."

In Sebuguero v. NLRC,[5] we held thru our esteemed Chief Justice Davide that "the requirement of notice to both the employees
concerned and the Department of Labor and Employment (DOLE) is mandatory and must be written and given at least one month
before the intended date of retrenchment." We explained that the "notice to the DOLE is essential because the right to retrench is not
an absolute prerogative of an employer but is subject to the requirement of law that retrenchment be proved to prevent losses. The
DOLE is the agency that will determine whether the planned retrenchment is justified and adequately supported by
fact."[6] Nonetheless, we ruled:

"The lack of written notice to the petitioners and to the DOLE does not, however, make the petitioners
retrenchment illegal such that they are entitled to the payment of back wages and separation pay in lieu of
reinstatement as they contend. Their retrenchment, for not having been effected with the required notices, is
merely defective. In those cases where we found the retrenchment to be illegal and ordered the employees
reinstatement and the payment of backwages, the validity of the cause for retrenchment, that is the existence of
imminent or actual serious or substantial losses, was not proven. But here, such a cause is present as found by both
the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in Article 283 of the
Labor Code in effecting the retrenchment of the petitioners.

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven to
be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice and
the opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-
compliance with the requirements of or for failure to observe due process. The sanction, in the nature of
indemnification or penalty, depends on the facts of each case and the gravity of the omission committed by the
employer and has ranged from P1,000.00 as in the cases of Wenphil vs. National Labor Relations Commission,
Seahorse Maritime Corp. v. National Labor Relations Commission, Shoemart, Inc. vs. National Labor Relations
Commission, Rubberworld (Phils.) Inc. vs. National Labor Relations Commission, Pacific Mills, Inc. vs.
Alonzo, and Aurelio vs. National Labor Relations Commission to P10,000.00 in Reta vs. National Labor Relations
Commission and Alhambra Industries, Inc. vs. National Labor Relations Commission. More recently, in Worldwide
Papermills, Inc. vs. National Labor Relations Commission, the sum of P5,000.00 was awarded to the employee as
indemnification for the employers failure to comply with the requirements of procedural due process.

Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because the required notices of
the petitioners retrenchment were not served upon the petitioners and the DOLE, GTI must be sanctioned for such
failure and thereby required to indemnify each of the petitioners the sum of P20,000.00 which we find to be just and
reasonable under the circumstances of this case."

III. RE-EXAMINATION OF THE WENPHIL DOCTRINE:

FROM BAD TO WORSE

The minority of the Court has asked for a re-examination of Wenphil because as the majority correctly observed, "the number of
cases involving dismissals without the requisite notice to the employee although effected for just or authorized causes suggests
that the imposition of fine for violation of the notice requirement has not been effective in deterring violations of the notice
requirement."

We must immediately set Wenphil in its proper perspective as it is a very exceptional case. Its doctrine must be limited to its
distinct facts. Its facts therefore ought to be carefully examined again. In Wenphil, it was clearly established that the employee had a
violent temper, caused trouble during office hours and even defied his superiors as they tried to pacify him. The employee was
working for a fast food chain that served the public and where violence has no place. These facts were established only in the
proceedings before the Labor Arbiter after the employee filed a complaint for illegal dismissal. There were no formal investigation
proceedings before the employer as the employee was dismissed without any notice by the employer. Given these facts, we ruled
that the pre-dismissal notice requirement was part of due process; nonetheless, we held that the employee was given due process as he
was heard by the Labor Arbiter; we found that the proceedings before the Labor Arbiter proved that the employee was guilty of grave
misconduct and insubordination; we concluded with the rule that it would be highly prejudicial to the interest of the employer to
reinstate the employee, but the employer must indemnify the employee the amount of P1,000.00 for dismissing him without notice.
We further held that "the measure of this award depends on the facts of each case and the gravity of the omission committed by the
employer."[7]

At the outset, I wish to emphasize that Wenphil itself held, and repeatedly held that "the failure of petitioner to give private
respondent the benefit of a hearing before he was dismissed, constitutes an infringement of his constitutional right to due process of
law and equal protection of the laws. The standards of due process of law in judicial as well as administrative proceedings have long
been established. In its bare minimum due process of law simply means giving notice and opportunity to be heard before judgment is
rendered."[8] The Court then satisfied itself with this bare minimum when it held that the post dismissal hearing before the Labor
Arbiter was enough compliance with the demands of due process and refused to reinstate an eminently undesirable
employee. Heretofore, the Court was far from satisfied with this bare minimum as it strictly imposed on an employer compliance
with the requirement of pre-dismissal notice, violation of which resulted in orders of reinstatement of the dismissed employee. This is
the only wrinkle wrought by Wenphil in our jurisprudence on dismissal. Nonetheless, it should be stressed that the Court still
punished Wenphils violation of the pre-dismissal notice requirement as it was ordered to pay an indemnity of P1,000.00 to the
employee. The indemnity was based on the iterated and reiterated rule that "the dismissal of an employee must be for just or
authorized cause and after due process."[9]

Our ten (10) years experience with Wenphil is not a happy one. Unscrupulous employers have abused the Wenphil ruling. They
have dismissed without notice employees including those who are not as eminently undesirable as the Wenphil employee. They
dismissed employees without notice as a general rule when it should be the exception. The purpose of the pre-dismissal notice
requirement was entirely defeated by employers who were just too willing to pay an indemnity for its violation. The result, as the
majority concedes, is that the indemnity we imposed has not been effective to prevent unjust dismissals of employees. To be sure,
this is even a supreme understatement. The ugly truth is that Wenphil is the mother of many unjust and unauthorized
dismissals of employees who are too weak to challenge their powerful employees.

As the Wenphil indemnity doctrine has proved to be highly inimical to the interest of our employees, I humbly submit a return
to the pre-Wenphil rule where a reasonless violation of the pre-dismissal notice requirement makes the dismissal of an employee
illegal and results in his reinstatement. In fine, we should strike down as illegal the dismissal of an employee even if it is for a
justified end if it is done thru unjustified means for we cannot be disciples of the Machiavellian doctrine of the end justifies the
means. With due respect, the majority decision comes too near this mischievous doctrine by giving emphasis on the end and not the
means of dismissal of employees. What grates is that the majority today espouses a doctrine more pernicious than Wenphil for now
it announces that a violation of the pre-dismissal notice requirement does not even concern due process. The reasons relied upon by
the majority for this new ruling against the job security of employees cannot inspire assent.

FIRST. I would like to emphasize that one undesirable effect of Wenphil is to compel employees to seek relief against illegal
dismissals with the DOLE whereas before, a remedy can be sought before the employer. In shifting this burden, an employees uneven
fight against his employer has become more uneven. Now, an illegally dismissed employee often goes to the DOLE without an exact
knowledge of the cause of his dismissal. As a matter of strategy, some employers today dismiss employees without notice. They know
that it is more advantageous for them to litigate with an employee who has no knowledge of the cause of dismissal. The probability is
that said employee will fail to prove the illegality of his dismissal. All that he can prove is that he was dismissed without notice and
the penalty for the omission is a mere fine, a pittance.

The case at bar demonstrates how disastrous Wenphil has been to our helpless employees. In holding that the petitioner failed to prove
his cause of action, the majority held ". . . we have only the bare assertion of petitioner that, in abolishing the security section, private
respondents real purpose was to avoid payment to the security checkers of the wage increases provided in the collective bargaining
agreement approved in 1990." The bare assertion of the petitioner is understandable. The notice given to him spoke of a general
ground - - - retrenchment. No details were given about the employers sudden retrenchment program. Indeed, the employee was
dismissed on the day he received the notice in violation of the 30-day requirement. He was given no time, no opportunity to
ascertain and verify the real cause of his dismissal. Thus, he filed with the DOLE a complaint for illegal dismissal with a hazy
knowledge of its real cause. Heretofore, it is the employer whom we blame and penalize if he does not notify his employee of the
cause of his dismissal. Today, the majority puts the blame on the employee for not knowing why he was dismissed when he was not
given any notice of dismissal. In truth, the suspicion of the petitioner in the case at bar that he was dismissed to avoid payment
of their wage increases is not without basis. The DOLE itself found that petitioner has unpaid wages which were ordered to be paid
by the employer. The majority itself affirmed this finding.

What hurts is that while the majority was strict with the petitioner-employee, it was not so with the employer
ISETANN. Immediately, it validated the finding of the NLRC that petitioner was dismissed due to the redundancy of his position.
This is inconsistent with the finding of the Labor Arbiter that the employer failed to prove retrenchment, the ground it used to dismiss
the petitioner. A perusal of the records will show that Ms. Cristina Ramos, Personnel Administration Manager of the employer
ISETANN testified on the cause of dismissal of the petitioner. She declared that petitioner was retrenched due to the installation
of a labor saving device. Allegedly, the labor saving device was the hiring of an independent security agency, thus: [10]

"x x x

Atty. Perdigon:
......You said that your company decided to phase out the position of security checkers x x x

Ms. Ramos:

......Yes Sir.

Q:......And instead hired the services of a security agency?

A:......Yes, sir.

............x x x

Q:......Did you not retrench the position of security checkers?

A:......We installed a labor saving device.

Q:......So you did not retrench?

A:......No. sir.

Q:......How about the position of Section Head of Security Department?

A:......It was abolished in 1991.

............x x x

Q:......Are you aware of the retrenchment program of the company as stated in this letter?

A:......Actually its not a retrenchment program. Its an installation of a labor saving device.

Q:......So you are telling this Court now that there was no retrenchment program?

A:......It was actually an installation of a labor saving device (emphasis supplied).

............x x x

Q:......x x x What (is) this labor saving device that you are referring to?

A:......The labor saving device is that the services of a security agency were contracted to handle the services of the
security checkers of our company.

Q:......Are you sure of what labor saving means, Madam witness?

A:......Yes, sir.

Q:......You said you installed a labor saving device, and you installed a security agency as a labor saving device?

A:......We hired the services of a security agency.

Q:......So according to you x x x a security agency is a labor saving device?

Atty. Salonga:

......Already answered, your Honor."

Obviously, Ms. Ramos could not even distinguish between retrenchment and redundancy. The Labor Arbiter thus ruled that
petitioners dismissal was illegal. The NLRC, however, reversed. The majority affirmed the NLRC ruling that ISETANNs phase out of
its security employees is a legitimate business decision, one that is necessary to obtain reasonable return from its investment. To use
the phrase of the majority, this is a "bare assertion." Nothing in the majority decision shows how the return of ISETANNs
investment has been threatened to justify its so-called business decision as legitimate.

SECOND. The majority holds that "the need is for a rule which, while recognizing the employees right to notice before he is
dismissed or laid off, at the same time acknowledges the right of the employer to dismiss for any of the just causes enumerated in Art.
282 or to terminate employment for any of the authorized causes mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on
an employer who is found to have dismissed an employee for cause without prior notice is deemed ineffective in deterring employer
violations of the notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for such
dismissal or if the termination is for an authorized cause. That would be to uphold the right of the employee but deny the right of the
employer to dismiss for cause. Rather, the remedy is to consider the dismissal or termination to be simply ineffectual for failure of
the employer to comply with the procedure for dismissal or termination."

With due respect, I find it most difficult to follow the logic of the majority. Before Wenphil, we protected employees with the
ruling that dismissals without prior notice are illegal and the illegally dismissed employee must be reinstated with
backwages. Wenphil diluted that rule when it held that due process is satisfied if the employee is given the opportunity to be heard
by the Labor Arbiter. It further held that an employee cannot be reinstated if it is established in the hearing that his dismissal is for a
just cause. The failure of the employer to give a pre-dismissal notice is only to be penalized by payment of an indemnity. The dilution
of the rule has been abused by unscrupulous employers who then followed the "dismiss now, pay later" strategy. This evil
practice of employers was what I expected the majority to address in re-examining the Wenphil doctrine. At the very least, I thought
that the majority would restore the balance of rights between an employee and an employer by giving back the employees mandatory
right to notice before dismissal. It is disquieting, however, that the majority re-arranged this balance of right by tilting it more in
favor of the employers right to dismiss.Thus, instead of weakening a bit the right to dismiss of employers, the majority further
strengthens it by insisting that a dismissal without prior notice is merely "ineffectual" and not illegal.

The stubborn refusal of the majority to appreciate the importance of pre-dismissal notice is difficult to understand. It is the linchpin
of an employees right against an illegal dismissal. The notice tells him the cause of his dismissal. It gives him a better chance to
contest his dismissal in an appropriate proceeding as laid down in the parties collective bargaining agreement or the rules of
employment established by the employer, as the case may be. In addition, it gives to both the employee and employer more cooling
time to settle their differences amicably. In fine, the prior notice requirement and the hearing before the employer give an
employee a distinct, different and effective first level of remedy to protect his job. In the event the employee is dismissed, he can
still file a complaint with the DOLE with better knowledge of the cause of his dismissal, with longer time to prepare his case, and
with greater opportunity to take care of the financial needs of his family pendente lite. The majority has taken away from
employees this effective remedy. This is not to say that the pre-dismissal notice requirement equalizes the fight between an employee
and an employer for the fight will remain unequal. This notice requirement merely gives an employee a fighting chance but that
fighting chance is now gone.

It is equally puzzling why the majority believes that restoring the employees right to pre-dismissal notice will negate the right of an
employer to dismiss for cause. The pre-Wenphil rule simply requires that before the right of the employer to dismiss can be
exercised, he must give prior notice to the employee of its cause. There is nothing strange nor difficult about this requirement. It
is no burden to an employer. He is bereft of reason not to give the simple notice. If he fails to give notice, he can only curse himself.
He forfeits his right to dismiss by failing to follow the procedure for the exercise of his right. Employees in the public sector cannot
be dismissed without prior notice. Equal protection of law demands similar treatment of employees in the private sector.

THIRD. The case at bar specifically involves Article 283 of the Labor Code which lays down four (4) authorized causes for
termination of employment.[11] These authorized causes are: (1) installation of labor-saving devices; (2) redundancy; (3) retrenchment
to prevent losses; and (4) closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the law. It also provides that prior to the dismissal of an employee for an authorized cause, the employer must
send two written notices at least one month before the intended dismissal -- one notice to the employee and another notice to the
Department of Labor and Employment (DOLE). We have ruled that the right to dismiss on authorized causes is not an absolute
prerogative of an employer.[12] We explained that the notice to the DOLE is necessary to enable it to ascertain the truth of the
cause of termination.[13] The DOLE is equipped with men and machines to determine whether the planned closure or cessation of
business or retrenchment or redundancy or installation of labor saving device is justified by economic facts. [14] For this reason too, we
have held that notice to the employee is required to enable him to contest the factual bases of the management decision or good faith
of the retrenchment or redundancy before the DOLE.[15] In addition, this notice requirement gives an employee a little time to adjust
to his joblessness.[16]

The majority insists that if an employee is laid off for an authorized cause under Article 283 in violation of the prior notice
requirement, his dismissal should not be considered void but only ineffectual. He shall not be reinstated but paid separation pay
and some backwages. I respectfully submit that an employee under Article 283 has a stronger claim to the right to a pre-dismissal
notice and hearing. To begin with, he is an innocent party for he has not violated any term or condition of his employment.
Moreover, an employee in an Article 283 situation may lose his job simply because of his employers desire for more profit. Thus, the
installation of a labor saving device is an authorized cause to terminate employment even if its non-installation need not necessarily
result in an over-all loss to an employer possessed by his possessions. In an Article 283 situation, it is easy to see that there is
a greater need to scrutinize the allegations of the employer that he is dismissing an employee for an authorized cause. The acts
involved here are unilateral acts of the employer. Their nature requires that they should be proved by the employer himself. The
need for a labor saving device, the reason for redundancy, the cause for retrenchment, the necessity for closing or cessation of business
are all within the knowledge of the employer and the employer alone. They involve a constellation of economic facts and factors
usually beyond the ken of knowledge of an ordinary employee. Thus, the burden should be on the employer to establish and
justify these authorized causes. Due to their complexity, the law correctly directs that notice should be given to the DOLE for it is
the DOLE more than the lowly employee that has the expertise to validate the alleged cause in an appropriate hearing. In fine, the
DOLE provides the equalizer to the powers of the employer in an Article 283 situation. Without the equalizing influence of
DOLE, the employee can be abused by his employer.

Further, I venture the view that the employees right to security of tenure guaranteed in our Constitution calls for a pre-dismissal
notice and hearing rather than a post facto dismissal hearing. The need for an employee to be heard before he can be dismissed
cannot be overemphasized. As aforestated, in the case at bar, petitioner was a regular employee of ISETANN. He had the right to
continue with his employment. The burden to establish that this right has ceased is with ISETANN, as petitioners employer. In fine,
ISETANN must be the one to first show that the alleged authorized cause for dismissing petitioner is real. And on this factual issue,
petitioner must be heard. Before the validity of the alleged authorized cause is established by ISETANN, the petitioner cannot
be separated from employment. This is the simple meaning of security of tenure. With due respect, the majority opinion will reduce
this right of our employees to a mere illusion. It will allow the employer to dismiss an employee for a cause that is yet to be
established. It tells the employee that if he wants to be heard, he can file a case with the labor arbiter, then the NLRC, and then this
Court. Thus, it unreasonably shifts the burden to the employee to prove that his dismissal is for an unauthorized cause.

The pernicious effects of the majority stance are self-evident in the case at bar. For one, petitioner found himself immediately
jobless and without means to support his family. For another, petitioner was denied the right to rely on the power of DOLE to
inquire whether his dismissal was for a genuine authorized cause. This is a valuable right for all too often, a lowly employee can
only rely on DOLEs vast powers to check employer abuses on illegal dismissals. Without DOLE, poor employees are preys to the
claws of powerful employers. Last but not the least, it was the petitioner who was forced to file a complaint for illegal dismissal. To
a jobless employee, filing a complaint is an unbearable burden due to its economic cost. He has to hire a lawyer and defray the
other expenses of litigation while already in a state of penury. At this point, the hapless employee is in a no win position to fight for
his right. To use a local adage, "aanhin pa ang damo kung patay na ang kabayo."

In the case at bar, the job of the petitioner could have been saved if DOLE was given notice of his dismissal. The records show
that petitioner worked in ISETANN as security checker for six (6) years. He served ISETANN faithfully and well. Nonetheless, in a
desire for more profits, and not because of losses, ISETANN contracted out the security work of the company. There was no effort
whatsoever on the part of ISETANN to accommodate petitioner in an equivalent position. Yet, there was the position of Safety
and Security Supervisor where petitioner fitted like a perfect T. Despite petitioners long and loyal service, he was treated like an
outsider, made to apply for the job, and given a stringent examination which he failed. Petitioner was booted out and given no chance
to contest his dismissal. Neither was the DOLE given the chance to check whether the dismissal of petitioner was really for an
authorized cause. All these because ISETANN did not follow the notice and hearing requirement of due process.

FOURTH. The majority has inflicted a most serious cut on the job security of employees. The majority did nothing to restore the
pre-Wenphil right of employees but even expanded the right to dismiss of employer by holding that the pre-dismissal notice
requirement is not even a function of due process. This seismic shift in our jurisprudence ought not to pass.

The key to the new majority ruling is that the "due process clause of the Constitution is a limitation on governmental
powers. It does not apply to the exercise of private power such as the termination of employment under the Labor Code." The main
reason alleged is that "only the State has authority to take the life, liberty, or property of the individual. The purpose of the Due
Process Clause is to ensure that the exercise of this power is consistent with settled usage of civilized society."

There can be no room for disagreement on the proposition that the due process clause found in the Bill of Rights of the Constitution is
a limitation on governmental powers. Nor can there be any debate that acts of government violative of due process are null and void.
Thus, former Chief Justice Roberto Concepcion emphasized in Cuaycong v. Senbengco[17] that "x x x acts of Congress as well as
those of the Executive, can deny due process only under pain of nullity, and judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision to the contrary notwithstanding." With due respect to the majority, however, I
part ways with the majority in its new ruling that the due process requirement does not apply to the exercise of private power.
This overly restrictive majority opinion will sap the due process right of employees of its remaining utility. Indeed, the new majority
opinion limiting violations of due process to government action alone is a throwback to a regime of law long discarded by more
progressive countries. Today, private due process is a settled norm in administrative law. Per Schwartz, a known authority in the
field, viz:[18]

"Private Due Process

As already stressed, procedural due process has proved of an increasingly encroaching

nature. Since Goldberg v. Kelly, the right to be heard has been extended to an ever-widening area,
covering virtually all aspects of agency action, including those previously excluded under the
privilege concept. The expansion of due process has not been limited to the traditional areas of
administrative law. We saw how procedural rights have expanded into the newer field of social
welfare, as well as that of education. But due process expansion has not been limited to these
fields. The courts have extended procedural protections to cases involving prisoners and parolees,
as well as the use of established adjudicatory procedures. Important Supreme Court decisions go
further and invalidate prejudgment wage garnishments and seizures of property under replevin
statutes where no provision is made for notice and hearing. But the Court has not gone so far as to
lay down an inflexible rule that due process requires an adversary hearing when an individual may
be deprived of any possessory interest, however brief the dispossession and however slight the
monetary interest in the property. Due process is not violated where state law requires, as a
precondition to invoking the states aid to sequester property of a defaulting debtor, that the
creditor furnish adequate security and make a specific showing of probable cause before a judge.

In addition, there has been an extension of procedural due process requirements from
governmental to private action. In Section 5.16 we saw that Goldberg v. Kelly has been
extended to the eviction of a tenant from a public housing project. The courts have not limited the
right to be heard to tenants who have governmental agencies as landlords. Due process
requirements also govern acts by "private" landlords where there is sufficient governmental
involvement in the rented premises. Such an involvement exists in the case of housing aided by
Federal Housing Administration financing and tax advantages. A tenant may not be summarily
evicted from a building operated by a "private" corporation where the corporation enjoyed
substantial tax exemption and had obtained an FHA-insured mortgage, with governmental
subsidies to reduce interest payments. The "private" corporation was so saturated with
governmental incidents as to be limited in its practices by constitutional due process. Hence, it
could not terminate tenancies without notice and an opportunity to be heard."

But we need not rely on foreign jurisprudence to repudiate the new majority ruling that due process restricts government alone and
not private employers like ISETANN. This Court has always protected employees whenever they are dismissed for an unjust
cause by private employers. We have consistently held that before dismissing an employee for a just cause, he must be given notice
and hearing by his private employer. In Kingsize Manufacturing Corporation vs. NLRC,[19] this Court, thru Mr. Justice Mendoza,
categorically ruled:

"x x x (P)etitioners failure to give notice with warning to the private respondents before their services were
terminated puts in grave doubt petitioners claim that dismissal was for a just cause. Section 2 Rule XIV of the Rules
implementing the Labor Code provides:

"An employer who seeks to dismiss a worker shall furnish him a written notice stating the
particular acts or omission constituting the ground for dismissal. In case of abandonment of work,
the notice shall be served on the workers last known address.

"The notice required, xxx, actually consists of two parts to be separately served on the employee, to wit: (1) notice
to apprise the employee of the particular acts or omissions for which the dismissal is sought; and (2) subsequent
notice to inform him of the employers decision to dismiss him.

"This requirement is not a mere technicality but a requirement of due process to which every employee is
entitled to insure that the employers prerogative to dismiss or lay off is not abused or exercised in an
arbitrary manner. This rule is clear and unequivocal xxx." [20]

In other words, we have long adopted in our decisions the doctrine of private due process. This is as it ought to be. The 1987
Constitution guarantees the rights of workers, especially the right to security of tenure in a separate article - - - section 3 of Article
XIII entitled Social Justice and Human Rights. Thus, a 20-20 vision of the Constitution will show that the more specific rights of
labor are not in the Bill of Rights which is historically directed against government acts alone. Needless to state, the
constitutional rights of labor should be safeguarded against assaults from both government and private parties. The majority should
not reverse our settled rulings outlawing violations of due process by employers in just causes cases.

To prop up its new ruling against our employees, the majority relates the evolution of our law on dismissal starting from Article 302 of
the Spanish Code of Commerce, to the New Civil Code of 1950, to R.A. No. 1052 (Termination Pay Law), then to RA No. 1787. To
complete the picture, let me add that on May 1, 1974, the Labor Code (PD 442) was signed into law by former President Marcos. It
took effect on May 1, 1974 or six months after its promulgation. The right of the employer to terminate the employment was
embodied in Articles 283,[21] 284,[22] and 285.[23] Batas Pambansa Blg. 130 which was enacted on August 21, 1981 amended Articles
283 and 284, which today are cited as Arts. 282 and 283 of the Labor Code.[24]

On March 2, 1989, Republic Act No. 6715 was approved which amended, among others, Article 277 of the Labor Code. Presently,
Article 277 (b) reads:

"Art. 277. Miscellaneous provisions. (a) xxx.

"(b)......Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just or authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity to be heard and to defend himself with
the assistance of his representative if he so desires in accordance with company rules and
regulations promulgated pursuant to the guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer. x x x."

Previous to the amendment, Article 277 (b) read:

"Article 277. Miscellaneous provisions. (a) xxx.

"(b) With or without a collective agreement, no employer may shut down his establishment or
dismiss or terminate the employment of employees with at least one year of service during the last
two years, whether such service is continuous or broken, without prior written authority issued in
accordance with the rules and regulations as the Secretary may promulgate."

Rule XIV, Book V of the 1997 Omnibus Rules Implementing the Labor Code provides:

"Termination of Employment

"Sec. 1. Security of tenure and due process. No worker shall be dismissed except for a just or authorized cause
provided by law and after due process.

"Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating
the particular acts or omissions constituting the grounds for his dismissal. xxx

xxx

"Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in the notice of dismissal
within a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to
be heard and to defend himself with the assistance of his representative, if he so desires."

These laws, rules and regulations should be related to our decisions interpreting them. Let me therefore emphasize our rulings
holding that the pre-dismissal notice requirement is part of due process. In Batangas Laguna Tayabas Bus Co. vs. Court of
Appeals,[25] which was decided under the provisions of RA No. 1052 as amended by RA No. 1787, this Court ruled that "the failure
of the employer to give the [employee] the benefit of a hearing before he was dismissed constitute an infringement on his
constitutional right to due process of law and not to be denied the equal protection of the laws. xxx. Since the right of [an employee]
to his labor is in itself a property and that the labor agreement between him and [his employer] is the law between the parties, his
summary and arbitrary dismissal amounted to deprivation of his property without due process." Since then, we have consistently
held that before dismissing an employee for a just cause, he must be given notice and hearing by his private employer as a matter of
due process.

I respectfully submit that these rulings are more in accord with the need to protect the right of employees against illegal dismissals.
Indeed, our laws and our present Constitution are more protective of the rights and interests of employees than their American
counterpart. For one, to justify private due process, we need not look for the factors of "sufficient governmental involvement" as
American courts do. Article 1700 of our Civil Code explicitly provides:

"Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special
laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of
labor and similar subjects."

Nor do we have to strain on the distinction made by American courts between property and privilege and follow their ruling that due
process will not apply if what is affected is a mere privilege. It is our hoary ruling that labor is property within the contemplation of
the due process clause of the Constitution. Thus, in Philippine Movie Pictures Workers Association vs. Premiere Productions,
Inc.,[26] private respondent-employer filed with the Court of Industrial Relations (CIR) a petition seeking authority to lay off forty-four
of its employees. On the date of the hearing of the petition, at the request of the counsel of the private respondent, the judge of the CIR
conducted an ocular inspection in the premises of the employer. He interrogated fifteen laborers. On the basis of the ocular inspection,
the judge concluded that the petition for lay off was justified. We did not agree and we ruled that "the right of a person to his labor
is deemed to be property within the meaning of constitutional guarantees. That is his means of livelihood. He can not be deprived
of his labor or work without due process of law. xxx (T)here are certain cardinal primary rights which the Court of Industrial Relations
must respect in the trial of every labor case. One of them is the right to a hearing which includes the right of the party interested to
present his own case and to submit evidence in support thereof."

I wish also to stress that the 1999 Rules and Regulations implementing the Labor Code categorically characterize this pre-
dismissal notice requirement as a requirement of due process. Rule XXIII provides:

"Section 2. Standards of due process: requirements of notice. In all cases of termination of employment, the
following standards of due process shall be substantially observed:

I.......For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds
for termination, and giving to said employee reasonable opportunity within
which to explain his side;

(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond
to the charge, present his evidence or rebut the evidence presented against him;
and

(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstance, grounds have been established to
justify his termination.

In case of termination, the foregoing notices shall be served on the employees last known address.

II.......For termination of employment as based on authorized causes defined in Article 283 of the
Code, the requirements of due process shall be deemed complied with upon service of a written
notice to the employee and the appropriate Regional Office of the Department at least thirty (30)
days before the effectivity of the termination, specifying the ground or grounds for termination.

The new ruling of the majority is not in consonance with this Rule XXIII.

If we are really zealous of protecting the rights of labor as called for by the Constitution, we should guard against every violation of
their rights regardless of whether the government or a private party is the culprit. Section 3 of Article XIII of the Constitution requires
the State to give full protection to labor. We cannot be faithful to this duty if we give no protection to labor when the violator of its
rights happens to be private parties like private employers. A private person does not have a better right than the government to
violate an employees right to due process. To be sure, violation of the particular right of employees to security of tenure comes
almost always from their private employers. To suggest that we take mere geriatric steps when it comes to protecting the rights of
labor from infringement by private parties is farthest from the intent of the Constitution. We trivialize the right of the employee if
we adopt the rule allowing the employer to dismiss an employee without any prior hearing and say let him be heard later on.
To a dismissed employee that remedy is too little and too late. The new majority ruling is doubly to be regretted because it comes
at a time when deregulation and privatization are buzzwords in the world being globalized. In such a setting, the new gods will not be
governments but non-governmental corporations. The greater need of the day therefore is protection from illegal dismissals sans due
process by these non-governmental corporations.

The majority also holds that the "third reason why the notice requirement under Art. 283 is not a requirement of due process is that the
employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of
employment for a just cause under Art. 282." Again, with due respect, I beg to disagree. In an Article 283 situation, dismissal due to
an authorized cause, the employer is not called upon to act as an impartial judge. The employer is given the duty to serve a
written notice on the worker and the DOLE at least one month before the intended date of lay-off. It is the DOLE, an impartial agency
that will judge whether or not the employee is being laid off for an authorized caused. [27] It is not the employer who will adjudge
whether the alleged authorized cause for dismissing the employee is fact or fiction. On the other hand, in an Article 282 situation,
dismissal for a just cause, it is also incorrect to hold that an employer cannot be an impartial judge. Today, the procedure on
discipline and dismissal of employees is usually defined in the parties collective bargaining agreement or in its absence, on the rules
and regulations made by the employer himself. This procedure is carefully designed to be bias free for it is to the interest of both the
employee and the employer that only a guilty employee is disciplined or dismissed. Hence, where the charge against an employee is
serious, it is standard practice to include in the investigating committee an employee representative to assure the integrity of the
process. In addition, it is usual practice to give the aggrieved employee an appellate body to review an unfavorable decision. Stated
otherwise, the investigators are mandated to act impartially for to do otherwise can bring havoc less to the employee but more to the
employer. For one, if the integrity of the grievance procedure becomes suspect, the employees may shun it and instead resort to
coercive measures like picketing and strikes that can financially bleed employers. For another, a wrong, especially a biased judgment
can always be challenged in the DOLE and the courts and can result in awards of huge damages against the company. Indeed, the
majority ruling that an employer cannot act as an impartial judge has no empirical evidence to support itself. Statistics in the
DOLE will prove the many cases won by employees before the grievance committees manned by impartial judges of the
company.

Next, the majority holds that "the requirement to hear an employee before he is dismissed should be considered simply as an
application of the Justinian precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and
good faith toward ones fellowmen." It then rules that violation of this norm will render the employer liable for damages but will not
render his act of dismissal void. Again, I cannot join the majority stance. The faultline of this ruling lies in the refusal to recognize
that employer-employee relationship is governed by special labor laws and not by the Civil Code. The majority has disregarded
the precept that relations between capital and labor are impressed with public interest. For this reason, we have the Labor
Code that specially regulates the relationship between employer-employee including dismissals of employees. Thus, Article 279 of the
Labor Code specifically provides that "in cases of regular employment, the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement." This provision of the Labor Code clearly gives the remedies that an unjustly dismissed employee deserves. It is not
the Civil Code that is the source of his remedies.

The majority also holds that lack of notice in an Article 283 situation merely makes an employee dismissal "ineffectual" but not
illegal. Again, the ruling is sought to be justified by analogy and our attention is called to Article 1592, in relation to Article 1191 of
the Civil Code. It is contended that "under these provisions, while the power to rescind is implied in reciprocal obligations,
nonetheless, in cases involving the sale of immovable property, the vendor cannot rescind the contract even though the vendee
defaults in the payment of the price, except by bringing an action in court or giving notice of rescission by means of a notarial
demand." The analogy of the majority cannot be allowed both in law and in logic. The legal relationship of an employer to his
employee is not similar to that of a vendor and a vendee. An employee suffers from a distinct disadvantage in his relationship with
an employer, hence, the Constitution and our laws give him extra protection. In contrast, a vendor and a vendee in a sale of
immovable property are at economic par with each other. To consider an employer-employee relationship as similar to a sale of
commodity is an archaic abomination. An employer-employee relationship involves the common good and labor cannot be
treated as a mere commodity. As well-stated by former Governor General Leonard Wood in his inaugural message before the
6thPhilippine Legislature on October 27, 1922, "it is opportune that we strive to impress upon all the people that labor is neither a
chattel nor a commodity, but human and must be dealt with from the standpoint of human interests."

Next, the majority holds that under the Labor Code, only the absence of a just cause for the termination of employment can make the
dismissal of an employee illegal. Quoting Article 279 which provides:
 "Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement."

it is then rationalized that "to hold that the employers failure to give notice before dismissing an employee xxx results in the nullity of
the dismissal would, in effect, be to amend Article 279 by adding another ground, for considering a dismissal illegal." With due
respect, the majority has misread Article 279. To start with, the article is entitled "Security of Tenure" and therefore protects an
employee against dismissal not only for an unjust cause but also for an unauthorized cause. Thus, the phrase "unjustly dismissed"
refers to employees who are dismissed without just cause and to employees who are laid off without any authorized cause. As
heretofore shown, we have interpreted dismissals without prior notice as illegal for violating the right to due process of the
employee. These rulings form part of the law of the land and Congress was aware of them when it enacted the Labor Code and
when its implementing rules and regulations were promulgated especially the rule ordering employers to follow due process
when dismissing employees. Needless to state, it is incorrect for the majority to urge that we are in effect amending Article 279.

In further explication of its ruling, the majority contends "what is more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in making his resignation void but only in making him liable for
damages." Article 285(a) states: "An employee may terminate without just cause the employee-employer relationship by serving a
written notice on the employer at least one (1) month in advance. The employer upon whom no such notice was served may hold the
employee liable for damages."

In effect, the majority view is that its new ruling puts at par both the employer and the employee - - - under Article 285, the failure of
an employee to pre-notify in writing his employer that he is terminating their relationship does not make his walk-out void; under its
new ruling, the failure of an employer to pre-notify an employee before his dismissal does not also render the dismissal void. By this
new ruling, the majority in a short stroke has rewritten the law on dismissal and tampered its pro-employee philosophy. Undoubtedly,
Article 285 favors the employee as it does not consider void his act of terminating his employment relationship before giving the
required notice. But this favor given to an employee just like the other favors in the Labor Code and the Constitution are
precisely designed to level the playing field between the employer and the employee. It cannot be gainsaid that employees are the
special subject of solicitous laws because they have been and they continue to be exploited by unscrupulous employers. Their
exploitation has resulted in labor warfare that has broken industrial peace and slowed down economic progress. In the exercise of their
wisdom, the founding fathers of our 1935, 1973 and 1987 Constitutions as well as the members our past and present Congresses, have
decided to give more legal protection and better legal treatment to our employees in their relationship with their employer.
Expressive of this policy is President Magsaysays call that "he who has less in life should have more in law." I respectfully submit that
the majority cannot revise our laws nor shun the social justice thrust of our Constitution in the guise of interpretation especially when
its result is to favor employers and disfavor employees. The majority talks of high nobility but the highest nobility it to stoop down to
reach the poor.

IV. NO UNJUST RESULTS OF CONSIDERING DISMISSALS

WITHOUT PRIOR NOTICE AS ILLEGAL

The majority further justifies its new ruling by holding:

"The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either
for an authorized or just cause can result in an injustice to the employer. For not having been given notice and
hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt against the life
of the employer, an employer will be forced to keep in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force." But so does it declare that it
"recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to
needed investment." The Constitution bids the State to "afford full protection to labor." But it is equally true that
"the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer."
And it is oppression to compel the employer to continue in employment one who is guilty or to force the employer
to remain in operation when it is not economically in his interest to do so."

With due respect, I cannot understand this total turnaround of the majority on the issue of the unjustness of lack of pre-dismissal
notice to an employee. Heretofore, we have always considered this lack of notice as unjust to the employee. Even under Article
302 of the Spanish Code of Commerce of 1882 as related by the majority, an employer who opts to dismiss an employee without any
notice has to pay a mesada equivalent to his salary for one month because of its unjustness. This policy was modified by our
legislators in favor of a more liberal treatment of labor as our country came under the influence of the United States whose major labor
laws became the matrix of our own laws like R.A. 875, otherwise known as the Industrial Peace Act. In accord with these laws, and as
aforediscussed, we laid down the case law that dismissals without prior notice offend due process. This is the case law when the Labor
Code was enacted on May 1, 1974 and until now despite its amendments. The 1935 and the 1973 Constitutions did not change this
case law. So with the 1987 Constitution which even strengthened the rights of employees, especially their right to security of tenure.
Mr. Justice Laurel in his usual inimitable prose expressed this shift in social policy in favor of employees as follows:

"It should be observed at the outset that our Constitution was adopted in the midst of surging unrest and
dissatisfaction resulting from economic and social distress which was threatening the stability of governments the
world over. Alive to the social and economic forces at work, the framers of our Constitution boldly met the
problems and difficulties which faced them and endeavored to crystallize, with more or less fidelity, the political,
social and economic propositions of their age, and this they did, with the consciousness that the political and
philosophical aphorism of their generation will, in the language of a great jurist, `be doubted by the next and perhaps
entirely discarded by the third. (Chief Justice Winslow in Gorgnis v. Falk Co., 147 Wis., 327; 133 N. W.,
209). Embodying the spirit of the present epoch, general provisions were inserted in the Constitution which
are intended to bring about the needed social and economic equilibrium between component elements of
society through the application of what may be termed as the justitia communis advocated by Grotius and
Leibnitz many years ago to be secured through the counter-balancing of economic and social forces and
employers or landlords, and employees or tenants, respectively; and by prescribing penalties for the violation of the
orders and later, Commonwealth Act No. 213, entitled `An Act to define and regulate legitimate labor
organizations."[28]

This ingrained social philosophy favoring employees has now been weakened by the new ruling of the majority. For while this
Court has always considered lack of pre-dismissal notice as unjust to employees, the new ruling of the majority now declares it is
unjust to employers as if employers are the ones exploited by employees. In truth, there is nothing unjust to employers by requiring
them to give notice to their employees before denying them their jobs. There is nothing unjust to the duty to give notice for the duty is
a reasonable duty. If the duty is reasonable, then it is also reasonable to demand its compliance before the right to dismiss on the part
of an employer can be exercised. If it is reasonable for an employer to comply with the duty, then it can never be unjust if non-
compliance therewith is penalized by denying said employer his right to dismiss. In fine, if the employers right to dismiss an employee
is forfeited for his failure to comply with this simple, reasonable duty to pre-notify his employee, he has nothing to blame but himself.
If the employer is estopped from litigating the issue of whether or not he is dismissing his employee for a just or an authorized cause,
he brought the consequence on to himself. The new ruling of the majority, however, inexplicably considers this consequence as unjust
to the employer and it merely winks at his failure to give notice.

V. A LAST WORD

The new ruling of the majority erodes the sanctity of the most important right of an employee, his constitutional right to security of
tenure. This right will never be respected by the employer if we merely honor the right with a price tag. The policy of "dismiss now
and pay later" favors monied employers and is a mockery of the right of employees to social justice. There is no way to justify
this pro-employer stance when the 1987 Constitution is undeniably more pro-employee than our previous fundamental laws.
Section 18 of Article II (State Policies) provides that "the State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare." Section 1, Article XIII (Social Justice and Human Rights) calls for the reduction of
economic inequalities.Section 3, Article XIII (Labor) directs the State to accord full protection to labor and to guaranty security
of tenure. These are constitutional polestars and not mere works of cosmetology. Our odes to the poor will be meaningless
mouthfuls if we cannot protect the employees right to due process against the power of the peso of employers.

To an employee, a job is everything. Its loss involves terrible repercussions - - - stoppage of the schooling of children, ejectment from
leased premises, hunger to the family, a life without any safety net. Indeed, to many employees, dismissal is their lethal injection.
Mere payment of money by way of separation pay and backwages will not secure food on the mouths of employees who do not even
have the right to choose what they will chew.

I vote to grant the petition.

 EN BANC

JENNY M. AGABON and G.R. No. 158693

VIRGILIO C. AGABON,
Petitioners, Present:

Davide, Jr., C.J.,

Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
- versus - Carpio,
Austria-Martinez,
Corona,
Carpio-Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario, and
Garcia, JJ.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC), RIVIERA
HOME IMPROVEMENTS, INC. Promulgated:
and VICENTE ANGELES,
Respondents. November 17, 2004
x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision[1] of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017,
modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction
materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2,
1992[2] until February 23, 1999 when they were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims [3] and on December 28, 1999, the Labor
Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary claims. The dispositive
portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent
is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of
hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years
1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabons 13th month pay
differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount
of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93)
Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY
 EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC,
Research and Computation Unit, NCR.

SO ORDERED.[4]

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not entitled
to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also denied for lack of evidence. [5]
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment
but ordered the payment of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it
dismissed petitioners money claims. Private respondents are ordered to pay petitioners holiday pay for four (4)
regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the
balance of petitioner Virgilio Agabons 13th month pay for 1998 in the amount of P2,150.00.

SO ORDERED.[6]

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed. [7]

Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless they
agreed to work on a pakyaw basis when they reported for duty on February 23, 1999. They did not agree on this arrangement because
it would mean losing benefits as Social Security System (SSS) members. Petitioners also claim that private respondent did not comply
with the twin requirements of notice and hearing. [8]

Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work. [9] In fact, private
respondent sent two letters to the last known addresses of the petitioners advising them to report for work. Private respondents
manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at
Pacific Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not report for work
because they had subcontracted to perform installation work for another company. Petitioners also demanded for an increase in their
wage to P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the illegal dismissal case. [10]
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even finality if the
findings are supported by substantial evidence. This is especially so when such findings were affirmed by the Court of
Appeals.[11] However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court
may delve into the records and examine for itself the questioned findings. [12]

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners dismissal was for a just cause.
They had abandoned their employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give the
employee the opportunity to be heard and to defend himself. [13] Article 282 of the Labor Code enumerates the just causes for
termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
the latters representative in connection with the employees work; (b) gross and habitual neglect by the employee of his duties; (c)
fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d)
commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his
duly authorized representative; and (e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.[14] It is a form of neglect of duty,
hence, a just cause for termination of employment by the employer. [15] For a valid finding of abandonment, these two factors should be
present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-
employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to discontinue the employment must be shown by clear proof
that it was deliberate and unjustified.[16]
In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company.
Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private
respondent. This was not the first time they did this. In January 1996, they did not report for work because they were working for
another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again. Petitioners
disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a
relevant consideration in determining the penalty that should be meted out to him. [17]

In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately absented from work without leave or permission from
his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job. We should apply that rule with
more reason here where petitioners were absent because they were already working in another company.
The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural
requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the
employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct [19] and loyalty.
The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to
his interests.[20]

After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were
observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the
Labor Code:

Standards of due process: requirements of notice. In all cases of termination of employment, the following
standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the
employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence
presented against him; and

(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employees last known address.

Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on
authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A termination for an
authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may
be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written
notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying
the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice
of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give
the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor
Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the
dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and
there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to
reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or
their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the
petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements
and instead argued that sending notices to the last known addresses would have been useless because they did not reside there
anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to
the employees last known address.[21] Thus, it should be held liable for non-compliance with the procedural requirements of due
process.
A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment
termination in the light of Serrano v. National Labor Relations Commission.[22]

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case
of Wenphil Corp. v. National Labor Relations Commission,[23] we reversed this long-standing rule and held that the dismissed
employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal was for
grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent temper and caused
trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding
backwages may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to
observe.[24] We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no
right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his
right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering the circumstances of
this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award
depends on the facts of each case and the gravity of the omission committed by the employer. [25]

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process
requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became
known as the Wenphil or Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the
employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the
termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is
judicially declared that the dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving
dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice
requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the
time the Court finds the dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to dismiss now and pay later by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code which
states:

ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law.
Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the
doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral principles
so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our
entire history. Due process is that which comports with the deepest notions of what is fair and right and just. [26] It is a constitutional
restraint on the legislative as well as on the executive and judicial powers of the government provided by the Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and
authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due
process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code
of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10. [27] Breaches of these due
process requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply
with constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or
administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees from
being unjustly terminated without just cause after notice and hearing.

In Sebuguero v. National Labor Relations Commission,[28] the dismissal was for a just and valid cause but the employee was
not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the
nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the
employer.

In Nath v. National Labor Relations Commission,[29] it was ruled that even if the employee was not given due process, the
failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause, albeit without due process, did not
entitle the employee to reinstatement, backwages, damages and attorneys fees.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations
Commission,[30] which opinion he reiterated in Serrano, stated:

C. Where there is just cause for dismissal but due process has not been properly observed by an employer,
it would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to
him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment of
separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally
constitute the two-part due process requirement of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would be
no more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa
loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x. [31]

After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that
in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to
abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the
employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a
fair result by dispensing justice not just to employees, but to employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due
process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due
process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates
the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has
become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a
month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment
in the local economy.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The
commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this
case.[32] Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and
whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither
oppression nor self-destruction of the employer.[33]

It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the requirements of
due process were complied with, would undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the
Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminent Justice Jose P. Laurel
observed, social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society
and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic
life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons,
and of bringing about the greatest good to the greatest number.[34]

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is
not based on rigid formulas set in stone. It has to allow for changing times and circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and dispense
justice with an even hand in every case:

We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he be a
millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the
balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it
justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich,
for justice must always be served for the poor and the rich alike, according to the mandate of the law. [35]

Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would
automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As
interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the
dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory
rights, as ruled in Reta v. National Labor Relations Commission.[36] The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of dismiss now, pay later, which we sought to deter in the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process
violation of the employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.[37]

As enunciated by this Court in Viernes v. National Labor Relations Commissions,[38] an employer is liable to pay indemnity in the
form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with
the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was
equivalent to the employees one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize
the employees right to statutory due process which was violated by the employer. [39]

The violation of the petitioners right to statutory due process by the private respondent warrants the payment of indemnity in the form
of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances.[40] Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We
believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees.
At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its
Implementing Rules.

Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners holiday pay, service incentive
leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners money claims. Private respondent is liable for petitioners holiday
pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment, the
general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason
for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that
overtime, differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but
in the custody and absolute control of the employer.[41]

In the case at bar, if private respondent indeed paid petitioners holiday pay and service incentive leave pay, it could have easily
presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did not, except with respect to
the 13th month pay wherein it presented cash vouchers showing payments of the benefit in the years disputed. [42] Allegations by private
respondent that it does not operate during holidays and that it allows its employees 10 days leave with pay, other than being self-
serving, do not constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for such
claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabons 13 th month pay, we find the same to be
unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in the form of the 13th month pay
to employees not already receiving the same[43] so as to further protect the level of real wages from the ravages of world-wide
inflation.[44] Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f) of the Labor
Code, to wit:

(f) Wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair
and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee

from which an employer is prohibited under Article 113 [45] of the same Code from making any deductions without the employees
knowledge and consent. In the instant case, private respondent failed to show that the deduction of the SSS loan and the value of the
shoes from petitioner Virgilio Agabons 13th month pay was authorized by the latter. The lack of authority to deduct is further bolstered
by the fact that petitioner Virgilio Agabon included the same as one of his money claims against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private respondent
to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive
leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabons thirteenth month pay for 1998 in the
amount of P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January 23, 2003, in
CA-G.R. SP No. 63017, finding that petitioners Jenny and Virgilio Agabon abandoned their work, and ordering private respondent to
pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive
leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabons thirteenth month pay for 1998 in the
amount of P2,150.00 is AFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc. is
further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory
due process.

No costs.

SO ORDERED.
 April 13, 2016

G.R. No. 195155

DIVINE WORD COLLEGE OF LAOAG, Petitioner,

vs.
SHIRLEY B. MINA, as heir-substitute of the late DELFIN A. MINA, Respondent.

DECISION

REYES, J.:

Assailed in this petition for review1 under Rule 45 of the Rules of Court is the Decision2 dated July 19, 2010 and Resolution3 dated
January 13, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 107749 declaring respondent Delfin A. Mina (Mina) to have been
constructively dismissed by petitioner Divine Word College of Laoag (DWCL) and awarding him backwages, damages and attorney's
fees.

Antecedent Facts

DWCL is a non-stock educational institution offering catholic education to the public. It is run by the Society of Divine Word (SVD),
a congregation of Catholic priests that maintains several other member educational institutions throughout the country.4

On July 1, 1969, the Society of Divine Word Educational Association (DWEA) established a Retirement Plan to provide retirement
benefits for qualified employees of DWEAs member institutions, offices and congregations. 5The DWEA Retirement Plan6 contains a
clause about the portability of benefits, to wit:

When a member who resigns or is separated from employment from one Participating Employer and who is employed by another
Participating Employer, the member will carry the credit he earned under his former Participating Employer to his new Employer and
the length of service in both will be taken into consideration in determining his total years of continuous service on the following
conditions:

a. The transfer is approved by both the Participating Employer whose service he is leaving and the new Participating
Employer;

b. The Retirement Board is notified of the transfer; and

c. The member is employed by another Participating Employer on the next working day after his resignation.7

Mina was first employed in 1971 as a high school teacher, and later on a high school principal, at the Academy of St. Joseph (ASJ), a
school run by the SVD. On June 1, 1979, he transferred to DWCL and was accorded a permanent status after a year of probationary
status.8 He was subsequently transferred in 2002 to DWCLs college department as an Associate Professor III. Thereafter, on June 1,
2003, Mina was assigned as the College Laboratory Custodian of the School of Nursing and was divested of his teaching load,
effective June 1, 2003 until May 31, 2004, subject to automatic termination and without need for any further notification. 9 He was the
only one among several teachers transferred to the college department who was divested of teaching load. 10

In early June 2004, Mina was offered early retirement by Professor Noreen dela Rosa, Officer-in-Charge of DWCLs School of
Nursing. He initially declined the offer because of his familys dependence on him for support. He later received a
Memorandum11 dated July 27, 2004 from the Office of the Dean enumerating specific acts of gross or habitual negligence,
insubordination, and reporting for work under the influence of alcohol. He answered the allegations against him; 12 sensing, however,
that it was

pointless to continue employment with DWCL, he requested that his retirement date be adjusted to September 2004 to enable him to
avail of the 25-year benefits. He also requested for the inclusion of his eight years of service in ASJ, to make his total years of service
to 33 years pursuant to the portability clause of the retirement plan, which was denied by DWCL. Instead, he was paid 275,513.10 as
retirement pay.13 It was made to appear that his services were terminated by reason of redundancy to avoid any tax implications. Mina
was also made to sign a deed of waiver and quitclaim14 stating that he no longer has any claim against DWCL with respect to any
matter arising from his employment in the school.15
On September 21, 2004, he filed a case for illegal dismissal and recovery of separation pay and other monetary claims. 16 Pending
resolution of his case, Mina passed away on June 18, 2005. 17

Ruling of the Labor Arbiter

On August 26, 2005, the Labor Arbiter (LA) rendered its Decision,18 ruling that the actuation of DWCL is not constitutive of
constructive dismissal. The LA ratiocinated, however, that the computation of Minas retirement pay based on redundancy is illegal;
hence, it was modified, and the number of years he worked for ASJ was added to the years he worked for DWCL thus making his
creditable number of years of service to 33 years. According to the LA, his length of service in both institutions will be taken into
consideration in determining his total years of continuous service since the DWEA Retirement Plan has a provision on portability,
which allows a member to carry the earned credit for his number of years of service from his former participating employer to his new
employer. Moreover, the LA held that there is no showing that Mina ceased to be a member of the plan when he left the ASJ as there
was not a day that he was separated from any school that is the member of the plan. The LAs computation of Minas retirement
benefits is as follows:

Monthly salary: P13,006.23

Date hired: June 1971

Years in service: 33 years

Birth day: 24 December 1950

Monthly pay/26.22 x 22.2 x 33 years x 100%

P13,006.23/26.23 x 22.2 [x] 33 years x 100% = P363,400.29

Less: Severance benefits received: = P275,513.10

Deficiency = P 87,887.1919

The LA disposed thus:

IN VIEW THEREOF, judgment is hereby rendered with the following dispositions:

1. Finding that [Mina] was underpaid in his retirement benefits pursuant to the DWEA Retirement Plan. Consequently,
[DWCL] must pay the deficiency in his retirement benefits in the amount of P87,887.19.

2. Finding that the respondents were harsh on him. Consequently, the DWCL must be adjudged to pay him P50,000 as moral
damages and P50,000 as exemplary damages.

3. That his claims for additional separation pay for his future services are denied.

4. [DWCL] must pay [Mina] 10% of the total award as attorneys fees for his having been forced to litigate to protect his
rights as an employee.

SO ORDERED.20

Both DWCL and Mina appealed to the National Labor Relations Commission (NLRC), with DWCL mainly questioning the LAs
decision making Minas creditable years of service 33 years, and awarding moral and exemplary damages. 21

Ruling of the NLRC

The NLRC ruled that Mina was constructively dismissed when he was appointed as College Laboratory Custodian and divested of his
teaching load without any justification.22 It also ruled that Mina was not deemed to have waived all his claims against DWCL as
quitclaims cannot bar employees from demanding benefits to which they are legally entitled.23 The NLRC, however, disregarded
Minas eight years of service in ASJ in the computation of his retirement pay because of his failure to show compliance with the
portability provision.24 The dispositive portion of the NLRC

Decision dated July 10, 2008 provided:

WHEREFORE, We grant in partly [sic] the appeals of both [Mina] and [DWCL]. The decision dated August 26, 200[5] is hereby
modified to delete the order adding the length of service rendered by [Mina] to the [ASJ] in the computation of the latters retirement
pay from the former. Accordingly, [DWCL] is held liable to pay [Mina] full backwages and separation pay, in lieu of
reinstatement and to his full compulsory retirement pay, less the amount already received by him representing his optional
retirement.

SO ORDERED.25 (Emphasis ours)

DWCL sought reconsideration of the NLRC decision but it was denied in a Resolution 26 dated November 28, 2008.

DWCL thus filed a petition for certiorari before the CA, seeking to reverse and set aside the NLRC decision and resolution. 27 DWCL
primarily asserted that the NLRC committed grave abuse of discretion in holding that Mina was constructively dismissed from work,
in holding DWCL liable for moral and exemplary damages, and in ordering the payment of separation pay as well as retirement pay
computed up to the age of 60.28

Ruling of the CA

On July 19, 2010, the CA rendered the assailed Decision, denying the petition but modifying the award. It sustained the NLRCs
ruling that Mina was indeed constructively dismissed from work. The CA also held that Mina is entitled to receive backwages, to be
computed from the time of hiring on June 1, 1979 until the time of his death on June 18, 2005, as he was constructively dismissed
from work, as follows:

Monthly Salary Php 13, 006.23

x 26 (1 June 1979 - 18 June 2005)

Backwages Php 338,161.9829

The dispositive portion of the CA decision provided:

WHEREFORE, the petition is DENIED, granting to [Mina] substituted by his heirs in addition to the full retirement benefits at
Php275,513.10, the following:

1. backwages in the amount of Php 338,161.98;

2. moral and exemplary damages at Php50,000.00; and

3. attorneys fees at ten percent (10%) of the amount due herein.

SO ORDERED.30

DWCLs motion for reconsideration was denied by the CA in its Resolution31 dated January 13, 2011.

Hence, the present petition, anchored on the following grounds:

I.

The Honorable [CA] erred in upholding [NLRCs] findings that [Mina] was constructively dismissed.

II.

The Honorable [CA] erred in holding [DWCL] liable for moral and exemplary damages and attorneys fees.
 III.

Even assuming, without admitting that [Mina] was constructively dismissed, the Honorable [CA] erred in ordering the payment of his
backwages "computed from the time of hiring, 1 June 1979 until the time of his death 18 June 2005."

IV.

Even assuming, without admitting, that [Mina] was constructively dismissed, the Honorable [CA] has no legal basis in awarding him
full retirement benefits since it invalidated Minas retirement for which the retirement benefits were given to him. 32

Ruling of the Court

In a petition for review on certiorari under Rule 45, only questions of law may be raised. The raison dtre is that the Court is not a
trier of facts.33 The rule, however, admits of certain exceptions, such as when the factual findings of the LA differ from those of the
NLRC, as in the instant case, which opens the door to a review by this Court. 34

The Constitution35 and the Labor Code36 mandate that employees be accorded security of tenure. The right of employees to security of
tenure, however, does not give the employees vested rights to their positions to the extent of depriving management of its prerogative
to change their assignments or to transfer them.37 In cases of transfer of an employee, the employer is charged with the burden of
proving that its conduct and action are for valid and legitimate grounds such as genuine business necessity and that the transfer is not
unreasonable, inconvenient or prejudicial to the employee. 38 If the employer cannot overcome this burden of proof, the employees
transfer shall be tantamount to unlawful constructive dismissal. 39

Constructive dismissal is a dismissal in disguise.40 There is cessation of work in constructive dismissal because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay and
other benefits."41 To be considered as such, an act must be a display of utter discrimination or insensibility on the part of the employer
so intense that it becomes unbearable for the employee to continue with his employment. 42 The law recognizes and resolves this
situation in favor of employees in order to protect their rights and interests from the coercive acts of the employer. 43

In this case, Minas transfer clearly amounted to a constructive dismissal. For almost 22 years, he was a high school teacher enjoying a
permanent status in DWCLs high school department. In 2002, he was appointed as an associate professor at the college department
but shortly thereafter, or on June 1, 2003, he was appointed as a college laboratory custodian, which is a clear relegation from his
previous position. Not only that. He was also divested of his teaching load. His appointment even became contractual in nature and
was subject to automatic termination after one year "without any further notification." 44 Aside from this, Mina was the only one
among the high school teachers transferred to the college department who was divested of teaching load. More importantly, DWCL
failed to show any reason for Minas transfer and that it was not unreasonable, inconvenient, or prejudicial to him. 45

Also, the CA correctly ruled that Minas appointment as laboratory custodian was a demotion. There is demotion when an employee
occupying a highly technical position requiring the use of ones mental faculty is transferred to another position, where the employee
performed mere mechanical work virtually a transfer from a position of dignity to a servile or menial job. The assessment whether
Minas transfer amounted to a demotion must be done in relation to his previous position, that is, from an associate college professor,
he was made a keeper and inventory-taker of laboratory materials. Clearly, Minas new duties as laboratory custodian were merely
perfunctory and a far cry from his previous teaching job, which involved the use of his mental faculties. And while there was no proof
adduced showing that his salaries and benefits were diminished, there was clearly a demotion in rank. As was stated in Blue Dairy
Corporation v. NLRC,46 "[i]t was virtually a transfer from a position of dignity to a servile or menial job." 47

Given the finding of constructive dismissal, Mina, therefore, is entitled to reinstatement without loss of seniority rights, and payment
of backwages computed from the time compensation was withheld up to the date of actual reinstatement. 48 The Court notes that aside
from full compulsory retirement pay, the NLRC awarded full backwages and separation pay, in lieu of reinstatement. 49 The CA,
however, computed the amount to be awarded as backwages from the time of Minas hiring on June 1, 1979 until the time of his death
on June 18, 2005, apparently interchanging backwages and separation pay.50 Aside from this, the CA omitted to include a separate
award of separation pay.

The Court has repeatedly stressed that the basis for the payment of backwages is different from that of the award of separation pay.
"The basis for computing separation pay is usually the length of the employees past service, while that for backwages is the actual
period when the employee was unlawfully prevented from working."51Thus, the Court explained in Bani Rural Bank, Inc. v. De
Guzman52 that:

[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is dismissed without just cause and without
due process is entitled to backwages and reinstatement or payment of separation pay in lieu thereof:
 xxxx

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no
longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages. 53 (Emphasis and underscoring deleted, and italics
ours)

Thus, the computation of Minas backwages should be from the time he was constructively dismissed on June 1, 2003.

Aside from the foregoing, the CA should have also awarded separation pay since reinstatement is no longer viable due to Minas death
in 2005. As stated before, the award of separation pay is distinct from the award of backwages. The award of separation pay is also
distinct from the grant of retirement benefits. These benefits are not mutually exclusive as "[r]etirement benefits are a form of reward
for an employees loyalty and service to an employer and are earned under existing laws, [Collective Bargaining Agreements],
employment contracts and company policies."54 Separation pay, on the other hand, is that amount which an employee receives at the
time of his severance from employment, designed to provide the employee with the wherewithal during the period that he is looking
for another employment.55 In the computation of separation pay, the Court stresses that it should not go beyond the date an
employee was deemed to have been actually separated from employment, or beyond the date when reinstatement was
rendered impossible.56 The period for the computation of separation pay Mina is entitled to shall therefore begin to run from June 1,
1979, when he was transferred to DWCL from ASJ, until his death on June 18, 2005, or for a period of 26 years.

The award of damages was also justified given the CA and NLRCs finding that DWCL acted in a manner wherein Mina was not
treated with utmost good faith. The intention of the school to erase him out of employment is too apparent. 57 The Court upholds the
CAs finding that when DWCLs act of unceremoniously demoting and giving Mina contractual employment for one year and citing
him for numerous violations of school regulations when he rejected the schools offer to voluntarily retire is constitutive of bad faith. 58

Lastly, the Court affirms the NLRCs findings that the eight years of service rendered by Mina in ASJ shall not be included in the
computation of his retirement benefits.1wphi1 No adequate proof is shown that he has complied with the portability clause of the
DWEA Retirement Plan. The employee has the burden of proof to show compliance with the requirements set forth in retirement
plans, being in the nature of privileges granted to employees. Failure to overcome the burden of proof would necessarily result in the
employees disqualification to receive the benefits.

WHEREFORE, the Decision dated July 19, 2010 and Resolution dated January 13, 2011 of the Court of Appeals in CA-G.R. SP No.
107749 are MODIFIED in that, in addition to the award of attorneys fees, and moral and exemplary damages, petitioner Divine
Word College of Laoag is ORDERED to pay Shirley B. Mina, as heir-substitute of the late Delfin Mina, the following:

(1) backwages, to be computed from June 1, 2003 until June 18, 2005, or 13,006.23 x 24 (months) = 312,149.52; and

(2) separation pay, to be computed from June 1, 1979 until June 18, 2005, or 13,006.23 x 26 (years) = 338,161.98.

The monetary awards granted shall earn legal interest at the rate of six percent (6%) per annum from the date of the finality of this
Decision until fully paid.

SO ORDERED.
 September 9, 2015

G.R. No. 202090

ICT MARKETING SERVICES, INC. (now known as SYKES MARKETING SERVICES, INC.), Petitioner,
vs.
MARIPHIL L. SALES, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails: 1) the Januruy 10, 2012 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No.
109860 nullifying and setting aside the February 16, 2009 3 and May 20, 20094 Resolutions of the National Labor Relations
Commission (NLRC) in NLRC LAC CN. 07-002404- 08(7)/(8) and reinstating with modification the April 30, 2008 Decision 5 of the
Labor Arbiter in NLRC-NCR Case No. 10-11004-07; and 2) the CA's May 28, 2012 Resolution6 denying petitioner's Motion for
Reconsideration7 of the herein Assailed Decision.

Factual Antecedents

Petitioner ICT Marketing Services, Inc. (ICT) now known as Sykes Marketing Services, Inc. is a duly registered domestic
corporation engaged in the business of providing outsourced customer relations management and business process outsourcing
solutions to various clients in government and in the financial services, insurance, telecommunications, health care, information
technology, media, energy, and hospitality industries.

On February 22, 2006, petitioner hired respondent Mariphil L. Sales as its Customer Service Representative (CSR) or Telephone
Service Representative (TSR), and assigned her to its Capital One account. On August 21, 2006, respondent became a regular
employee, and her monthly base salary was increased to P16,350.00 and she was given monthly transportation and meal allowances.

On February 21, 2007, respondent was assigned to the Washington Mutual account, where she was awarded with a certificate for
being the "Top Converter/Seller (Second Place)" for the month of April 2007. 8

On July 3, 2007, respondent wrote to Glen Odom (Odom) petitioners Vice President complaining about supposed irregularities in
the handling of funds entrusted to petitioner by Washington Mutual which were intended for distribution to outstanding Washington
Mutual CSRs and TSRs as prizes and incentives. However, no action appears to have been taken on her complaint.

Respondent was then transferred to the Bank of America account on July 30, 2007. Without prior notice to respondent, petitioner
scheduled her for training from July 30 to August 6, 2007 on the very same day of her transfer. On the third day of training (August
1), respondent was unable to attend. When she reported for training the next day, respondent was informed that she could not be
certified to handle calls for Bank of America due to her failure to complete the training. From then on, respondent was placed on
"floating status" and was not given any work assignment.

In a September 28, 2007 letter9 to petitioners Human Resource (HR) Manager, respondent tendered her resignation from work,
effective upon receipt of the letter. Respondent wrote:

I was forced to resign due to the reason that my employment was made on "floating status" effective August 4, 2007 and up to present
(almost two months)

I havent receive [sic] any notice from you or the HR department to report for work despite my repeated follow-up [with] your office
thru telephone and mobile phone text messages. Hence, I consider your inaction to my follow-up as an indirect termination of my
work with ICT.

The reason I was placed [on] floating status is that, I was absent during the third day of my training with Bank of America, the account
to which I was transferred from Washington Mutual (WaMu). However, my absence during such period was justified by the fact that I
was sick and I need [sic] to undergo a medical check-up on that date.

Furthermore, I see my transfer from WaMu Account to Bank of America and the continued floating status of my work was prompted
by the fact that I lodged a complaint against managers/supervisors assigned in WaMu account regarding irregularities in the handling
of funds given by ICT clients which were supposed to be distributed as prizes to TSRs assigned with WaMu. After the filing of the
said complaint, through your office, I was transferred to another account (Bank of America) for no apparent reason. I was not even
included in the original list of those who were supposed to be transferred because my performance record with WaMu is satisfactory
as proven by the fact that I was even awarded with a certificate as "top converter (seller)" for the month of April and was supposed to
be included again in the top three highest converter[s] for the month of May, but unfortunately irregularities were committed, that is
why I filed the aforementioned complaint [with] your office.

On August 1, 2007, a few days after my transfer [to] Bank of America, my coach, angelo [sic], informed me that I will be having a
training on that same day with Bank of America which is really unexpected. I was not given a notice in advance about the training. My
coach informed me only three hours before the said training. Later on during my training with Bank of America I was [placed on
floating status] indefinitely due to a single absence even though I am a regular employee having worked in ICT for almost two years.
Another instance [of] discrimination [sic] and bad faith on the part of ICT management is that, all my fellow agents who were [placed
on floating status] for the same reason were all ordered to return to work except me [sic]. Moreover, ICT is continuously hiring TSRs
which only shows that there are still accounts open or work available in ICT. However despite the availability of work, I was still on
floating status.

Based on the aforementioned facts and circumstance[s], it is very clear that the harassment, pressure, and indefinite floating of my
employment with ICT are retaliatory acts perpetrated by the company because of my complaint/ request for investigation on the
irregularities being committed by certain company officials.

Thus, I can no longer bear the above-mentioned abuses and discrimination committed against me by ICT management. Therefore, I
have no option but to sever my relationship with the company, as my continued floating status had already prejudiced me emotionally
and financially.10

Ruling of the Labor Arbiter

On October 2, 2007, respondent filed a complaint for constructive dismissal against petitioner and Odom before the NLRC NCR,
Quezon City, docketed as NLRC-NCR Case No. 10-11004-07.

In her Position Paper,11 Reply,12 Rejoinder,13 and Surrejoinder,14 respondent claimed that for complaining about the supposed
irregularities in the Washington Mutual account, petitioner discriminated against her and unduly punished her. Although she was not
included in the original list of CSRs/TSRs for program transfer, she was transferred to another account, and then placed on "floating
status," which is tantamount to suspending her indefinitely without due process, despite her satisfactory performance. Respondent
averred that petitioners claim of multiple absences is not true, because not once was she penalized therefor, assuming such charge is
true. Respondent also alleged that her one-day absence during the training for the Bank of America program cannot justify her being
placed on a "floating status" because the "no-absence during training" requirement cited by petitioner using her employment
contract15 and the "New Hire Training Bay"16 as bases applies only to new hires on probationary status, and not to regularized
employees. In any case, the "New Hire Training Bay" used by petitioner was for the Capital One program. She also pointed out that
during her indefinite suspension or "floating status," petitioner continued to hire new CSRs, as shown by its newspaper advertisements
during the period.17Finally, she asserted that her resignation was not voluntary, but was forced upon her by petitioner as a result of its
unlawful acts. Thus, respondent prayed for the recovery of backwages, separation pay, P100,000.00 combined moral and exemplary
damages, and attorneys fees equivalent to 10 per cent (10%) of the total award.

In its Position Paper,18 Reply,19 Rejoinder,20 and Surrejoinder,21 petitioner prayed for the dismissal of the complaint, arguing that
respondent was transferred from the Washington Mutual account as an exercise of management initiative or prerogative, and due to
infractions22 committed by her, as well as attendance and punctuality issues that arose. It claimed that respondent could not be
certified for the Bank of America account for failing to complete the training. It maintained that respondent was placed on standby
status only, and not suspended or constructively dismissed. In fact, she was directed to report to its HR department, but she did not do
so. It also insisted that respondent resigned voluntarily. It denied committing any act of discrimination or any other act which rendered
respondents employment impossible, unreasonable or unlikely. Finally, it claimed that prior notice of her transfer to the Bank of
America account was made through an electronic mail message sent to her; and that respondent has no cause of action since she
resigned voluntarily, and thus could not have been illegally dismissed.

On April 30, 2008, the Labor Arbiter rendered a Decision23 finding complainant to have been constructively dismissed and awarding
separation pay, moral and exemplary damages, and attorneys fees to respondent. The Labor Arbiter held:

x x x Complainant was indeed constructively dismissed from her employment and she quitted [sic] because her continued employment
thereat is rendered impossible, unreasonable or unlikely.

Complainants resignation was sparked by her transfer of assignment and eventual placing her [sic] by the respondent company of
[sic] a "on floating" status.
x x x [T]here was no x x x evidence x x x that complainants transfer was due to the request of a client. Further, if complainant was
indeed remised of [sic] her duties due to her punctuality and attendance problem of committing twelve (12) absences alone incurred in
July 2007 [sic], why was there no disciplinary action taken against her like reprimand or warning[?]

xxxx

And its effect, complainant is entitled to her claim of separation pay, moral and exemplary damages of P50,000.00 pesos [sic]
including an award of attorneys fees.

WHEREFORE, premises considered, judgment is rendered ordering the respondents to pay complainant of [sic] one month pay per
year of service as separation pay in the total amount of P32,700.00, P50,000.00 moral and exemplary damages plus 10% of the award
as attorneys fees, hereunder computed:

I Separation Pay

2/21/06 8/4/07 = 2 yrs.

P16,350.00 x 2 yrs. = P32,700.00

II Damages P50,000.00

P82,700.00

P8,270.00

10% Attorneys Fees

P90,970.00

SO ORDERED.24

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC arguing that the Labor Arbiter erred in ruling that respondent was constructively dismissed. It
also argued that Odom was not personally liable as he was merely acting in good faith and within his authority as corporate officer.

Respondent likewise interposed an appeal25 arguing that the award of backwages should be computed from the date of her dismissal
until finality of the Labor Arbiters Decision; and that the proportionate share of her 13th month pay should be paid to her as well.

On February 16, 2009, the NLRC issued a Resolution, 26 declaring as follows:

We reverse.

Upon an examination of the pleadings on file, We find that in the past the complainant had been transferred from one program to
another without any objection on her part. Insofar as the instant case is concerned, it appears that the complainant, aside from having
been given a warning for wrong disposition of a call, had been absent or usually late in reporting for work, constraining the respondent
ICT to transfer her to another program/account. Required of the complainant was for her to undergo Product Training for the program
from July 30 to August 6, 2007, and the records indicate that she attended only two (2) days of training on July 30 and 31, 2007, did
not report on August 1, 2007 and again reported for training on August 2, 2007. It was then that ICTs Operations Subject Matter
Expert, Ms. Suzette Lualhati, informed the complainant that she cannot be certified for the program because she failed to complete the
number of training days, and there was a need for her to report to Human Resources for further instructions. As the complainant did
not report to Human Resources, and due to her derogatory record, the respondent company could not find another program where the
complainant could be transferred.

From what has been narrated above, We come to the conclusion that the respondent company cannot be faulted for placing the
complainant on "floating status." And there does not appear to be any ill will or bad faith that can be attributed to the respondent.
Finally, it is well to emphasize that the complainant tendered her resignation on October 1, 2007. There is no evidence that the
complainant has presented that would indicate that duress or force has been exerted on her.

All told, We are of the opinion that the findings of the Labor Arbiter are in stark contrast to the evidence on record.

WHEREFORE, in view of the foregoing, the decision appealed from is hereby reversed and set aside. Addordingly [sic], a new one is
entered dismissing the complaint for lack of merit.

SO ORDERED.27

Respondent filed a Motion for Reconsideration,28 but in a May 20, 2009 Resolution,29 the motion was denied.

Ruling of the Court of Appeals

In a Petition for Certiorari30 filed with the CA and docketed as CA-G.R. SP No. 109860, respondent sought a reversal of the February
16, 2009 and May 20, 2009 Resolutions of the NLRC.

Petitioner filed its Comment,31 to which respondent interposed a Reply.32

On January 10, 2012, the CA issued the assailed Decision containing the following pronouncement:

This Court finds the petition meritorious.

While it is true that management has the prerogative to transfer employees, the exercise of such right should not be motivated by
discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause. When the transfer is
unreasonable, unlikely, inconvenient, impossible, or prejudicial to the employee, it already amounts to constructive dismissal. In
constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are for just and valid
grounds, such as genuine business necessity. Should the employer fail to overcome this burden of proof, the employees transfer shall
be tantamount to unlawful constructive dismissal.

In the case at bench, private respondent corporation failed to discharge this burden of proof considering the circumstances surrounding
the petitioners July 2007 transfer to another account. Prior to her reassignment, petitioners annual performance merited increase in
her salary effective February 2007 and was also awarded a certificate of achievement for performing well in April 2007. Her transfer
was also abrupt as there was no written transfer agreement informing her of the same and its requirements unlike her previous transfer
from Capital One to Washington Mutual account. It is therefore difficult to see the reasonableness, urgency, or genuine business
necessity to transfer petitioner to a new account. While it may be true that petitioner has attendance and punctuality issues, her over-all
performance as a CSR/TSR cannot be said to be below par given the annual merit increase and the certificate of achievement awarded
to her. If indeed, private respondent corporation had trouble transferring the petitioner to another post because of her derogatory
record, the corporation could just have dismissed her for cause.

After petitioners unjustified transfer, she was informed by private respondent corporation that she could not be "certified" or allowed
to handle calls for the new account because of her absence during training. She was later placed on a floating status and was not given
another post.

The Court considers placing the petitioner on a floating status as another unjustified action of the private respondent corporation
prejudicial to petitioner as employee. In this case, except for private respondent corporations bare assertion that petitioner no longer
reported to the human resources department as instructed, no proof was offered to prove that petitioner intended to sever the
employer-employee relationship. Private respondent corporation also offered no credible explanation why it failed to provide a new
assignment to petitioner. Its assertion that it is petitioners derogatory record which made it difficult for the corporation to transfer her
to another account despite its efforts is not sufficient to discharge the burden of proving that there are no posts or no accounts
available or willing to accept her.

In Nationwide Security and Allied Services, Inc. vs. Valderama, 33 the Supreme Court declared that due to the grim economic
consequences to the employee of being placed on a floating status, the employer should bear the burden of proving that there are no
posts available to which the employee temporarily out of work can be assigned.

These acts by the private respondent corporation, of transferring petitioner to another account without sufficient cause and proper
notice and its subsequent failure to provide a new post for her for two months without credible explanation, constitute unjustified
actions prejudicial to the petitioner as an employee, making it unbearable for her to continue employment.
Thus, petitioner opted to resign, albeit involuntarily. The involuntariness of her resignation is evident in her letter which states
categorically:

"I was forced to resign due to the reason that my employment was made on floating status effective August 4, 2007 and up to the
present (almost two months) I havent receive [sic] any notice from you or the HR department to report for work despite my repeated
follow-up to your office thru telephone and mobile phone text messages.1avvphi1 Hence, I consider your inaction to my follow-up as
an indirect termination of my work with ICT."

Further, petitioner immediately filed a complaint for illegal dismissal. Resignation, it has been held, is inconsistent with the filing of a
complaint. Thus, private respondent corporations mere assertion that petitioner voluntarily resigned without offering convincing
evidence to prove it, is not sufficient to discharge the burden of proving such assertion. It is worthy to note that the fact of filing a
resignation letter alone does not shift the burden of proof and it is still incumbent upon the employer to prove that the employee
voluntarily resigned.

Therefore, we believe and so hold that petitioner was constructively dismissed from employment. Constructive dismissal exists when
the resignation on the part of the employee was involuntary due to the harsh, hostile and unfavorable conditions set by the employer.
The test for constructive dismissal is whether a reasonable person in the employees position would feel compelled to give up his
employment under the prevailing circumstances. With the decision of the private respondent corporation to transfer and to thereafter
placed [sic] her on floating status, petitioner felt that she was being discriminated and this perception compelled her to resign. It is
clear from her resignation letter that petitioner felt oppressed by the situation created by the private respondent corporation, and this
forced her to surrender her position.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

As petitioner did not pray for reinstatement but only sought payment of money claims, the labor arbiter is correct in awarding
separation pay equivalent to one month pay for every year of service. We also do not find any cogent reason to disturb the award of
damages and attorneys fees since we have found bad faith on the part of the private respondent corporation to abruptly [sic] transfer
and place the petitioner on floating status. Individual respondent Glen Odom is however, exonerated from any liability as there was no
clear finding that he acted with malice or bad faith. Backwages and other monetary benefits must also be included in compliance with
the above-mentioned provision of labor law which shall be reckoned from the time her constructive dismissal took effect until the
finality of this decision.

WHEREFORE, premises considered, the Resolutions dated February 16, 2009 and May 20, 2009 respectively, issued by the public
respondent National Labor Relations Commission (NLRC) in NLRC CA No. 07-002404-08 are REVERSED and SET ASIDE. The
decision of the Labor Arbiter dated April 30, 2008 is REINSTATED with MODIFICATION that the petitioner Mariphil L. Sales, be
awarded backwages and other monetary benefits from the date of her constructive dismissal up to the finality of this Decision.

SO ORDERED.34

Petitioner filed a Motion for Reconsideration, but the same was denied in a May 28, 2012 Resolution. Hence, the present Petition.

In a November 11, 2013 Resolution,35 this Court resolved to give due course to the Petition.

Issues

Petitioner submits that

A.

THE COURT OF APPEALS ERRED WHEN IT HELD THAT RESPONDENTS TRANSFER WAS UNJUSTIFIED
NOTWITHSTANDING EVIDENCE TO SHOW THAT RESPONDENT WAS NOT DEMOTED AND WAS EVEN GIVEN THE
SAME RANK AND PAY.

B.
THE COURT OF APPEALS ERRED WHEN IT HELD THAT RESPONDENTS PLACEMENT UNDER FLOATING STATUS
WAS TANTAMOUNT TO CONSTRUCTIVE DISMISSAL AS THIS IS CONTRARY TO NUMEROUS DECISIONS OF THE
HONORABLE COURT.

C.

THE COURT OF APPEALS ERRED WHEN IT REINSTATED LABOR ARBITER MACAMS DECISION DATED 30 APRIL
2008 WHICH DECLARED THAT RESPONDENT WAS CONSTRUCTIVELY DISMISSED, NOTWITHSTANDING EVIDENCE
THAT CLEARLY SHOWS THAT RESPONDENT VOLUNTARILY RESIGNED.

D.

THE COURT OF APPEALS ERRED IN AWARDING RESPONDENT SEPARATION PAY, BACKWAGES, MORAL AND
EXEMPLARY DAMAGES AND ATTORNEYS FEES.36

Petitioners Arguments

Praying that the assailed CA dispositions be set aside and that the NLRCs February 16, 2009 and May 20, 2009 Resolutions be
reinstated instead, petitioner maintains in the Petition and Reply37 that respondents transfer to another account was done as a valid
exercise of management prerogative, which allows it to regulate all aspects of employment. Her transfer was done in good faith, and
without diminution in rank and salary. It contends that respondent knew very well that any CSR/TSR may be transferred to another
program/account anytime for business reasons; in fact, respondent herself was transferred from Capital One to Washington Mutual,
and she did not complain. Moreover, she knew as well that "schedule adherence" or attendance/punctuality is one of the "metrics" or
standards by which the performance of a CSR is measured, and that she failed to comply in this regard. It claims that the decision to
place her on "floating status" instead of dismissing her was an accommodation and should not be treated as an illegal or unjustified
act; that being on "floating status" is not tantamount to constructive dismissal, and the failure to place or transfer respondent to another
account was due to her derogatory record, and not petitioners bad faith or inaction. It insists that the placing of an employee on
"floating status" for up to six months is allowed in the event of a bona fide suspension of the operations or undertaking of a
business.38 In any event, respondents voluntary resignation prior to the expiration of the allowable six-month "floating status" period
cannot constitute constructive dismissal, and her immediate filing of the labor case thereafter is thus premature. Finally, petitioner
posits that since there is no illegal dismissal but rather a voluntary relinquishment of respondents post, then there is no basis for the
pecuniary awards in her favor.

Respondents Arguments

In her Comment39 praying for dismissal of the Petition and the corresponding affirmance of the assailed dispositions, respondent
insists that she was illegally dismissed. She reiterates that her transfer to the Bank of America account was an undue penalty for her
complaining about supposed anomalies in the Washington Mutual account. She avers that the documentary evidence of her supposed
unauthorized absences were manufactured to support petitioners false allegations and mislead this Court into believing that she was
delinquent at work.

She argues that assuming that these absences were true, then they should have merited her dismissal for cause yet the fact is she was
not dismissed nor punished for these supposed absences. She asserts that petitioners claim that she was transferred on the
recommendation of a client is untrue and self-serving, and is unjustified since the client has no authority to order or recommend her
transfer. She maintains that her being placed on "floating status" was illegal, since a) there is no evidence to prove her alleged
"attendance and punctuality issues," and b) there was no bona fide suspension of petitioners business or undertaking for a period not
exceeding six months, as prescribed under Article 286 of the Labor Code, 40 which would justify the suspension of her employment for
up to six months. As enunciated in the Philippine Industrial Security Agency Corp. v. Dapiton41case which petitioner itself cited,
Article 286 applies only when there is a bona fide suspension of the employers operation or undertaking for a period not exceeding
six months, due to dire exigencies of the business that compel the employer to suspend the employment of its workers. Respondent
points out that petitioner continued with its business, and worse, it in fact continued to hire new CSRs/TSRs during the period of
respondents suspension from work. In fine, respondent alleges that she was constructively dismissed and forced to resign, rather than
continue to subject herself to petitioners discrimination, insensibility, harassment, and disdain; and that for such illegal acts, she is
entitled to indemnity from petitioner.

Our Ruling

The Court denies the Petition.

Respondents Transfer
Under the doctrine of management prerogative, every employer has the inherent right to regulate, according to his own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and manner of work,
work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees. The only limitations to
the exercise of this prerogative are those imposed by labor laws and the principles of equity and substantial justice.

While the law imposes many obligations upon the employer, nonetheless, it also protects the employers right to expect from its
employees not only good performance, adequate work, and diligence, but also good conduct and loyalty. In fact, the Labor Code does
not excuse employees from complying with valid company policies and reasonable regulations for their governance and guidance.

Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a movement from one
position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to another
of equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign an employee for legitimate business
purposes; (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment
or is a demotion without sufficient cause; (d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or
prejudicial to the employee.42

While the prerogative to transfer respondent to another account belonged to petitioner, it wielded the same unfairly. The evidence
suggests that at the time respondent was transferred from the Washington Mutual account to the Bank of America program, petitioner
was hiring additional CSRs/TSRs.43 This simply means that if it was then hiring new CSRs/TSRs, then there should be no need to
transfer respondent to the Bank of America program; it could simply train new hires for that program. Transferring respondent an
experienced employee who was already familiar with the Washington Mutual account, and who even proved to be outstanding in
handling the same to another account means additional expenses for petitioner: it would have to train respondent for the Bank of
America account, and train a new hire to take her place in the Washington Mutual account. This does not make sense; quite the
contrary, it is impractical and entails more expense on petitioners part. If respondent already knew her work at the Washington
Mutual account very well, then it is contrary to experience and logic to transfer her to another account which she is not familiar with,
there to start from scratch; this could have been properly relegated to a new hire.

There can be no truth to petitioners claim either that respondents transfer was made upon request of the client. If she was performing
outstanding work and bringing in good business for the client, there is no reason indeed it is beyond experience and logic to
conclude that the client would seek her transfer. Such a claim could only be fabricated. Truly, Experience which is the life of the law
as well as logic and common sense militates against the petitioners cause.44

Moreover, as the appellate court correctly observed, even if respondent had attendance and punctuality issues, her overall performance
as a CSR/TSR was certainly far from mediocre; on the contrary, she proved to be a top performer. And if it were true that respondent
suddenly became lax by way of attendance in July 2007, it is not entirely her fault. This may be attributed to petitioners failure to
properly address her grievances relative to the supposed irregularities in the handling of funds entrusted to petitioner by Washington
Mutual which were intended for distribution to outstanding Washington Mutual CSRs and TSRs as prizes and incentives. She wrote
petitioner about her complaint on July 3, 2007; however, no explanation was forthcoming from petitioner, and it was only during these
proceedings or after a case had already been filed that petitioner belatedly and for no other useful purpose attempted to address her
concerns. This may have caused a bit of disillusionment on the part of respondent, which led her to miss work for a few days in July
2007. Her grievance should have been addressed by petitioner; after all, they were serious accusations, and have a bearing on the
CSRs/TSRs overall performance in the Washington Mutual account.

Respondents work as a CSR which is essentially that of a call center agent is not easy. For one, she was made to work the
graveyard shift that is, from late at night or midnight until dawn or early morning. This certainly takes a toll on anyones physical
health. Indeed, call center agents are subjected to conditions that adversely affect their physical, mental and emotional health; exposed
to extreme stress and pressure at work by having to address the customers needs and insure their satisfaction, while simultaneously
being conscious of the need to insure efficiency at work by improving productivity and a high level of service; subjected to excessive
control and strict surveillance by management; exposed to verbal abuse from customers; suffer social alienation precisely because they
work the graveyard shift while family and friends are at rest, they are working, and when they are at rest, family and friends are up
and about; and they work at a quick-paced environment and under difficult circumstances owing to progressive demands and
ambitious quotas/targets set by management. To top it all, they are not exactly well-paid for the work they have to do and the
conditions they have to endure. Respondents written query about the prizes and incentives is not exactly baseless and frivolous; the
least petitioner could have done was to timely address it, if it cared about its employees welfare. By failing to address respondents
concerns, petitioner exhibited an indifference and lack of concern for its employees qualities that are diametrically antithetical to the
spirit of the labor laws, which aim to protect the welfare of the workingman and foster harmonious relations between capital and labor.
By its actions, petitioner betrayed the manner it treats its employees.

Thus, the only conceivable reason why petitioner transferred respondent to another account is the fact that she openly and bravely
complained about the supposed anomalies in the Washington Mutual account; it is not her "derogatory record" or her "attendance and
punctuality issues", which are insignificant and thus irrelevant to her overall performance in the Washington Mutual account. And, as
earlier stated, respondents "attendance and punctuality issues" were attributable to petitioners indifference, inaction, and lack of
sensitivity in failing to timely address respondents complaint. It should share the blame for respondents resultant delinquencies.

Thus, in causing respondents transfer, petitioner clearly acted in bad faith and with discrimination, insensibility and disdain; the
transfer was effected as a form of punishment for her raising a valid grievance related to her work.

Furthermore, said transfer was obviously unreasonable, not to mention contrary to experience, logic, and good business sense. This
being the case, the transfer amounted to constructive dismissal.

The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic
elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it
cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to
show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employees
transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered
impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay.

Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so
unbearable to the employee leaving him with no option but to forego with his continued employment. 45(Emphasis and underscoring
supplied)

The instant case can be compared to the situation in Veterans Security Agency, Inc. v. Gonzalvo, Jr., 46 where the employee concerned
a security guard who was brave enough to complain about his employers failure to remit its employees Social Security System
premiums was "tossed around" and finally placed on floating status for no valid reason. Taking the poor employees side, this Court
declared:

True, it is the inherent prerogative of an employer to transfer and reassign its employees to meet the requirements of its business. Be
that as it may, the prerogative of the management to transfer its employees must be exercised without grave abuse of discretion. The
exercise of the prerogative should not defeat an employees right to security of tenure. The employers privilege to transfer its
employees to different workstations cannot be used as a subterfuge to rid itself of an undesirable worker.

Here, riled by respondents consecutive filing of complaint against it for nonpayment of SSS contributions, VSAI had been tossing
respondent to different stations thereafter. From his assignment at University of Santo Tomas for almost a year, he was assigned at the
OWWA main [o]ffice in Pasig where he served for more than three years. After three years at the OWWA main office, he was
transferred to the OWWA Pasay City parking lot knowing that the security services will end forthwith. VSAI even concocted the
reason that he had to be assigned somewhere because his spouse was already a lady guard assigned at the OWWA main office.
Inasmuch as respondent was single at that time, this was obviously a mere facade to [get] rid of respondent who was no longer in
VSAIs good graces.

The only logical conclusion from the foregoing discussion is that the VSAI constructively dismissed the respondent. This ruling is in
rhyme with the findings of the Court of Appeals and the NLRC. Dismissal is the ultimate penalty that can be meted to an employee.
Inasmuch as petitioners failed to adduce clear and convincing evidence to support the legality of respondents dismissal, the latter is
entitled to reinstatement and back wages as a necessary consequence. However, reinstatement is no longer feasible in this case
because of the palpable strained relations, thus, separation pay is awarded in lieu of reinstatement.

xxxx

Indeed, the Court ought to deny this petition lest the wheels of justice for aggrieved workingmen grind to a halt. We ought to abate the
culture of employers bestowing security of tenure to employees, not on the basis of the latters performance on the job, but on their
ability to toe the line set by their employer and endure in silence the flagrant incursion of their rights, zealously protected by our labor
laws and by the Constitution, no less.47(Emphasis and underscoring supplied)

Respondents Floating Status

In placing respondent on "floating status," petitioner further acted arbitrarily and unfairly, making life unbearable for her. In so doing,
it treated respondent as if she were a new hire; it improperly disregarded her experience, status, performance, and achievements in the
company; and most importantly, respondent was illegally deprived of her salary and other emoluments. For her single absence during
training for the Bank of America account, she was refused certification, and as a result, she was placed on floating status and her
salary was withheld. Clearly, this was an act of discrimination and unfairness considering that she was not an inexperienced new hire,
but a promising and award-winning employee who was more than eager to succeed within the company. This conclusion is not totally
baseless, and is rooted in her outstanding performance at the Washington Mutual account and her complaint regarding the incentives,
which only proves her zeal, positive work attitude, and drive to achieve financial success through hard work. But instead of rewarding
her, petitioner unduly punished her; instead of inspiring her, petitioner dashed her hopes and dreams; in return for her industry,
idealism, positive outlook and fervor, petitioner left her with a legacy of, and awful examples in, office politicking, intrigue, and
internecine schemes.

In effect, respondents transfer to the Bank of America account was not only unreasonable, unfair, inconvenient, and prejudicial to
her; it was effectively a demotion in rank and diminution of her salaries, privileges and other benefits. She was unfairly treated as a
new hire, and eventually her salaries, privileges and other benefits were withheld when petitioner refused to certify her and instead
placed her on floating status. Far from being an "accommodation" as petitioner repeatedly insists, respondent became the victim of a
series of illegal punitive measures inflicted upon her by the former.

Besides, as correctly argued by respondent, there is no basis to place her on "floating status" in the first place since petitioner
continued to hire new CSRs/TSRs during the period, as shown by its paid advertisements and placements in leading newspapers
seeking to hire new CSRs/TSRs and other employees.48 True enough, the placing of an employee on "floating status" presupposes,
among others, that there is less work than there are employees; 49 but if petitioner continued to hire new CSRs/TSRs, then surely there
is a surplus of work available for its existing employees: there is no need at all to place respondent on floating status. If any,
respondent with her experience, knowledge, familiarity with the workings of the company, and achievements should be the first to
be given work or posted with new clients/accounts, and not new hires who have no experience working for petitioner or who have no
related experience at all. Once more, experience, common sense, and logic go against the position of petitioner.

The CA could not be more correct in its pronouncement that placing an employee on floating status presents dire consequences for
him or her, occasioned by the withholding of wages and benefits while he or she is not reinstated. To restate what the appellate court
cited, "[d]ue to the grim economic consequences to the employee, the employer should bear the burden of proving that there are no
posts available to which the employee temporarily out of work can be assigned." 50 However, petitioner has failed miserably in this
regard.

Resignation

While this Court agrees with the appellate courts observation that respondents resignation was involuntary as it became unbearable
for her to continue with her employment, expounding on the issue at length is unnecessary.

Because she is deemed constructively dismissed from the time of her illegal transfer, her subsequent resignation became unnecessary
and irrelevant. There was no longer any position to relinquish at the time of her resignation.

Pecuniary Awards

With the foregoing pronouncements, an award of indemnity in favor of respondent should be forthcoming. In case of constructive
dismissal, the employee is entitled to full backwages, inclusive of allowances, and other benefits or their monetary equivalent, as well
as separation pay in lieu of reinstatement. The readily determinable amounts, as computed by the Labor Arbiter and correspondingly
reviewed and corrected by the appellate court, should be accorded finality and deemed binding on this Court.

Settled is the rule that an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges, and to his full backwages, inclusive of allowances and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld up to the time of actual reinstatement. If reinstatement is not possible,
however, the award of separation pay is proper.

Backwages and reinstatement are separate and distinct reliefs given to an illegally dismissed employee in order to alleviate the
economic damage brought about by the employees dismissal. "Reinstatement is a restoration to a state from which one has been
removed or separated" while "the payment of backwages is a form of relief that restores the income that was lost by reason of the
unlawful dismissal." Therefore, the award of one does not bar the other.

In the case of Aliling v. Feliciano, citing Golden Ace Builders v. Talde, the Court explained:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are separate
and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the
employer, separation pay is granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no
longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages.51

WHEREFORE, the Petition is DENIED. The assailed January 10, 2012 Decision and May 28, 2012 Resolution of the Court of
Appeals in CA-G.R. SP No. 109860 are AFFIRMED, with MODIFICATIONS, in that petitioner ICT Marketing Services, Inc., now
known as Sykes Marketing Services, Inc., is ordered to PAY respondent Mariphil L. Sales the following:

1) Backwages and all other benefits from July 30, 2007 until finality of this Decision;

2) Separation pay equivalent to one (1) month salary for every year of service;

3) Moral and exemplary damages in the amount of P50,000.00;

4) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and

5) Interest of twelve per cent (12%) per annum of the total monetary awards, computed from July 30, 2007 up to June 30,
2013, and thereafter, six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The appropriate Computation Division of the National Labor Relations Commission is hereby ordered to COMPUTE and UPDATE
the award as herein determined WITII DISPATCH.

SO ORDERED.
G.R. No. 185100 July 9, 2014

GIRLY G. ICO, Petitioner,

vs.
SYSTEMS TECHNOLOGY INSTITUTE, INC., MONICO V. JACOB and PETER K. FERNANDEZ, Respondents.

DECISION

DEL CASTILLO, J.:

When another employee is soon after appointed to a position which the employer claims has been abolished, while the employee who
had to vacate the same is transferred against her will to a position which does not e:x.ist in the corporate structure, there is evidently a
case of illegal constructive dismissal.

Before us is a Petition for Review on Certiorari1 questioning the October 27, 2008 Decision2 of the Court of Appeals (CA) which
dismissed the petition in CA-G.R. SP No. 104437, entitled "Girly G. Jco, Petitioner, versus National Labor Relations Commission
(First Division), Systems Technology Institute, Inc., Monico V. Jacob and Peter K Femandez, Respondents."

Factual Antecedents

Respondent Systems Technology Institute, Inc. (STI) is an educational institution duly incorporated, organized, and existing under
Philippine laws. Respondents Monico V. Jacob (Jacob) and Peter K. Fernandez (Fernandez) are STI officers, the former being the
President and Chief Executive Officer (CEO) and the latter Senior Vice-President.

STI offers pre-school, elementary, secondary and tertiary education, as well as post-graduate courses either through franchisees or STI
wholly-owned schools.3

Petitioner Girly G. Ico,a masteral degree holder with doctorate units earned, 4 was hired as Faculty Member bySTI College Makati
(Inc.), which operates STI College-Makati (STI-Makati). STI College Makati (Inc.) is a wholly-owned subsidiary of STI.5

At STI, petitioner servedunder contract from June1997 to March 1998. In April 1998, she was recalled to STIs Makati Central Office
orHeadquarters (STIHQ) and promoted to the position of Dean of STI College-Paraaque (STIParaaque). In November1999, she was
again recalled to STI-HQ and STI appointed her as Full-Time Assistant Professor I reporting directly to STIs Academic Services
Division (ASD).

In June 2000, petitioner was promoted to the position of Dean under ASD, and assigned to STI College-Guadalupe (STI-Guadalupe),
where she served as Dean from June 5, 2000 up to October 28, 2002. 6

Meanwhile, petitioners position as Deanwas reclassified from "Job Grade 4" to "Job Grade Manager B"with a monthly salary
of P37,483.58 effective April 1, 2002,7 up from the P27,000.00salary petitioner was then receiving.

After petitioners stint as Dean of STI-Guadalupe, she was promoted to the position of Chief Operating Officer (COO) of STI-Makati,
under the same position classification and salary level of "Job Grade Manager B". She concurrently served as STI-Makati School
Administrator.8

Sometime in July 2003,or during petitioners stint as COO and School Administrator of STI-Makati, a Plan of Merger9 was executed
between STI and STI College Makati (Inc.), whereby the latter would be absorbed by STI. The merger was approved by the Securities
and Exchange Commission on November 12, 2003. STI College Makati (Inc.) thus ceased to exist, and STI-Makati was placed under
STIs Education Management Division (EMD).10

In a March 12, 2004 Memorandum,11 STI "[i]n line with the recently approved organizational structure effective August 1, 2003" 12
updated petitioners appointment as COO, "Job Grade Manager B" witha gross monthly salary of P37,483.58. She was re-appointed as
COO of STI-Makati, under the supervision of the AcademicServices Group of the EMD and reporting directly to the Head thereof,
herein respondent Fernandez. However,petitioner was not given the salary commensurate to her position as COO, which by this time
appeared to be pegged at P120,000.00.13 It likewise appears that she was not given benefits and privileges which holdersof equivalent
positions were entitled to, such as a car plan.14
Two months after confirming petitioners appointment as STI-Makati COO, another Memorandum15 dated May 18, 2004 was issued
by STI Human Resources Division Head, Yolanda Briones (Briones), signed and approved by STI Senior Vice-President for
Corporate Services Division Jeanette B. Fabul (Fabul), and noted by respondent Jacob

a) Cancelling, effective May 20, 2004, petitioners COO assignment at STI-Makati, citing managements decision to
undertake an "organizational restructuring" in line with the merger of STI and STI-Makati;

b) Ordering petitioner to report to STI-HQ on May 20, 2004 and to turn over her work to one Victoria Luz (Luz), who shall
function as STI-Makatis School Administrator; and

c) Appointing petitioner, effective May 20, 2004, as STIs Compliance Manager with the same "Job Grade Manager B" rank
and salarylevel, reporting directly to SchoolCompliance Group Head Armand Paraiso (Paraiso).

According to STI, the "organizational re-structuring" was undertaken "in order to streamline operations. In the process, the positions
of Chief Executive Officer and Chief Operating Officer of STI Makati were abolished." 16

On May 18, 2004, Fernandez summoned petitioner to his office, where the following conversation which appears to have been
recorded by petitioner with the knowledge and consent of Fernandez took place:

F: (Fernandez) Im sure you know already why you are here.

P: (Petitioner) No, sir. Nanalo ba tayo sa Winners Circle

F: Girly, lets stop this. You will be pulled out [from] STI CollegeMakati[.] x x x [T]urn over toVicky Luz everything tomorrow.

P: Sir? What have I done? May I know what is the reason of (sic) an immediate transfer and a short period of turn-over?

F: I dont trust you anymore. Ive beenhearing too many things from [sic] you and as your CEO, you dont submit to me FSP monthly.
Me high school student ka na inenroll para lang makasali sa basketball.

P: Sir, thats not true.

F: Would you like me to call Liezel? ([H]e stood up and called Ms. Liezel Diego)

P: Yes, sir.

F: Liezel, how many times did STI College-Makati submitted [sic] to you the FSP?

L: (Liezel Diego) Sir, sa akin po 2 beses peromeron pa po ke Ervie.

Tanong ko lang po ke Ervie kung ilan sa kanya.

P: Sir, can I have one minute to call STI College-Makati to fax the data of the receiving copies of the FSP?

F: Irrelevant! I dont have time.

P: Sir, you will please put that in writing[. It] is a very strong accusation you are making and I think I should defend myself.

F: No way! You cannot get anything from me. Why? Sothat when I will provide such then you will go toLabor? (in a shouting
manner)

P: Sir, what is this all about? Please tell me the real score. I am honest to you and I believe I am performing well. Is this what I
deserve?

F: Dont talk to me about honesty (again said in a shouting manner and fuming mad). Girly, dont push me to the limit! Dont let me
do things that you will regret later. Dont be like Chito (Salazar, the former STI President) who have [sic] left STI without proving to
everybody whether [sic] he have [sic] done wrong or not. I dont want that to happen to you!
P: Sir, can I have one minute to go outside. I can no longer bear this?

(begging with both hands [together] as a sign of surrender)

F: No! (still shouting) I dont have time. Heres the letter from HR[.] I want you to sign this.

P: Sir, Im sorry but I will not sign. I think it should be HR who will give this to me.

F: You want me to call HR? You wantme to call Atty. Pascua? You want me to call people outside [to] witness that you refused to
sign? (still shouting) I dont care if you have a tape recorder there with you. After all, that will not be a [sic] valid evidence in court.

xxxx

F: Ok. Dont make me loose [sic] my temper again (with a soft voice already). You just sign this (giving to me the [May 18, 2004
Memorandum]). Dont go to Bohol anymore. If ever you will win in the Winners Circle, you can get the tripjust like what happened
to Redger (Agudo, the former COO of STI College-Makati).

P: Sir, what will be the consequence if I will not sign this?

F: I will file a case against you. What do you call this? (pausing for a little while then uttered the word) Disobedience!

P: Ok, sir, but please I want to know what exactly my violation is (while signing the paper). Now that we will be parting ways, I am
still hoping that you can tell [sic] the violationsthat I made, if there is any.

F: You can have it after 2-3 weeks time. Besides, we are not parting ways (with a sarcastic smile). I am still your boss in Audit. Audit
and Compliance is still under my supervision.

P: Thank you, sir. (I went out in [sic] his room still trembling) 17

Incidentally, by this time, petitioner had garnered the following awards and distinctions:

1) Silver Awardee, 2004 STI Winners Circle Awards, 17thSTI Leaders Convention;

2) STI Academic Winners Circle Award as Dean of STI-Guadalupe given at the 2002 STI Leaders Convention;

3) Academic Head of the Year for 2002, as Dean of STI-Guadalupe; and

4) 2001 STI Winners Circle, as Academic Head, STI-Guadalupe.18

On May 20, 2004, petitioner reported toher new office at STIs School Compliance Group, only to find out that all members ofthe
department had gone to Baguio City for a planning session. Petitioner, who was not apprised of the official trip, was thus left behind.
That same day, an official communication19 was disseminated throughout STI, announcing Jacobs appointment as the new STI
President and CEO, Fernandez as the new COO of STI-Makati,and Luz as the new STI-Makati School Administrator; however,
petitioners appointment as Compliance Manager was left out.

In a May 24, 2004 letter20 to Jacob, petitioner took exception to the incidents of May 18 and 20, 2004, claiming that she became the
victim of a series of discriminatory acts and objecting to the manner by which she was transferred, asserting that she was illegally
demoted and that her name was tarnished as a result of the demotion and transfer. Jacob replied through a June 7, 2004
letter21 advising petitioner that her letter was forwarded to Fernandez for comment.

Prior to that, on May 25, 2004, during the 17th STI Leaders Convention held in Panglao, Bohol, petitioners achievement as a Silver
Awardee for the 2004 STI Winners Circle Awards was announced, but she did notattend, claiming that she was too embarrassed to
attend owing to the events leading to her transfer, which to her was a demotion. 22 STI withheld petitioners prize a South Korea trip
termed "Travel Incentive Award" for the Winners Circle for STI fiscal year 2003-2004 "pending the final result of the
investigations being conducted" by STI relative to irregularities and violations of company policies allegedly committed by
petitioner.23
It appears that from May 28, 2004 up to June 10, 2004, STIs Corporate Auditor/Audit Advisory Group conducted anaudit of STI-
Makati covering the whole period of petitioners stint as COO/School Administrator therein. In a report (Audit Report) later submitted
to Fernandez, the auditors claim to have discovered irregularities, specifically

1. Appointment papers of STI-Makati employees did not have the written approval of Fernandez inhis capacity as CEO;

2. There were instances where employees became regular after only an abbreviated probationary period, and in some
cases,the employees did not undergo probation;

3. Petitioner failed to fully liquidate cash advances amounting to P60,000.00, relative tothe purchase of books;

4. There was a lack of internal controlsin regard to cost of planning sessions, liquidation reports, journal entries, use of petty
cash fund, and inventory; and

5. Petitioner and other employees falsified school records in order to enable high school players to play for STI-Makatis
volleyball team.24

In a June 17, 2004 Memorandum25 to Jacob, Fernandez cited the above Audit Report and recommended that an investigation
committee be formed to investigate petitioner for grave abuse of authority, falsification, gross dishonesty, maligning and causing
intrigues, commission of acts tending tocast negativity upon his person (Fernandez), and other charges. Fernandez recommended that
petitioner be placed under preventive suspension pending investigation. Meanwhile, with respect to petitioners May 24, 2004 letter, it
appears that Fernandez did not submit a comment or answer thereto.

Jacob approved Fernandezs recommendations, and on June 21, 2004, a Memorandum26 was issued placing petitioner under
preventive suspension and banning her entry to any of STIs premiseseffective June 22, 2004 up to July 16, 2004, citing "(an) Audit
investigation being conducted relative to the offenses" for which petitioner was charged, namely:

I. FACULTY MANUAL

a) Making malicious, obscene or libelous statements about the person of any member of the academic community.

b) Threatening, intimidating, coercingor harassing another person within the school premises.

c) Commission of acts inimicalto students [sic] interest.

II. STI-HO POLICY MANUAL

A. Class 3

1. Making false or malicious statements against another employee.

2. Causing intrigues tending to cast insult, dishonor and discredit to another employee.

3. Reading or gaining access to files,records, memos, correspondence and other classified documents of the
company.

[B] Class 4

1. Concealing errors of omission or commission, thus negatively prejudice [sic] the interest of the company.

[C] Class 5

1. Falsifying timekeeping reports and records, drawing salary/allowance, in any form, or money by virtue of
falsified timekeeping report of records, vouchers, receipts and the like.

2. Giving false and untruthful statements of [sic] concealing material facts in an investigation conducted byan
authorized representative of the company.
 3. Misappropriating or withholding company funds.

4. All acts of dishonesty, which cause [sic] tend to cause prejudice to the company.27

On June 24, 2004, petitioner received another Memorandum 28 from Briones dated June 23, 2004, this time stating that charges
havealready been filed against her allegedly "based on the Audit Findings", yet makingreference to the June 21, 2004 Memorandum
and without informing petitioner of the particulars of the charges or the results of the audit. Nor was a copy of the said audit findings
attached to the memorandum.

In a June 28, 2004 demand letter29 addressed to Jacob,petitioner protested anew her alleged maltreatment, claiming illegal constructive
dismissal and demanding immediate reinstatement to her COO position and the payment of actual and other damages, under pain of
suit.

In a June 30, 2004 letter, petitioner was notified of a hearing scheduled for July 2, 2004 and required to submit her written explanation
to the charges. It appears, however, that petitioner did not receive the said letter. 30 On even date, petitioner filed with the National
Labor Relations Commission (NLRC) a labor case against herein respondents, Fabul and Briones. Docketed as NLRC NCR Case No.
00-06-07767-04, the Complaint31 alleged illegal constructive dismissal and illegal suspension, withclaims for regularization as well as
for underpayment of salaries, holiday pay, service incentive leave, 13th -month pay, moral and exemplary damages, and attorneys
fees.

In a July 12, 2004 Memorandum32 to petitioner, STI lifted petitioners suspension and ordered her to return towork on July 13, 2004,
with full salary from the time of her suspension.

In a July 13, 2004 electronic mail message33 sent by STIs Reuel Virtucio (Virtucio) to petitioner, the latter was invited to a July 19,
2004 "meeting with the committee formed to act on the complaint filed against (petitioner) by (Fernandez)." 34 The committee was
composed ofSTIs officers, namely Amiel Sangalang (Sangalang); Flerdeliza Catalina Domingo (Domingo); and Virtucio.

On July 19, 2004, during the supposed scheduled meeting with the committee, petitioner was furnished with several documents;
however, no copy of the formal complaint or written chargewas given to her.The meeting was adjourned without the committee
setting another meeting for the submission of petitioners answer; nor was a hearing set for the presentation of the parties evidence.35

Thereafter, petitioner wenton sanctioned leave of absence. After the lapse of her approved leave, she reported for workseveral times.
After August 9, 2004, however, she no longer reported for work.

On August 17, 2004, STI issued another Memorandum36 to petitioner, informing her that her South Korea travelincentive award was
being withheld, as the investigation covering her alleged involvement in irregularities and violations of company policies was still
pending.

In a January 13, 2005 letter cumnotice of termination signed by Jacob, petitioner was dismissed from STI effective January 11, 2005. 37

The Labor Arbiter Decision

In her Position Paper,38 petitioner claimed that during her stint as COO of STI-Makati and up to her transfer and appointment as
Compliance Manager, she was discriminated against and unfairly treated by respondents; that she was denied a) the salary
corresponding to the COO position in the amount of P100,000.00 P120,000.00, b) her prizes as Winners Circle awardee, aswell as
c) her benefits such as a car plan and honorarium of P8,500.00 monthly.She likewise contended that her removal as STI-Makati COO
and transfer to the School Compliance Group as Compliance Manager was illegal and constituted a demotion amounting to
constructive dismissal, as she was not given prior notice of the transfer; forced to give her written conformity thereto; placed in an
embarrassing situation thereafter; and never given any task or work while she held such position. She added that the alleged
reorganization which caused her removal as STI-Makati COO was a sham, calculated to ease her out inthe guise of a restructuring;
that she was illegally placed under suspension for alleged offenses which respondents could not substantiate and which she was not
informedabout; that she was not accorded due process during the conduct of the purported investigation; and that as a consequence of
the discrimination and unfair treatment she received from respondents, she suffered untold injury. Petitioner thus pleaded:

WHEREFORE, complainant respectfully prays that, after due proceedings, judgment be rendered ordering respondents, jointly and
severally, as follows:
 1. To reinstate complainant to her former position as COO without loss to [sic] her seniority rights with backwages and other
benefits, such the [sic] monthly P8,500.00 honorarium, among others, to be paid until fully reinstated with the necessary
adjustments to equal the salary and benefits now being received by her replacement, respondent Peter K. Fernandez.

2. To pay complainant the unpaid salaryand benefits differential due her as COO computed from November 5, 2002 to equal
the salary and benefits of respondent Peter K. Fernandez, plus the legal rate of interest thereon from the same date until fully
paid.

3. To pay the money equivalent, plus the legal rate [sic] interest thereon until fully paid, of complainants awards as a Silver
Awardee in its STI 17th Winners Circle, consisting of the tripto Panglao, Bohol from May 25 to 27, 2004 and Korea from
September 21 to 24, 2004.

4. To pay complainant the unpaid Holiday Pay duly adjusted as above [sic] and with legal interest thereon until fully paid.

5. To pay complainant the proportionate 13th [-]month pay for the current year with legal interestthereon until fully paid.

6. To pay complainant moral damages in [sic] sum of P3 Million and exemplary damages in the amount of P2 Million,
including attorneys fees, and expenses of litigation.

Complainant prays for such other reliefs just and equitable in the premises. 39

In their Position Paper,40 the respondents in NLRC NCR Case No. 00-06-07767-04 claimed that petitioner was removed as STI-
Makati COO pursuant to a reorganization aimed atstreamlining STIs operations after the merger; as a result, the positions of STI-
Makati CEO and COO were abolished. They argued that petitioner was merely "laterally transferred" to the School Compliance Group
as Compliance Manager, and was not demoted in rank; nor did she suffer a diminution in her salary and benefits, as the positions of
STI-Makati COO and Compliance Manager are equivalent in rank under the STI structure, that is, they both fall under "Job Grade
Manager B". They added that petitioner committed anomalies and irregularities, as stated above, which became the subject of an Audit
Report.41 They asserted that the abolition of a position in STI is a recognized prerogative of management which may not be interfered
with absent malice or bad faith, and more so when done pursuant to a valid corporate restructuring; the abolition of the CEO, COO,
Treasurer, Corporate Secretary, and Director positions in STI-Makati was pursued as a matterof course because with the merger, STI-
Makati ceased to exist as it was absorbed by STI, and consequently these positions became unnecessary. Petitioners transfer was
justified as an exercise of STIs prerogative and right to transfer its employees when called for, and was done reasonably, without
malice or bad faith, and without unnecessarily inconveniencing petitioner.

Respondents added that petitioners suspension was vital for the protection of sensitive data and to ensure the smooth conduct of the
investigation, and in order that she may not gain access to sensitive information which, if divulged to government agenciessuch as the
Commission on Higher Education (CHED), would result in the denial/withholding of permits to STI. 42 On petitioners claim for
regularization, respondents claimed that this was unnecessary since petitioner was already a regular employee of STI. Regarding
petitioners money claims, respondents argued that petitioner could not be entitled to them, as she received all her salaries, benefits
and entitlementsduring her stint with STI. Finally, respondents contended that petitioner was not entitled to damages and attorneys
fees, since she was not illegally dismissed and, in carrying out her transfer, they did not act with malice, bad faith, orin a wanton and
oppressive manner.

In her Reply43 to respondents Position Paper, petitioner noted that while STI and STI College Makati (Inc.) merged, there was in fact
no restructuring that took place which required her transfer and demotion; onthe contrary, the merger created 29 additional vacant
positions in STI. Petitioner added that no prior announcement of the restructuring of STI-Makati was made, which thus renders such
reorganization of questionable integrity; instead, the merger was utilized as a tool to ease her out, through the bogus reorganization.
She contended that Fernandez had prejudged her case even before an investigation into the alleged anomalies could be conducted.
Petitioner likewise notedthat even her appointment as Compliance Manager was a sham, because no such vacant position existed
within the School Compliance Group, as the only two Compliance Manager positions were then occupied by Eddie Musico (Musico)
and Reynaldo Gozum (Gozum);44 the only other vacant positions in that department were those for lower level Compliance Officers.
In effect, petitioner was in fact made a mere ComplianceOfficer, which meant that she was effectively demoted. Petitioner claimed as
well that her demotion was highlighted by the fact that while she had a masteral degreeand doctorate units, all the others within the
School Compliance Group including her superior, Paraiso were mere bachelors degree holders.

Finally, petitioner maintained that the multiple charges lodged against her were without basis, and respondents failed to prove them
byadequate evidence.

On the other hand, respondents maintained in their Reply (to Complainants Position Paper) 45 that as to salary and benefits, petitioner
was not discriminated against, and was merely given a compensation package commensurate to her rank as "Job Grade Manager B",
taking into consideration her length of service at STI.Her salary was thus at par with those of other STI employees of equivalent rank
and similar durations ofemployment. They added that honoraria are not given to its employees,as well as to those who are deployed to
company-owned schools such as STI-Makati. Respondents asserted further that the reorganization was not a ruse to ease petitioner
out; it was necessary as a means toward streamlining STIs operations. Fernandez characterized petitioners account of their
conversation as inaccurate.46 Respondents likewise debunked petitioners claims that she was discriminated against while she held the
position of Compliance Manager, saying that this claim was specious and exaggerated. They added that even though Fernandez was
later appointed COO of STI-Makati after petitioner was appointed Compliance Manager, his work assuch STI-Makati COO was
limited to performance of oversight functions, which functions he already performs as SeniorVice-President of the Education
Management Division of STI. With regard to the July 19, 2004 meeting, respondents argued that nothing was achieved during said
meeting owing to petitioners and her counsels "quarrelsome attitude" and insistence thatshe be furnished the written charges against
her as well as the supporting evidenceor documents, which would have been unnecessary if she only cooperated during said meeting
and answered the charges against her. They underscored the fact that during said meeting, petitioner was furnished with a copy of the
charges against her, including all other documents, particularlythe Audit Findings.

On March 31, 2006, LaborArbiter Renaldo O. Hernandez issued a Decision 47 in NLRC Case No. 00-06-07767-04, decreeing as
follows:

WHEREFORE, premises considered, judgment is hereby finding [sic] complainant to have been illegally constructively and in bad
faith dismissed by respondents in her legally acquired status as regular employee thus, ORDERING respondents SYSTEMS
TECHNOLOGY INSTITUTE, INC. and/or MONICO V. JACOB, PETER K. FERNANDEZ in solido:

1) To reinstate her to her former position, without loss of seniority rights and benefits, allowances, which reinstatement
aspect, actual or in the payroll, is immediately executory, even pending appeal.

2) To pay complainants full back wages, which should legally start from date of her illegal constructive dismissal/illegal
demotion on 05/18/2004, but reckoned from date of the illegal suspension when she was physically prevented/ barred from
working on 06/22/2004, based on her gross monthly salary P37,483.58, 15 days Vacation Leave/yearand 15 days Sick
Leave/year, 13th [-] month pay, and other benefits accruingto her in her regular position as COO until actually reinstated,
which as of date amounts to:

Basic P37,483.58 x 21 months = P787,155.18

13th[-]month pay 1/12 thereof = 65,596.26

VL 15 days/yr P1,249.45 x 15 x 1.75 years = 32,798.13

SL 15 days/yr P1,249.45 x 15 x 1.75 years = 32,798.13

Total F/B as of date = P918,347.70

3) To pay her moral and exemplary damages in the combined amount of P1,000,000.00.

4) To pay her the monetary equivalentof the awards due her as her being proclaimed as a Silver Awardee of US$630.00 for
the Korean travel from 09/21-24/2004, and the round trip ticket US$350.00, hotel accommodation and expenses to be paid,
viz. 1. PhilippineTravel Tax P1,620.00, NAIA Terminal Fee P550.00, Visa Processing Fee P500.00, War Risk Tax
US$12.00, Seoul Tax US$15.00, Ticket Insurance US$3.00, Travel Insurance P420.00, Tour Guide and Drivers Tip
US$4.00/day.

5) To pay her 10% of the entire computable award herein as attorneys fees.

SO ORDERED.48

The Labor Arbiter found that petitioner was illegally dismissed, and respondents were guilty of malice and bad faith in the handling of
her case. He held that petitioners transfer which STI claimed was the result of STIs restructuring was irregular, because at the
time of such transfer, the reorganization and restructuring of STI-Makati had already been effected; STIs March 12, 2004
Memorandum topetitioner which confirmed and renewed her appointment as STI-Makati COO was precisely issued as a
consequence of the merger and reorganization,which took place as early as November 2003. STIs claim that petitioners lateral
transferwas necessary is thus contrived.

In addition, the Labor Arbiter declared that even as petitioner was appointed to the position of Compliance Manager, such position did
not actually exist in STIs new corporate structure; under the Compliance Group, which was headed by Paraiso, there were only two
Compliance Manager positions which were at the time occupied by Musico and Gozum, and the only other vacant positions in the
Compliance Group were for Compliance Officers. In effect, petitioner was appointed to the position of a mere Compliance Officer,
which was lower in rank.

The Labor Arbiter held further that during the process of her illegal transfer, petitioner was harassed, humiliated, and oppressed, thus:

1. On May 18, 2004, she was subjected to threats and intimidation by Fernandez, the latter bullying and forcing her toreceive
the May 18, 2004 Memorandum while petitioner was inside his office;

2. On the day she reported to her new position as Compliance Manager, the whole ComplianceGroup team left for a three-
day out-of-town planning session, without respondents informing her or including her in the official event as she should be;

3. On May 20, 2004, an official written announcement was made regarding Jacobs appointment as new STI President and
CEO, Fernandez as new STI-Makati COO, and Luz as new STI-Makati School Administrator. Adding insult to injury,
petitioners appointment as Compliance Manager was intentionally left out;

4. Petitioner, given her illustrious career in STI having risen from the ranks as a faculty member, to full-time professor, to
Dean, and finally to the position of STI-Makati COO, and having achieved multiple awards and distinctions was thereafter
treated "as a non-entity" by respondents.

The Labor Arbiter added that the purported audit and investigation of petitioners alleged irregularities was a sham, as the same was
conducted without official sanction from STI and without petitioners knowledge; it was founded on hearsay evidence and based on
charges known only to Fernandez; it was conducted merely to conceal respondents shabby treatment of petitioner, and without
apprising petitioner of the writtenformal charges against her.

Finally, respondents wereadjudged guilty of malice, bad faith, acts oppressive to labor and contrary to morals, good customs and
public policy, which caused upon petitioner suffering and humiliation which entitles her to an award of moral and exemplary
damages, as well as attorneys fees.

Ruling of the National LaborRelations Commission

Respondents interposed an appeal with the NLRC, docketed as NLRC NCR Case No. 050756-06.In an October 31, 2007
Decision,49 the NLRC decreed, thus:

WHEREFORE, the [D]ecision appealed from is VACATED and SET ASIDE and a new one entered dismissingthe complaint for lack
of merit.

SO ORDERED.50

In reversing the Labor Arbiters Decision and finding that there was no illegal constructive dismissal,the NLRC held that any action
taken by STI after the merger can be reasonably concluded as one of the valid consequences thereof; the regulation of manpower is a
management prerogative enjoyed by STI, and it was free to regulate according to its own discretion and judgment all aspects of
petitioners employment. Inthis light, and since no concrete evidence was presented by petitioner to show that respondents acted with
maliceor bad faith, the NLRC held that it may not be said that the abolition of the position of STI-Makati COO was done to unduly
ease her out of STI.

The NLRC added that while it may be conceded that a heated argument between petitioner and Fernandez took place during their May
18, 2004 meeting, the charged emotional outbreaks were nonetheless occasioned by extraneous matters injected during such meeting,
and consequently, Fernandez may not be faulted for insisting that petitioner receive the May 18, 2004 Memorandum ordering
petitioners transfer.

Moreover, the NLRC declared that petitioners preventive suspension was not done irregularly, as it was based on charges leveled
against her and made pursuant to an administrativeinvestigation then being conducted; likewise, it held that the pending investigation
justified the withholding ofpetitioners Korea travel incentive award.
Finally, the NLRC noted that petitioners failure to report for work after August 9, 2004 should betaken against her, and on this note it
would be unfair to hold respondents liable for illegal constructive dismissal.

Petitioner moved for reconsideration,but in a March 28, 2008 Resolution, 51 the NLRC denied the same.

Ruling of the Court of Appeals

Petitioner went up to the CA via certiorari. On October 27, 2008, the CA issued the assailedDecision, decreeing as follows:

WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.52

According to the CA, the NLRC was correct in finding that as a result of the November 2003 merger of STI and STI-Makati,
petitioners transfer to her new position as Compliance Manager became necessary, as the position of STIMakati COO which
petitioner then held was abolished as a result of a reorganization that was implemented pursuant to the merger. It noted further that
the March 12, 2004 confirmation53 of petitioners appointment as STI-Makati COO was done pursuant to an August 2003
reorganization or one that was implemented priorto the November 2003merger; thus, petitioners transfer and appointment as
Compliance Manager days later,per the May 18, 2004 Memorandum, may not be said to be irregular, as it was made in accordance
with a newreorganization or restructuring program implemented in accordance with the November 2003 merger.

The CA held further that petitionerstransfer was made pursuant to the valid exercise of STIs prerogative toabolish certain positions
and transfer/ reassign its employees, for valid reasons and in accordance with the requirements of its business. Since petitioners
transferwas not attended by malice or bad faith, as it was shown to be necessary following the merger and abolition of the position that
she held, and was done without diminution in rank, salary and benefits, there could be no cause of action against respondents for
illegal dismissal.

The appellate court did not give credence to petitioners allegations of discrimination and harassmenteither, as it found them to be
self-serving and unsubstantiated. Regarding her suspension, the CA affirmed the NLRCs view that the same was not irregularly
imposed; the withholding of her travel award was justified as well.

Issues

Petitioner now submits the following issues for the Courts resolution:

THE COURT OF APPEALS ERRED IN DEVIATING FROM THE 18 MAY 2004 EMPLOYMENT UPDATE CLEARLY
ADMITTING AN INVALID ABOLITION OF PETITIONERS POSITION WITH STISAPPOINTMENT OF HER
REPLACEMENT AND RENAMING HER OFFICE AS "SCHOOL ADMINISTRATOR".

II

AS THERE WAS NO VALID ABOLITION OF PETITIONERS POSITION AS COO, THE COURT OF APPEALS ERRED IN
FRAMING A CASE OF VALID LATERAL TRANSFER INSTEAD OF CONSTRUCTIVE DISMISSAL DONE IN BAD FAITH. 54

Petitioners Arguments

In a nutshell, petitioner argues in her Petition and Reply55 that her appointment as Compliance Manager is illegal, because the
abolition of the STIMakati COO position and the creation of the position of Compliance Manager were contrived and fabricated. She
adds that her appointment to the position of Compliance Manager was in fact a demotion: she was relegated to a position where she
did not have any staff to supervise; her work became merely mechanical in nature; she became a mere Compliance Officer reporting
to the Compliance Group Head; and her work was severely limited.

Petitioner adds that contrary to the CAs pronouncement, she was subjected to harassment and discrimination, humiliated and became
the victim of STIs fraudulent scheme to illegally oust her from her position as STI-Makati COO. She cites: 1) the May 18, 2004
incident, noting the treatment accorded her by Fernandez and the manner by which she was allegedly forced to receive the
Memorandum of even date; 2)the investigation into alleged irregularities, which she characterized as sham; 3) her preventive
suspension, which she claims was illegal for being based on non-existent charges; and 4) the withholding of her travel award.

Petitioner insists that her suspension was illegal, as her new employment as Compliance Manager did not put her in a position where
she would have access to sensitive STI records;thus, she was never a serious threat to such extent that respondents believed she was.
Besides, the investigation into allegations of irregularities committed by her, which was the cause for her suspension as well, was a
sham for violating her rightsto a hearing and due process. Respondents Arguments

In their Comment,56 respondents maintain that the merger of STI and STIMakati required the abolition of the Chairman,
President/CEO, COO, Treasurer and Corporate Secretary positions in STI-Makati; likewise, it became necessary to effect a
reorganization of STIs corporate structure inorder to streamline its operations. Petitioners transfer was in line with such merger and
reorganization; no bad faith may thus be inferred from their actions, which were carried out legally and pursuant to STIs rights,
prerogatives, and needs at the time.

Respondents argue further that petitioners transfer did not amount to a demotion in rank, as the positions of COO and Compliance
Manager are of equal importance; in fact, the functions of Compliance Manager are much broader in scope as they involve the conduct
of operations and academic audits of allof STIs schools, and not just STI-Makati. As to salaryand benefits, petitioner as Compliance
Manager is given the same salary and benefits which she received at the time she was STI-Makati COO.

Respondents add that, ascorrectly held by the NLRC and CA, petitioner was never subjected to harassment and humiliation, thus:

1. Petitioner was not excluded from the Compliance Groups planning session held in Baguio City. At the timeof petitioners
transfer, Briones was not aware of the scheduled Baguio trip, and thus petitioner was not duly informed thereof. Thus, her
inability to attend the official event may not be blamed on respondents;

2. Petitioner was assigned ample work at the Compliance Group, contrary to her claims that she virtually did nothing in her
new position;

3. It is not true that petitioner was not given her own room as Compliance Manager in order to humiliate her. She could not
begiven a room simply on account of office space constraints.

On petitioners suspension, respondents reiterate that petitioners threats to divulge sensitive information and jeopardize STIs then
pending permit applications justified the taking of drastic measures to insure that company records are kept intact and free from
access; the preventive suspension of petitioner thus became necessary. Moreover, an audit investigation was then being conducted on
alleged irregularities committed by petitioner; preventive suspension as a preliminary step in the investigation is thus authorized.

Our Ruling

The Petition is granted.

As a rule, this Court is not a trier of facts, and thus the findings of fact of the NLRC and CA are final and conclusive and will not be
reviewed on appeal. However, there are well-recognized exceptions to the rule, such as when its judgment is based on a
misapprehension of facts or relevant facts not disputed by the parties were overlooked which, if properly considered, would justify a
different conclusion. Petitioners case falls under these exceptions.

Both the NLRC and CA found thatpetitioner was not constructively dismissed, for the following reasons:

1. Petitioners position as STI-Makati COO was abolished as a necessary result of the merger of STI and STI-Makati,and the
restructuring of STI aimed at streamlining its operations;

2. Petitioner was merely "laterally transferred" to the Compliance Group as Compliance Manager, with no diminution in
rank, salary and benefits; and

3. The reorganization of STI was done in good faith and in the exercise of the management prerogative. In the same manner,
petitioners transfer was a) made in the exercise of the management prerogative to transfer employees when necessary; b)
done in good faith; and c)not unreasonable, inconvenient or prejudicial to her interests.

It appears, however, that the position of STI-Makati COO was actually never abolished. As a matter of fact, soon after petitioner was
removed from the position, Fernandez was appointed to take her place as STI-Makati COO; his appointment was even publicly
announced via an official communication disseminated company-wide. This thus belies respondents claim thatthe position of STI-
Makati COO became unnecessary and was thus abolished. Respondents may argue, as they did in their Reply57 to petitioners Position
Paper, that Fernandezs appointment as STI-Makati COO replacing petitioner was merely for oversight purposes. Whatever the reason
could be for Fernandezs appointment as STI-Makati COO, the fact still remains that such position continued to exist.

Next, petitioners appointment as Compliance Manager appears to be contrived as well. At the time of petitioners appointment, the
only two Compliance Manager positions within STIs compliance department the School Compliance Group were already filled
up as they were then occupiedby Musico and Gozum.58 None of them has been dismissed or resigned. Nor could petitioner have been
appointed head ofthe department, as Paraiso was very much in charge thereof, as its ComplianceGroup Head. The only
positionswithin the department that were at the time vacant were those of Compliance Officers, which are of lower rank. In other
words,petitioner could not have been validly appointed as Compliance Manager, a position within STI that was then very much
occupied; if ever, petitioner took the position of a mereCompliance Officer, the only vacant position within the department.

Thirdly, even though it isclaimed that from May 28, 2004 up to June 10, 2004, STIs Corporate Auditor/Audit Advisory Group
conducted an audit of STIMakati covering the whole period of petitioners stint as COO/School Administrator, it appears that even
prior to such audit, petitioners superior Fernandez had already prejudged her case. The May 18, 2004 conversation between
petitioner and Fernandez inside the latters office is quite revealing.

The May 18 conversation between petitioner and Fernandez, taken in conjunction with the Courts findings that the position of STI-
Makati COO was never abolished and that petitioners appointment as Compliance Manager was contrived, confirms the view that
petitioner was not transferred to the School Compliance Group as a matter of necessity, but as punishment for her perceived
irregularities. In effect, petitioner was demoted and relegated to a position of insignificance within STI, there to suffer for what her
employer alleged were transgressions committed by her. To all intents and purposes, petitioner was punished even before she could be
tried.

Fernandezs declarations during the May 18 conversation undoubtedly provide the true motive behind petitioners removal as STI-
Makati COO:

a. After "hearing too many things" about petitioner, Fernandez simply lost confidence in her meaning that Fernandez had
made up his mind about petitioner after hearing rumors about her; b. Fernandez accused petitioner of specific violations,
without the benefit of accurate information and without giving her the opportunity to refute the accusations;

c. Fernandez has no time to listen to petitioners explanations, despite her pleas to be heard;

d. Fernandez refused to provide petitioner with the evidence or other basis for his accusations, in spite of petitioners request
for him to put the same in writing;

e. Fernandez has prejudged petitioner, and intimated to her that she was dishonest, even before she could be heard; and

f. Fernandez threatened petitioner, that if she pushed him further, she would suffer the fate of a former employee who was
separated fromSTI without the benefit of clearing his name. In other words, she could find herself without a job at STI even
before her innocence or guilt could be established.

From the May 18 conversation alone, it can be seen that petitioners fate in STI was a foregone conclusion. She was threatened to
accept her fate or else she would find herself without work, either through dismissal or forced resignation. Evidently, she became the
subject of an illegal constructive dismissal in the guise of a transfer.

The supposed audit conducted from May 28, 2004 up to June 10, 2004 by STIs Corporate Auditor/Audit Advisory Group was a mere
afterthought, as it was apparent that as early as May 18, 2004, petitioner has been found guilty of whatever transgressions she was
being charged with, founded or unfounded. The same is true with respect to her preventive suspension; it was imposed with malice
and bad faith, and calculated to harass her further, if not trick her into believing that respondents were properly addressing her case.
Needless to say, all proceedings and actions taken in regard to petitioners employment and case, beginning on May 18, 2004, were all
but a farce, done or carried out in bad faith, with the objective of harassing and humiliating her, all in the fervent hope that she would
fold up and quit.

Constructive dismissal exists where there is cessation of work because continued employment is rendered impossible, unreasonable
or unlikely, as an offer involving a demotion in rank or a diminution in pay and other benefits. Aptly called a dismissal in disguise or
anact amounting to dismissal but made to appear as if it were not, constructive dismissal may, likewise, exist if an act of clear
discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it could foreclose any
choice by him except to forego his continued employment. In cases of a transfer of an employee, the rule is settled that the employer is
charged with the burden of proving that its conduct and action are for valid and legitimate grounds such as genuine business necessity
and that the transfer is not unreasonable, inconvenient or prejudicial to the employee. If the employer cannot overcome this burden of
proof, the employees transfer shall be tantamount to unlawful constructive dismissal. 59

There is no doubt that petitioner was subjected to indignities and humiliated by the respondents. As correctly observed by the Labor
Arbiter, she was bullied, threatened, shouted at, and treated insolently by Fernandez on May 18, 2004 inside the latters own office.
She was shamedwhen, on her very first day at the School Compliance Group, all of the employees of the department have gone on an
official out-of-town event without her and, as a result,she was left alone at the office for several days. Respondents did not even have
the courtesy to offer her the opportunity to catch up with the group sothat she could makeit to the event, even if belatedly. Then again,
on May 20, 2004, STI made an official companywide announcement of Jacobs appointment as new STI President and CEO,
Fernandez as new STI-Makati COO, and Luz asnew STI-Makati School Administrator, but petitioners appointment as new
Compliance Manager was inconsiderately excluded. Respondents made her go through the rigors of a contrived investigation, causing
her to incur unnecessary legal expenses as a result of her hiring the services of counsel. Her well-deserved awards and distinctions
were unduly withheld in the guise of continuing investigation which obviously was taking too long to conclude; investigation began
formally on May 28, 2004 (start of audit), yet by August 17 (date of memorandum informing petitioner of the withholding of Korea
travel award), the investigation was still allegedly ongoing. She was deprived of the privilege to attend company events where she
would have received her well-deserved awards with pride and honor, and her colleagues would have been inspired by her in return.
Certainly, respondents made sure that petitioner suffered a humiliating fate and consigned to oblivion.

Indeed, petitioner could not be faulted for taking an indefinite leave of absence, and for altogether failing to report for work after
August 9, 2004. Human nature dictates that petitioner should refuse to subject herself to further embarrassment and indignitiesfrom
the respondents and her colleagues. All told, petitioner was deemed constructively dismissed as of May 18, 2004. Finally, since the
position of STI-Makati COO was never abolished, it follows that petitioner should bereinstated to the very same position, and there to
receive exactly what Fernandez gets by way of salaries, benefits, privileges and emoluments, without diminution in amount and
extent. Petitioner, multi-awarded, deserving and loyal, is entitled to what Fernandez receives, and is deemed merely to take over the
office from him; moreover, the position of Chief Operations Officer is not merely an ordinary managerial position, asit is a senior
managerial office. In turn, Fernandez or anyone who currently occupies the position of STIMakati COO must vacatethe office and
hand over the same to petitioner.

It is correct for petitioner to have included among the reliefs prayed for in her Complaint that she be paid the salary, benefits and
privileges being enjoyed by Fernandez currently. The Court, in granting said relief, deems it only fair that she should be entitled to
what Fernandez is receiving. Not only that the position requires greater expertise in many areas,or that it involves great responsibility,
or that petitioner deserves it from the point of view of her qualifications and experience; but it would be to prevent another form of
oppressive practice, where an employee is appointed toa senior management position, there to enjoy only the prestige or title, but not
the benefitscommensurate with the work and responsibility assumed. It would likewise prevent a situation where, as in this case, an
employer obliged by law or the courts to reinstate an "unwanted" employee holding a senior management position is given an
opportunity to retaliate by limiting the employees salary, privileges and benefits to a certain level low or high, so long as it is within
the managerial range that is however 1) not commensurate with the work and responsibility assumed by the employee, or 2)
discriminatory, or 3) indicative of a tendency to favor only one or some employees.

Nonetheless, the Court failsto discern any bad faithor negligence on the part of respondent Jacob. The principal character that figures
prominently in this case is Fernandez; he alone relentlessly caused petitioners hardships and suffering. He alone is guilty of
persecuting petitioner. Indeed, some of his actions were without sanction of STI itself, and were committedoutside of the authority
given to him by the school; they bordered on the personal, rather than official. His superior, Jacob, may have been, for the most part,
clueless of what Fernandez was doing to petitioner. After all, Fernandez was the Head of the Academic Services Group of the EMD,
and petitioner directly reported to him at the time; his position enabled him to pursue a course of action with petitioner that Jacob was
largely unaware of.

A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result of the
directors and officers acts as corporate agents, are nottheir personal liability but the direct responsibility of the corporation they
represent. As a rule, they are only solidarily liable with the corporation for the illegal termination of servicesof employees if they acted
with malice or bad faith.

To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) it must be alleged in the
complaint that the director or officer assented to patently unlawful acts of the corporation or that the officer was guilty of gross
negligence or bad faith; and (2) there must be proof that the officer acted in bad faith. 60

WHEREFORE, the Petition is GRANTED. The October 27, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 104437 is
ANNULLED andSET ASIDE. The March 31, 2006 Decision ofLabor Arbiter Renaldo O. Hernandez in NLRCCase No. 00-06-07767-
04 is hereby REINSTATED, WITH MODIFICATIONS, in that:
 1. Respondent Systems Technology Institute, Inc., is ordered to REINSTATEpetitioner Girly G. Ico to the position of STI-
Makati College Chief Operating Officer and pay her the exact salary, benefits, privileges, and emoluments which respondent
Peter K. Fernandez is receiving, but not less than what petitioner was receiving at the time of her illegal constructive
dismissal on May 18, 2004;

2. Respondent Monico V. Jacob is ABSOLVED of any liability;

3. Respondent Peter K. Fernandez is ordered to VACATEthe said office of STI-Makati Chief Operating Officer and turn over
the same to petitioner;

4. The award of backwages shall earn LEGAL INTERESTat the rate of six per cent(6%) per annumfrom the date of the
petitioners illegal dismissal until fully paid;61

5. Finally, the appropriate Computation Division of the NLRC is hereby ordered to COMPUTE AND UPDATEthe award as
herein established WITH DISPATCH.

SO ORDERED.
 January 11, 2016

G.R. No. 214092

ECHO 2000 COMMERCIAL CORPORATION, EDWARD N. ENRIQUEZ, LEONORA K. BENEDICTO and ATTY. GINA
WENCESLAO, Petitioners,
vs.
OBRERO FILIPINO-ECHO 2000 CHAPTER-CLO, ARLO C. CORTES and DAVE SOMIDO, Respondents.

DECISION

REYES, J.:

Before the Court is the petition for review on certiorari1 filed by Echo 2000 Commercial Corporation (Echo) to assail the
Decision2 rendered on September 24, 2013 and Resolution3 issued on March 28, 2014 by the Court of Appeals (CA) in CA-G.R. SP
No. 121393. The CA affirmed the Decision4 dated April 15, 2011 of the National Labor Relations Commission's (NLRC) Fifth
Division, which declared that Arlo C. Cortes (Cortes) and Dave Somido (Somido) (respondents) were illegally dismissed from
employment by Echo. Edward N. Enriquez (Enriquez), Leonora K. Benedicto (Benedicto) and Atty. Gina Wenceslao (Atty.
Wenceslao) used to be Echo's General Manager, Operations and Human Resources Officer, and External Counsel, respectively (Echo
and the three officers are to be referred collectively as the petitioners). The CA and NLRC's rulings reversed the Decision5of Labor
Arbiter (LA) Renaldo O. Hernandez (Hernandez), who found the respondents' termination from service as valid.

Antecedents

Echo is a provider of warehousing management and delivery services.

King 8 Commercial Corporation (King 8), Echo's predecessor, initially employed Cortes on September 17, 2002, and Somido, on
October 12, 2004. Echo thereafter absorbed the respondents as employees on April 1, 2005. In 2008, Somido was made a Warehouse
Checker, while Cortes, a Forklift Operator.6

In January of 2009, the respondents and their co-workers formed Obrero Pilipino-Echo 2000 Commercial Chapter (Union). Cortes
was elected as Vice-President while Somido became an active member. The respondents claimed that the Union's President, Secretary
and one of the board members were subsequently harassed, discriminated and eventually terminated from employment by Echo.7

In May of 2009, Echo received information about shortages in peso value arising from the movement of products to and from its
warehouse. After an immediate audit, Echo suspected that there was a conspiracy among the employees in the warehouse. Since an
uninterrupted investigation was necessary, Echo, in the exercise of its management prerogative, decided to re-assign the staff. The
respondents were among those affected.8

On July 7, 2009, Enriquez issued a memorandum informing the respondents of their transfer to the Delivery Section, which was
within the premises of Echo's warehouse. The transfer would entail no change in ranks, status and salaries. 9

On July 14, 2009, Somido wrote Echo a letter10 indicating his refusal to be promoted as a "Delivery Supervisor." He explained that he
was already happy as a Warehouse Checker. Further, he was not ready to be a Delivery Supervisor since the position was sensitive and
required more expertise and training, which he did not have.

Cortes similarly declined Echo's offer of promotion claiming that he was contented in his post then as a Forklift Operator. He also
alleged that he would be more productive as an employee if he remained in his post. He also lacked prior supervisory experience.11

On July 16, 2009, Enriquez, sans consent of the respondents, informed the latter of their assignments/designations, effective July 17,
2009, as Delivery Supervisors with the following duties: (a) act as delivery dispatchers of booked and planned deliveries for the day;
(b) ensure the early loading of goods to the delivery trucks to avoid late take-offs; (c) man delivery teams for the trucks; (d) check the
operational and cleanliness conditions of the trucks; (e) attend to delivery concerns of account specialists of their outlets; and (f) call
the attention of other warehouse personnel and report the same to the Human Resources Department regarding absences/tardiness,
incomplete uniforms, appearances, refusal to accept delivery trips and other matters affecting warehouse productivity. 12

Echo alleged that the respondents did not perform the new duties assigned to them. Hence, they were each issued a memorandum,
dated July 16, 2009, requiring them to explain in writing their failure to abide with the new assignments. 13
On July 18, 2009, Echo clarified through a memo that the respondents were designated as "Delivery Coordinators" and not
"Supervisors."14

Thereafter, successive memoranda were issued by Echo to the respondents, who refused to acknowledge receipt and comply with the
directives therein. The Memoranda15 dated July 20, 2009 suspended them without pay for five days for their alleged insubordination.
The Memoranda16 dated August 8, 2009 informed them of their termination from employment, effective August 15, 2009, by reason
of their repeated refusal to acknowledge receipt of Echo's memoranda and flagrant defiance to assume the duties of Delivery
Coordinators.

The Proceedings Before the LA

On August 17, 2009, the respondents filed before the NLRC a complaint against Echo for unfair labor practice, illegal dismissal,
illegal suspension, illegal deductions and payment of money claims, damages and attorney's fees. 17 The respondents claimed that they
were offered promotions, which were mere ploys to remove them as rank-and-file employees, and oust them as Union members.18

The petitioners, on the other hand, insisted that the respondents were merely transferred, and not promoted. Further, the respondents
arrogantly refused to comply with Enriquez's directives. Their insubordination constituted just cause to terminate them from
employment.19

On April 20, 2010, LA Hernandez dismissed the respondents' complaint for reasons stated below: (a) the claims of union-busting,
harassment and discrimination were not supported by evidence; 20 (b) no promotions occurred as the duties of the Delivery
Supervisors/Coordinators were merely reportorial in nature and not indicative of any authority to hire, fire or change the status of
other employees;21 and (c) Echo properly exercised its management prerogative to order the transfer, and this was done without
intended changes in the ranks, salaries, status or places of assignment of the respondents.22

The Proceedings Before the NLRC

The respondents filed an appeal assailing LA Hernandez's ruling. The dispositive portion of the NLRC's Decision dated April 15, 2011
is quoted below:

WHEREFORE, premises considered, the appeal is GRANTED. The appealed decision of the [LA] dated April 20, 2010
is REVERSED and SET ASIDE and a new one is entered declaring [the petitioners] guilty of unfair labor practice and illegal
dismissal of the [respondents]. [The petitioners] are ordered to immediately reinstate [the respondents] to their previous positions
without loss of seniority rights and other privileges/benefits and to pay [the respondents] the following:

1. full backwages from the time of their dismissal up to their actual reinstatement;

2. the sum of P20,000.00 as moral damages[;]

3. the sum of P20,000.00 as exemplary damages; and ten [percent (10%)] of the monetary award as attorney's fees.

All other monetary claims are dismissed for lack of substantiation.

SO ORDERED.23

In sustaining the respondents' arguments, the NLRC explained that at the time of the farmer's dismissal, they had been employed by
Echo for several years since 2002 and 2004, respectively. There were no prior untoward incidents. However, things changed when the
Union was formed. When the two did not agree to be transferred, they were terminated for insubordination, a mere ploy to lend a
semblance of legality to a pre-conceived management strategy.24

The NLRC denied the petitioners' motion for reconsideration.25

The Proceedings Before the CA

The petitioners thereafter filed a Petition for Certiorari.26 In the herein assailed Decision dated September 24, 2013, the CA
affirmed in toto the NLRC's ruling citing the following as grounds:
A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in service.
Promotion, on the other hand, is the advancement from one position to another with an increase in duties and responsibilities as
authorized by law, and usually accompanied by an increase in salary.

x x x There is no doubt that said position of Delivery Supervisor/Coordinator entails great duties and responsibilities of overseeing
ECHO's business and involves discretionary powers. x x x What is important is the change in the nature of work which resulted in an
upgrade of their work condition and increase of duties and responsibilities which constitute promotion and not a mere transfer.

A transfer that results in promotion cannot be done without the employee's consent since there is no law that compels an employee to
accept a promotion for the reason that a promotion is in the nature of a gift or reward, which a person has a right to refuse. When [the
respondents] refused to accept their promotion as Delivery Supervisors/Coordinators, they were exercising a right and they cannot be
punished for it. He who uses his own legal right injures no one. Thus, [the respondents'] refusal to be promoted was not a valid cause
for their dismissal.

Anent the award of moral damages, exemplary damages and attorney's fees, We agree with the NLRC that [the respondents] are
entitled to the same.

xxxx

x x x We agree with the NLRC that the dismissal of [the respondents] was tainted with bad faith as they were dismissed by ECHO for
refusing to accept their promotion as Delivery Supervisor[s]/Coordinator[s]. x x x The NLRC also found that ECHO's act of
transferring [the respondents] from Forklift Operator and Warehouse Checker x x x to Delivery Supervisors/Coordinators was aimed
to remove them among the rank-and-file employees which amounts to union interference. Without the leadership of Cortes, as Vice-
President, and Somido, as an active member, the union would be severely weakened, especially since most of its officers were already
terminated by ECHO. xx x.27 (Citations omitted)

The petitioners filed a motion for reconsideration, which the CA denied through the Resolution 28 dated March 28, 2014.1wphi1

Issues

Unperturbed, the petitioners are now before the Court raising the issues of whether or not:

(1) the respondents were illegally suspended and terminated, hence, entitled to payment of their money claims, damages and
attorney's fees;

(2) Echo and its officers are guilty of unfair labor practice; and

(3) Echo's officers, who are sued as nominal parties, should be held liable to pay the respondents their money claims. 29

In support thereof, the petitioners claim that the respondents' refusal to comply with the management's transfer order constitutes just
cause to terminate the latter from employment. Echo also points out that before it closed shop on July 6, 2011, the Union continued
existing despite the respondents' dismissal from service. Hence, there is no factual basis in the NLRC and CA's ruling that the
respondents' termination is intertwined with union-busting.30

The petitioners further argue that the respondents failed to establish by substantial evidence that Echo's officers, namely, Enriquez,
Benedicto and Atty. Wenceslao, acted with malice. Thus, they cannot be held liable as well. 31

Corollarily, the dismissal being valid, there is no ground to grant the respondents' prayer for reinstatement and payment of money
claims and damages.32

In their Comment,33 the respondents reiterate that their transfer/promotion was conceived to pave the way for their eventual
termination from employment. Moreover, even before the respondents could convey their acceptance or refusal to the
transfer/promotion, they were promptly replaced by newly-hired contractual employees.

Ruling of the Court

The Court partially grants the instant petition.

The first two issues, being interrelated, shall be discussed jointly.

The offer of transfer is, in legal contemplation, a promotion, which the respondents validly refused. Such refusal cannot be the
basis for the respondents' dismissal from service. The finding of unfair labor practice and the award of moral and exemplary
damages do not however follow solely by reason of the dismissal.

Article 212(13) of the Labor Code distinguishes from each other as follows the concepts of managerial, supervisory and rank-and-file
employees:

"Managerial employee" is one who is vested with the powers or prerogatives to lay down and execute management policies and/or to
hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory employees are those who, in the interest
of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in
nature but requires the use of independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book. (Italics ours)

As to the extent of management prerogative to transfer/promote employees, and the differences between transfer on one hand, and
promotion, on the other, Coca-Cola Bottlers Philippines, Inc. v. Del Villar34 is instructive, viz:

[L]abor laws discourage interference in employers' judgment concerning the conduct of their business.

In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one office or
area of operation to another - provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the
action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause.
xx x.

x x x In the case of Blue Dairy Corporation v. National Labor Relations Commission, we described in more detail the limitations on
the right of management to transfer employees:

x x x [I]t cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be
able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank
or a diminution of his salaries, privileges and other benefits. xxx.

xxxx

A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in
service. Promotion, on the other hand, is the advancement from one position to another with an increase in duties and responsibilities
as authorized by law, and usually accompanied by an increase in salary. Conversely, demotion involves a situation where an
employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a
corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary. 35 (Citations omitted and
emphasis and underscoring ours)

For promotion to occur, there must be an advancement from one position to another or an upward vertical movement of the
employee's rank or position. Any increase in salary should only be considered incidental but never determinative of whether or not a
promotion is bestowed upon an employee.36

An employee is not bound to accept a promotion, which is in the nature of a gift or reward. Refusal to be promoted is a valid exercise
of a right.37 Such exercise cannot be considered in law as insubordination, or willful disobedience of a lawful order of the employer,
hence, it cannot be the basis of an employee's dismissal from service. 38

In the case at bench, a Warehouse Checker and a Forklift Operator are rank-and-file employees. On the other hand, the job of a
Delivery Supervisor/Coordinator requires the exercise of discretion and judgment from time to time. Specifically, a Delivery
Supervisor/Coordinator assigns teams to man the trucks, oversees the loading of goods, checks the conditions of the trucks,
coordinates with account specialists in the outlets regarding their delivery concerns, and supervises other personnel about their
performance in the warehouse. A Delivery Supervisor/Coordinator's duties and responsibilities are apparently not of the same weight
as those of a Warehouse Checker or Forklift Operator. Hence, despite the fact that no salary increases were effected, the assumption of
the post of a Delivery Supervisor/Coordinator should be considered a promotion. The respondents' refusal to accept the same was
therefore valid.
Notwithstanding the illegality of the respondents' dismissal, the Court finds no sufficient basis to award moral and exemplary
damages.

A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the dismissed employee to moral
damages. The award of moral and exemplary damages cannot be justified solely upon the premise that the employer dismissed his
employee without just or authorized cause.39

In the instant case, the right not to accept an offered promotion pertained to each of the respondents. However, they exhibited
disrespectful behavior by their repeated refusal to receive the memoranda issued by Echo and by their continued presence in their
respective areas without any work output.40 The Court thus finds that although the respondents' dismissal from service for just cause
was unwarranted, there is likewise no basis for the award of moral and exemplary damages in their favor. Echo expectedly imposed
disciplinary penalties upon the respondents for the latter's intransigence. Albeit the Court is not convinced of the character and extent
of the measures taken by Echo, bad faith cannot be inferred solely from the said impositions.

Anent the NLRC and CA's conclusion that Echo committed unfair labor practice, the Court disagrees.

Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate
interests of both labor and management, including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management
relations.41

The respondents allege that their transfer/promotion was intended to deprive the Union of leadership and membership. They claim that
other officers were already dismissed. The foregoing, however, lacks substantiation. Unfair labor practice is a serious charge, and the
respondents failed to show that the petitioners conclusively interfered with, restrained, or coerced employees in the exercise of their
right to self-organization.

Enriquez, Benedicto and Atty. Wenceslao cannot be held personally liable for the respondents' money claims.

Lambert Pawnbrokers and Jewelry Corporation, et al. v. Binamira 42 expounds on the liabilities of corporate officers to illegally
dismissed employees. The Court declared:

As a general rule, only the employer-corporation, partnership or association or any other entity, and not its officers, which may be held
liable for illegal dismissal of employees or for other wrongful acts. This is as it should be because a corporation is a juridical entity
with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. A
corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result of the
directors' and officers' acts as corporate agents, are not their personal liability but the direct responsibility of the corporation they
represent. It is settled that in the absence of malice and bad faith, a stockholder or an officer of a corporation cannot be made
personally liable for corporate liabilities. They are only solidarily liable with the corporation for the illegal termination of services of
employees if they acted with malice or bad faith. In Philippine American Life and General Insurance v. Gramaje, bad faith is defined
as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purpose. It
implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.43 (Citations omitted and
underlining ours)

In the instant petition, the respondents failed to specify and sufficiently prove the alleged acts of Enriquez, Benedicto and Atty.
Wenceslao from which malice or bad faith can be concluded. Hence, there is no reason to invoke the exception to the general rule on
non-liability of corporate officers.

In lieu of actual reinstatement, the respondents are entitled to separation pay.

"In cases of illegal dismissal, the accepted doctrine is that separation pay is available in lieu of reinstatement when the latter recourse
is no longer practical or in the best interest of the parties." 44

The Court notes that the respondents were terminated from service on August 15, 2009, or more than six years ago. Their
reinstatement will not be practical and to the best interest of the parties. The Court thus finds more prudence in awarding separation
pay to the respondents equivalent to one (1) month pay for every year of service, with a fraction of at least six (6) months considered
as one (1) whole year, from the time of their illegal dismissal up to the finality of this Decision.

An annual interest of six percent (6%) is imposed on the monetary award.

In accordance with Nacar v. Gallery Frames,45 the Court now imposes an interest on the monetary awards at the rate of six percent
(6%) per annum from the date of finality of this Decision until full payment

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 121393, dated September 24, 2013 and March 28, 2014, respectively, are MODIFIED.

The petitioner, Echo 2000 Commercial Corporation, is hereby declared guilty of illegal dismissal. In addition to the National Labor
Relations Commission's award of attorney's fees, Echo 2000 Commercial Corporation is likewise ORDERED to pay the respondents,
Arlo C. Cortes and Dave Somido, the following:

(a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay for every year of service, with a fraction of
at least six (6) months considered as one (1) whole year from the time of the dismissal up to the finality of this Decision;

(b) full backwages from the time of the illegal dismissal up to the finality of this Decision; and

(c) interest on all monetary awards at the rate of 6% per annum from the finality of this Decision until full payment.

The amounts awarded as moral and exemplary damages by the National Labor Relations Commission to Arlo C. Cortes and Dave
Somido are however deleted for lack of basis.

The case is REMANDED to the Labor Arbiter, who is hereby DIRECTED to COMPUTE the monetary benefits awarded in
accordance with this Decision.

SO ORDERED.
REPUBLIC OF THE PHILIPPINES, G.R. No. 178021
represented by the CIVIL SERVICE
COMMISSION, Present:
Petitioner,
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
- versus - DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

MINERVA M.P. PACHEO,

Respondent. Promulgated:
January 25, 2012

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

DECISION

MENDOZA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Republic of the
Philippines, represented by the Office of the Solicitor General (OSG), which assails the February 22, 2007 Decision[1] and the May 15,
2007 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 93781. The CA reversed the November 21, 2005 Resolution of
the Civil Service Commission (CSC) declaring the re-assignment of respondent Minerva M.P. Pacheos (Pacheo) not valid and
ordering her reinstatement to her original station but without backwages under the principle of no work, no pay.

The Facts

Pacheo was a Revenue Attorney IV, Assistant Chief of the Legal Division of the Bureau of Internal Revenue (BIR) in
Revenue Region No. 7 (RR7), Quezon City.

On May 7, 2002, the BIR issued Revenue Travel Assignment Order (RTAO) No. 25-2002,[3] ordering the reassignment of
Pacheo as Assistant Chief, Legal Division from RR7 in Quezon City to RR4 in San Fernando, Pampanga. The BIR cited exigencies of
the revenue service as basis for the issuance of the said RTAO.

Pacheo questioned the reassignment through her Letter dated May 9, 2002[4] addressed to Rene G. Banez, then Commissioner
of Internal Revenue (CIR). She complained that the transfer would mean economic dislocation since she would have to spend 200.00
on daily travel expenses or approximately 4,000.00 a month. It would also mean physical burden on her part as she would be
compelled to wake up early in the morning for her daily travel from Quezon City to San Fernando, Pampanga, and to return home late
at night from San Fernando, Pampanga to Quezon City. She was of the view that that her reassignment was merely intended to harass
and force her out of the BIR in the guise of exigencies of the revenue service. In sum, she considered her transfer from Quezon City to
Pampanga as amounting to a constructive dismissal.

Due to the then inaction of the BIR, Pacheo filed a complaint [5] dated May 30, 2002, before the CSC- National Capital
Region (CSC-NCR), praying for the nullification of RTAO No. 25-2002. In its July 22, 2002 Order, [6] the CSC-NCR treated Pacheos
Complaint as an appeal and dismissed the same, without prejudice, for failure to comply with Sections 73 and 74 of Rule V(b) of the
Uniform Rules on Administrative Cases in the Civil Service.[7]

In its Letter-reply[8] dated September 13, 2002, the BIR, through its Deputy Commissioner for Legal and Inspection Group,
Edmundo P. Guevara (Guevara), denied Pacheos protest for lack of merit. It contended that her reassignment could not be considered
constructive dismissal as she maintained her position as Revenue Attorney IV and was designated as Assistant Chief of Legal
Division. It emphasized that her appointment to the position of Revenue Attorney IV was without a specific station. Consequently, she
could properly be reassigned from one organizational unit to another within the BIR. Lastly, she could not validly claim a vested right
to any specific station, or a violation of her right to security of tenure.

Not in conformity with the ruling of the BIR, Pacheo appealed her case before the CSC.

On November 21, 2005, the CSC issued Resolution No. 051697[9] granting Pacheos appeal, the dispositive portion of which
reads:

WHEREFORE, the instant appeal of Minerva M.P. Pacheo is hereby GRANTED. The Bureau of Internal
Revenue Revenue Travel Assignment Order No. 25-2002 dated May 7, 2002, on the reassignment of Pacheo to the
Legal Division Revenue Region No. 4 San Fernanado, Pampanga, is hereby declared NOT
VALID. ACCORDINGLY, Pacheo should now be recalled to her original station. This Commission, however rules
and so holds that the withholding by the BIR of Pacheos salary for the period she did not report to work is justified.

The CSCRO No. III is directed to monitor the implementation of this Resolution.

In granting Pacheos appeal, the CSC explained:

On the second issue, this Commission finds merit in appellants contention that her reassignment in not
valid.

Of pertinent application thereto is Rule III, Section 6 of CSC Memorandum Circular No. 40, series of
1998, dated December 14, 1998, which provides:

Section 6. Other Personnel Movements. The following personnel movements which will
not require issuance of an appointment shall nevertheless require an office order by duly
authorized official.

a. Reassignment Movement of an employee from one organizational unit to another in the

same department or agency which does not involve reduction in rank, status or salary. If
reassignment is done without consent of the employee being reassigned it shall be allowed for a
maximum period of one year. Reassignment is presumed to be regular and made in the interest of
public service unless proven otherwise or it constitutes constructive dismissal.

No assignment shall be undertaken if done indiscriminately or whimsically because the

law is not intended as a convenient shield for the appointing/ disciplining authority to harass or
oppress a subordinate on the pretext of advancing and promoting public interest.

Reassignment of small salaried employee is not permissible if it causes significant

financial dislocation.

Although reassignment is a management prerogative, the same must be done in the exigency of the service
without diminution in rank, status and salary on the part of the officer or employee being temporarily reassigned.
Reassignment of small salaried employees, however is not allowed if it will cause significant financial dislocation to
the employee reassigned. Otherwise the Commission will have to intervene.

The primary purpose of emphasizing small salaried employees in the foregoing rule is to protect the rank
and file employees from possible abuse by the management in the guise of transfer/reassignment. The Supreme
Court in Alzate v. Mabutas, (51 O.G. 2452) ruled:

x x x [T]he protection against invalid transfer is especially needed by lower ranking

employees. The Court emphasized this need when it ruled that officials in the unclassified service,
presidential appointees, men in the government set up occupy positions in the higher echelon
should be entitled to security of tenure, unquestionable a lesser sol[ci]itude cannot be meant for
the little men, that great mass of Common underprivileged employees-thousand there are of them
in the lower bracket, who generally are without connections and who pin their hopes of
advancement on the merit system instituted by our civil service law.

In other words, in order to be embraced in the term small-salaried employees, the latter must belong to
the rank and file; and, his/her salary would be significantly reduced by virtue of the transfer/reassignment. Rank and
 file was categorized as those occupying the position of Division Chief and below, pursuant to CSC Resolution No.
1, series of 1991, dated January 28, 1991.

The facts established on record show that Pacheo belongs to the rank and file receiving an average monthly
salary of Twenty Thousand Pesos (20,000.00) under the salary standardization law and a monthly take home pay of
Fourteen Thousand Pesos (14,000.00). She has to spend around Four Thousand Pesos (4,000.00) a month for her
transportation expenses as a consequence of her reassignment, roughly twenty eight percent (28%) of her monthly
take home pay. Clearly, Pacheos salary shall be significantly reduced as a result of her reassignment.

In ANORE, Ma. Theresa F., this Commission ruled:

Anore, a lowly salaried employee, was reassigned to an isolated island 15 kilometers

away from her original place of assignment. She has to travel by boat with only one trip a day to
report to her new place of assignment in an office without any facilities, except its bare structure.
Worst, the municipality did not provide her with transportation allowance. She was forced to be
separated from her family, look for a boarding house where she can stay while in the island and
spend for her board and lodging. The circumstances surrounding Anores reassignment is exactly
the kind of reassignment that is being frowned upon by law.

This Commission, however, rules and so holds that the withholding by the BIR of her salaries is justified as
she is not entitled thereto since she is deemed not to have performed any actual work in the government on the
principle of no work no pay.

Accordingly, Pacheo should now be reinstated to her original station without any right to claim back salary
as she did not report to work either at her new place of assignment or at her original station. [10] [Emphases in the
original]

Still not satisfied, Pacheo moved for reconsideration. She argued that the CSC erred in not finding that she was constructively
dismissed and, therefore, entitled to back salary.

On March 7, 2006, the CSC issued Resolution No. 060397 [11] denying Pacheos motion for reconsideration.

Undaunted, Pacheo sought recourse before the CA via a petition for review.

In its February 22, 2007 Decision, the CA reversed the CSC Resolution and ruled in favor of Pacheo, the fallo of which
states:

WHEREFORE, the petition is GRANTED. Resolution nos. 051697 and 060397 dated November 21,
2005 and March 7, 2006, respectively, of the Civil Service Commission are REVERSED and SET ASIDE. A new
judgment is hereby entered finding petitioner to have been constructively dismissed and ordering her immediate
reinstatement with full backwages and benefits.

SO ORDERED.[12]
In setting aside CSC Resolution Nos. 051697 and 060397, the CA held that:

While this Court agrees that petitioners reassignment was not valid considering that a diminution in salary is enough
to invalidate such reassignment, We cannot agree that the latter has not been constructively dismissed as a result
thereof.

It is well to remember that constructive dismissal does not always involve forthright dismissal or diminution in rank,
compensation, benefits and privileges. For an act of clear discrimination, insensibility, or disdain by an employer
may become so unbearable on the part of the employee that it could foreclose any choice by him except to forgo his
continued employment.

The management prerogative to transfer personnel must be exercised without grave abuse of discretion and putting
to mind the basic elements of justice and fair play. The employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee.
In this case, petitioners reassignment will result in the reduction of her salary, not to mention the physical burden
that she would suffer in waking up early in the morning to travel daily from Quezon City to San Fernando,
Pampanga and in coming home late at night.

Clearly, the insensibility of the employer is deducible from the foregoing circumstances and petitioner may have no
other choice but to forego her continued employment.

Moreover, it would be inconsistent to hold that the reassignment was not valid due to the significant reduction in
petitioners salary and then rule that there is no constructive dismissal just because said reduction in salary will not
render petitioner penniless if she will report to her new place of assignment. It must be noted that there is
constructive dismissal when the reassignment of an employee involves a diminution in pay.

Having determined that petitioner has been constructively dismissed as a result of her reassignment, We
shall resolve whether or not she is entitled to backwages.

In denying petitioners claim for backwages, the CSC held:

This Commission, however, rules and so holds that the withholding by the BIR of her salaries is
justified as she is not entitled thereto since she is deemed not to have performed any actual work in
the government on the principle of no work no pay.

Accordingly, Pacheo should now be reinstated to her original station without any right to claim
back salary as she did not report for work either at her new place of assignment or at her original
station.

Pacheo, while belonging to the rank-and-file employees, is holding a responsible position as an

Assistant Division Chief, who could not just abandon her duties merely because she protested her
re-assignment and filed an appeal afterwards.

We do not agree.

If there is no work performed by the employee there can be no wage or pay, unless of course the laborer
was able, willing and ready to work but was illegally locked out, dismissed or suspended. The No work, no pay
principle contemplates a no work situation where the employees voluntarily absent themselves.

In this case, petitioner was forced to forego her continued employment and did not just abandon her
duties. In fact, she lost no time in protesting her reassignment as a form of constructive dismissal. It is settled that
the filing of a complaint for illegal dismissal is inconsistent with a charge of abandonment. The filing of the
complaint is proof enough of his desire to return to work, thus negating any suggestion of abandonment.

Neither do we agree with the OSG when it opined that:

No one in the Civil Service should be allowed to decide on whether she is going to accept or not
any work dictated upon by the exigency of the service. One should consider that public office is a
public trust and that the act of respondent CIR enjoys the presumption of regularity. To uphold the
failure of respondent to heed the RTAO would result in chaos. Every employee would put his or
her vested interest or personal opinion over and above the smooth functioning of the bureaucracy.

Security of tenure is a right of paramount value as recognized and guaranteed under Sec. 3, Art. XIII of the
1987 Constitution.

The State shall afford full protection to labor, xxx and promote full employment and equality of
employment opportunities for all. It shall guarantee the rights of all workers to xxx security of
tenure xxx

Such constitutional right should not be denied on mere speculation of any similar unclear and nebulous basis.
 In Garcia, et al. v. Lejano, et al., the Supreme Court rejected the OSGs opinion that when the transfer is
motivated solely by the interest of the service of such act cannot be considered violative of the Constitution, thus:

We do not agree to this view. While temporary transfers or assignments may be made of
the personnel of a bureau or department without first obtaining the consent of the employee
concerned within the scope of Section 79 (D) of the Administrative Code which party provides
that The Department Head also may, from time to time, in the interest of the service, change the
distribution among the several Bureaus and offices of his Department of the employees or
subordinates authorized by law, such cannot be undertaken when the transfer of the employee is
with a view to his removal. Such cannot be done without the consent of the employee. And if the
transfer is resorted to as a scheme to lure the employee away from his permanent position, such
attitude is improper as it would in effect result in a circumvention of the prohibition which
safeguards the tenure of office of those who are in the civil service. It is not without reason that
this Court made the following observation:

To permit circumvention of the constitutional prohibition in question by allowing removal from

office without lawful cause, in the form or guise of transfers from one office to another, or from
one province to another, without the consent of the transferee, would blast the hopes of these
young civil service officials and career men and women, destroy their security and tenure of office
and make for a subservient, discontented and inefficient civil service force that sways with every
political wind that blows and plays up to whatever political party is in the saddle. That would be
far from what the framers of our Constitution contemplated and desired. Neither would that be our
concept of a free and efficient Government force, possessed of self-respect and reasonable
ambition.
Clearly, the principle of no work, no pay does not apply in this case. As held in Neeland v. Villanueva, Jr:

We also cannot deny back salaries and other economic benefits on the ground that
respondent Clerk of Court did not work. For the principle of no work, no pay does not apply when
the employee himself was forced out of job. Xxx Indeed, it is not always true that back salaries are
paid only when work is done. Xxx For another, the poor employee could offer no work since he
was forced out of work. Thus, to always require complete exoneration or performance of work
would ultimately leave the dismissal uncompensated no matter how grossly disproportionate the
penalty was. Clearly, it does not serve justice to simply restore the dismissed employee to his
position and deny him his claim for back salaries and other economic benefits on these
grounds. We would otherwise be serving justice in halves.

An illegally dismissed government employee who is later ordered reinstated is entitled to back wages and
other monetary benefits from the time of his illegal dismissal up to his reinstatement. This is only fair and sensible
because an employee who is reinstated after having been illegally dismissed is considered as not having left his
office and should be given a comparable compensation at the time of his reinstatement.

When a government official or employee in the classified civil service had been illegally dismissed, and his
reinstatement had later been ordered, for all legal purposes he is considered as not having left his office, so that he is
entitled to all the rights and privileges that accrue to him by virtue of the office that he held.[13]

The CSC moved for reconsideration but its motion was denied by the CA in its May 15, 2007 Resolution.

Hence, this petition.

THE ISSUES
 WHETHER OR NOT THE ASSAILED DECISION IS LEGALLY CORRECT IN DECLARING THAT
RESPONDENT WAS CONSTRUCTIVELY DISMISED AND ENTITLED TO BACK WAGES,
NOTWITHSTANDING RESPONDENTS REFUSAL TO COMPLY WITH BIR RTAO No. 25-2002 WHICH
IS IMMEDIATELY EXECUTORY PURSUANT TO SECTION 24 (F) OF P.D. 807.

WHETHER OR NOT RESPONDENT SUFFERED A DIMINUTION IN HER SALARY IN RELATION TO

SECTION 6, RULE III OF CSC MEMORANDUM CIRCULAR No. 40, SERIES OF 1998, DATED
DECEMBER 14, 1998, AS A RESULT OF THE ISSUANCE [OF] BIR RTAO No. 25-2002 ORDERING HER
REASSIGNMENT FROM BIR RR No. 7 IN QUEZON CITY TO BIR RR No. 4 IN SAN FERNANDO,
PAMPANGA.[14]

In her Memorandum,[15] Pacheo asserts that RTAO No. 25-2002, on the pretense of the exigencies of the revenue service, was solely
meant to harass her and force her to resign. As a result of her invalid reassignment, she was constructively dismissed and, therefore,
entitled to her back salaries and monetary benefits from the time of her illegal dismissal up to her reinstatement.

In its own Memorandum,[16] the CSC, through the OSG, argues that constructive dismissal is not applicable in this case because it was
Pacheo herself who adamantly refused to report for work either in her original station or new place of assignment in clear violation of
Section 24 (f) of Presidential Decree (PD) No. 807.[17] Citing jurisprudence,[18] the CSC avers that the RTAO is immediately
executory, unless otherwise ordered by the CSC. Therefore, Pacheo should have first reported to her new place of assignment and then
appealed her case to the CSC if she indeed believed that there was no justification for her reassignment. Since Pacheo did not report
for work at all, she is not entitled to backwages following the principle of no work, no pay.

THE COURTS RULING

The petition fails to persuade.

It appears undisputed that the reassignment of Pacheo was not valid. In its memorandum, the OSG initially argues for the
validity of RTAO No. 25-2002 authorizing Pacheos reassignment from Quezon City to San Fernando, Pampanga. Later, however, it
specifically prays for the reinstatement of CSC Resolution Nos. 051697 and 060397, which categorically declared RTAO No. 25-2002
as not valid. In seeking such relief, the OSG has effectively accepted the finding of the CSC, as affirmed by the CA, that Pacheos
reassignment was indeed invalid. Since the issue of Pacheos reassignment is already settled, the Court finds it futile to pass upon the
same at this point.

The question that remains to be resolved is whether or not Pacheos assignment constitutes constructive dismissal and, thus,
entitling her to reinstatement and backwages. Was Pacheo constructively dismissed by reason of her reassignment?

The Court agrees with the CA on this point.

While a temporary transfer or assignment of personnel is permissible even without the employee's prior consent, it cannot be
done when the transfer is a preliminary step toward his removal, or a scheme to lure him away from his permanent position, or when it
is designed to indirectly terminate his service, or force his resignation. Such a transfer would in effect circumvent the provision which
safeguards the tenure of office of those who are in the Civil Service. [19]
Significantly, Section 6, Rule III of CSC Memorandum Circular No. 40, series of 1998, defines constructive dismissal as a
situation when an employee quits his work because of the agency heads unreasonable, humiliating, or demeaning actuations which
render continued work impossible. Hence, the employee is deemed to have been illegally dismissed. This may occur although there is
no diminution or reduction of salary of the employee. It may be a transfer from one position of dignity to a more servile or menial job.

The CSC, through the OSG, contends that the deliberate refusal of Pacheo to report for work either in her original station in Quezon
City or her new place of assignment in San Fernando, Pampanga negates her claim of constructive dismissal in the present case being
in violation of Section 24 (f) of P.D. 807 [now Executive Order (EO) 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (6)]. [20] It
further argues that the subject RTAO was immediately executory, unless otherwise ordered by the CSC. It was, therefore, incumbent
on Pacheo to have reported to her new place of assignment and then appealed her case to the CSC if she indeed believed that there was
no justification for her reassignment.
 Anent the first argument of CSC, the Court cannot sustain the proposition. It was legally impossible for Pacheo to report to
her original place of assignment in Quezon Cityconsidering that the subject RTAO No. 25-2002 also reassigned Amado Rey B.
Pagarigan (Pagarigan) as Assistant Chief, Legal Division, from RR4, San Fernando, Pampanga to RR7, Quezon City, the very same
position Pacheo formerly held. The reassignment of Pagarigan to the same position palpably created an impediment to Pacheos return
to her original station.

The Court finds Itself unable to agree to CSCs argument that the subject RTAO was immediately executory. The Court
deems it necessary to distinguish between a detail and reassignment, as they are governed by different rules.

A detail is defined and governed by Executive Order 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (6), thus:
(6) Detail. A detail is the movement of an employee from one agency to another without the issuance of an
appointment and shall be allowed, only for a limited period in the case of employees occupying professional,
technical and scientific positions. If the employee believes that there is no justification for the detail, he may appeal
his case to the Commission. Pending appeal, the decision to detail the employee shall be executory unless otherwise
ordered by the Commission. [Underscoring supplied]

On the other hand, a reassignment is defined and governed by E.O. 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26
(7), thus:
(7) Reassignment.An employee may be reassigned from one organizational unit to another in the same
agency; Provided, That such reassignment shall not involve a reduction in rank, status or salaries. [Underscoring
supplied]

The principal distinctions between a detail and reassignment lie in the place where the employee is to be moved and in its
effectivity pending appeal with the CSC. Based on the definition, a detail requires a movement from one agency to another while a
reassignment requires a movement within the same agency. Moreover, pending appeal with the CSC, an order to detail is immediately
executory, whereas a reassignment order does not become immediately effective.

In the case at bench, the lateral movement of Pacheo as Assistant Chief, Legal Division from Quezon City to San Fernando, Pampanga
within the same agency is undeniably a reassignment. The OSG posits that she should have first reported to her new place of
assignment and then subsequently question her reassignment. It is clear, however, from E.O. 292, Book V, Title 1, Subtitle A, Chapter
5, Section 26 (7) that there is no such duty to first report to the new place of assignment prior to questioning an alleged invalid
reassignment imposed upon an employee. Pacheo was well within her right not to report immediately to RR4, San Fernando,
Pampanga, and to question her reassignment.
Reassignments involving a reduction in rank, status or salary violate an employees security of tenure, which is assured by the
Constitution, the Administrative Code of 1987, and the Omnibus Civil Service Rules and Regulations. Security of tenure covers not
only employees removed without cause, but also cases of unconsented transfers and reassignments, which are tantamount to
illegal/constructive removal.[21]

The Court is not unaware that the BIR is authorized to assign or reassign internal revenue officers and employees as the exigencies of
service may require. This authority of the BIR, however, should be prudently exercised in accordance with existing civil service rules.

Having ruled that Pacheo was constructively dismissed, is she entitled to reinstatement and back wages? The Court agrees
with the CA that she is entitled to reinstatement, but finds Itself unable to sustain the ruling that she is entitled to full back wages and
benefits. It is a settled jurisprudence[22] that an illegally dismissed civil service employee is entitled to back salaries but limited only to
a maximum period of five (5) years, and not full back salaries from his illegal dismissal up to his reinstatement.

WHEREFORE, the petition is DENIED. The assailed February 22, 2007 Decision and May 15, 2007 Resolution of the
Court of Appeals, in CA-G.R. SP No. 93781, are hereby AFFIRMED with MODIFICATION that respondent Minerva
M.P. Pacheo is hereby ordered reinstated without loss of seniority rights but is only entitled to the payment of back salaries
corresponding to five (5) years from the date of her invalid reassignment on May 7, 2002.

SO ORDERED.
 January 13, 2016

G.R. Nos. 173254-55 & 173263

DIAMOND FARMS, INC., Petitioner,

vs.
SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE
COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICIO CAPRECHO, REY DIMACALI,
ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO* DIAZ, RUDY VISTAL, ROGER MONTERO,
JOSISIMO GOMEZ and MANUEL MOSQUERA, Respondents.

DECISION

JARDELEZA, J.:

We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the issue of who among Diamond Farms, Inc. ("DFI"),
Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO") and the individual
contractors2 ("respondent-contractors") is the employer of the 400 employees ("respondent-workers").

DFI challenges the March 31, 2006 Decision3 and May 30, 2006 Resolution4 of the Court Appeals, Special Twenty-Second Division,
Cagayan De Oro City for being contrary to law and jurisprudence. The Decision dismissed DFIs Petition for Certiorari in C.A.-G.R.
SP Nos. 53806 and 61607 and granted DARBMUPCOs Petition for Certiorari in C.A.-G.R. SP No. 59958. It declared DFI as the
statutory employer of the respondent-workers.

The Facts

DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao. 5 Pursuant to Republic Act No. 6657 or
the Comprehensive Agrarian Reform Law of 1988 ("CARL"), commercial farms shall be subject to compulsory acquisition and
distribution,6 thus the original plantation was covered by the law. However, the Department of Agrarian Reform ("DAR") granted DFI
a deferment privilege to continue agricultural operations until 1998. 7 Due to adverse marketing problems and observance of the so-
called "lay-follow" or the resting of a parcel of land for a certain period of time after exhaustive utilization, DFI closed some areas of
operation in the original plantation and laid off its employees. 8 These employees petitioned the DAR for the cancellation of DFIs
deferment privilege alleging that DFI already abandoned its area of operations. 9 The DAR Regional Director recalled DFIs deferment
privilege resulting in the original plantations automatic compulsory acquisition and distribution under the CARL. 10 DFI filed a
motion for reconsideration which was denied. It then appealed to the DAR Secretary. 11

In the meantime, to minimize losses, DFI offered to give up its rights and interest over the original plantation in favor of the
government by way of a Voluntary Offer to Sell.12 The DAR accepted DFIs offer to sell the original plantation. However, out of the
total 800 hectares, the DAR only approved the disposition of 689.88 hectares. Hence, the original plantation was split into two: 689.88
hectares were sold to the government ("awarded plantation") and the remaining 200 hectares, more or less, were retained by DFI
("managed area").13 The managed area is subject to the outcome of the appeal on the cancellation of the deferment privilege before the
DAR Secretary.

On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries ("ARBs") under the CARL.
These ARBs are the same farmers who were working in the original plantation. They subsequently organized themselves into a multi-
purpose cooperative named "DARBMUPCO," which is one of the respondents in this case.14

On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement ("BPPA") 15 with DFI.16 Under the
BPPA, DARBMUPCO and its members as owners of the awarded plantation, agreed to grow and cultivate only high grade quality
exportable bananas to be sold exclusively to DFI.17 The BPPA is effective for 10 years.18

On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement" ("SMA"). 19 The SMA stated that
DFI shall take care of the labor cost arising from the packaging operation, cable maintenance, irrigation pump and irrigation
maintenance that the workers of DARBMUPCO shall conduct for DFIs account under the BPPA. 20

From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the BPPA because
some of its members were not willing to work.21 Hence, to assist DARBMUPCO in meeting its production obligations under the
BPPA, DFI engaged the services of the respondent-contractors, who in turn recruited the respondent-workers.22
The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among DARBMUPCO, DFI and
the respondent-contractors.

C.A. G.R. SP No. 53806

On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")a legitimate labor organization with a local
chapter in the awarded plantationfiled a petition for certification election in the Office of the Med-Arbiter in Davao City.23 SPFL
filed the petition on behalf of some 400 workers (the respondent-workers in this petition) "jointly employed by DFI and
DARBMUPCO" working in the awarded plantation.

DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed, instead, that the respondent-
workers are the employees of the respondent-contractors.24

In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for certification election. It directed the conduct of
certification election and declared that DARBMUPCO was the employer of the respondent-workers. The Order stated that "whether
the said workers/employees were hired by independent contractors is of no moment. What is material is that they were hired purposely
to work on the 689.88 hectares banana plantation [the awarded plantation] now owned and operated by DARBMUPCO." 26

DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated February 18, 1999, 27 the SOLE
modified the decision of the Med-Arbiter. The SOLE held that DFI, through its manager and personnel, supervised and directed the
performance of the work of the respondentcontractors. The SOLE thus declared DFI as the employer of the respondent-workers.28

DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999. 29

On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition for Certiorari30 under Rule 65 of the Rules of
Court. The case was raffled to the CAs former Twelfth Division and was docketed as C.A.-G.R. SP No. 53806.

C.A.-G.R. SP. No. 59958

Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300 workers, filed a case for underpayment
of wages, non-payment of 13th month pay and service incentive leave pay and attorneys fees against DFI, DARBMUPCO and the
respondent-contractors before the National Labor Relations Commission ("NLRC") in Davao City. DARBMUPCO averred that it is
not the employer of respondent-workers; neither is DFI. It asserted that the money claims should be directed against the true
employerthe respondent-contractors.33

In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that the respondent-contractors are "labor-only contractors."
The LA gave credence to the affidavits of the other contractors 35 of DFI (who are not party-respondents in this petition) asserting that
DFI engaged their services, and supervised and paid their laborers. The affidavits also stated that the contractors had no dealings with
DARBMUPCO, except that their work is done in the awarded plantation. 36

The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-workers.37 The LA dismissed the case
against DARBMUPCO and the respondent-contractors.38

DFI appealed to the NLRC. In a Resolution dated May 24, 1999,39 the NLRC Fifth Division modified the Decision of the LA and
declared that DARBMUPCO and DFI are the statutory employers of the workers rendering services in the awarded plantation and the
managed area, respectively.40 It adjudged DFI and DARBMUPCO as solidarily liable with the respondent-contractors for the
monetary claims of the workers, in proportion to their net planted area. 41

DARBMUPCO filed a motion for reconsideration which was denied. 42 It filed a second motion for reconsideration in the NLRC,
which was also denied for lack of merit and for being barred under the NLRC Rules of Procedure. 43Hence, DARBMUPCO elevated
the case to the CA by way of a Petition for Certiorari.44 The case was docketed as C.A.-G.R. SP. No. 59958.

The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No. 53806 in a Resolution dated
January 27, 2001.45

C.A.-G.R. SP No. 61607

Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the Department of Labor and
Employment ("DOLE") conducted a certification election on October 1, 1999. 46 On even date, DFI filed an election protest47 before
the Med-Arbiter arguing that the certification election was premature due to the pendency of a petition for certiorari before the CA
assailing the February 18, 1999 and May 4, 1999 Resolutions of the SOLE (previously discussed in C.A.-G.R. SP No. 53806).

In an Order dated December 15, 1999,48 the Med-Arbiter denied DFIs election protest, and certified SPFL-Workers Solidarity of
DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining representative of the respondent-workers. DFI filed a
Motion for Reconsideration49 which the Med-Arbiter treated as an appeal, and which the latter elevated to the SOLE.

In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The Resolution stated that the May 4, 1999 Resolution
directing the conduct of certification election is already final and executory on June 4, 1999. It pointed out that the filing of the
petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999 Resolutions does not stay the conduct of the
certification election because the CA did not issue a restraining order. 51 DFI filed a Motion for Reconsideration but the motion was
denied.52

On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No. 61607.

In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No. 61607 with C.A.-G.R. SP. No.
59958 and C.A. G.R. SP No. 53806.

The Assailed CA Decision and Resolution

The CA was confronted with two issues:55

(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in these petitions; and

(2) Whether or not a certification election may be conducted pending the resolution of the petition for certiorari filed before
this Court, the main issue of which is the identity of the employer of the [respondent-workers] in these petitions."

On the first issue, the CA agreed with the ruling of the SOLE 56 that DFI is the statutory employer of the respondent-workers. It noted
that the DFI hired the respondent-contractors, who in turn procured their own men to work in the land owned by DARBMUPCO.
Further, DFI admitted that the respondent-contractors worked under the direction and supervision of DFIs managers and personnel.
DFI also paid for the respondent-contractors services.57 The CA said that the fact that the respondent-workers worked in the land
owned by DARBMUPCO is immaterial. "Ownership of the land is not one of the four (4) elements generally considered to establish
employer-employee relationship."58

The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-contractors are not independent
contractors.59 The CA stressed that in its pleadings before the Med-Arbiter, the SOLE, and the CA, DFI revealed that DARBMUPCO
lacks manpower to fulfill the production requirements under the BPPA. This impelled DFI to hire contractors to supply labor enabling
DARBMUPCO to meet its quota. The CA observed that while the various agencies involved in the consolidated petitions sometimes
differ as to who the statutory employer of the respondent-workers is, they are uniform in finding that the respondent-contractors are
labor-only contractors.60

On the second issue, the CA reiterated the ruling of the SOLE 61 that absent an injunction from the CA, the pendency of a petition
for certiorari does not stay the holding of the certification election. 62 The challenged Resolution of the SOLE is already final and
executory as evidenced by an Entry of Judgment dated July 14, 1999; hence, the merits of the case can no longer be reviewed. 63

The CA thus held in its Decision dated March 31, 2006:

WHEREFORE, premises considered, this Court hereby ORDERS:

(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and

(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the assailed resolutions of the
NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000, respectively.

SO ORDERED.64

DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May 30, 2006. 65
DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be declared the true employer of the
respondent-workers.

DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the true employer of the respondent-workers.

Respondent-contractors filed a Verified Explanation and Memorandum67 asserting that they were labor-only contractors; hence, they
are merely agents of the true employer of the respondent-workers.

SPFL did not file any comment or memorandum on behalf of the respondent-workers.68

The Issue

The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the employer of the respondent-
workers.

Our Ruling

We deny the petition.

This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or subcontracting is an arrangement
whereby a principal (or employer) agrees to put out or farm out with a contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal. 69 It involves a trilateral relationship among the principal or
employer, the contractor or subcontractor, and the workers engaged by the contractor or subcontractor. 70

Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the relations which may arise between an employer, a
contractor, and the contractors employees,72 thus:

ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the performance of
the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the
provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.

The Omnibus Rules Implementing the Labor Code73 distinguishes between permissible job contracting (or independent
contractorship) and labor-only contracting. Job contracting is permissible under the Code if the following conditions are met:

(a) The contractor carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof; and

(b) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of his business. 74
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if a person who undertakes
to supply workers to an employer:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other
materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the principal
business or operations of the employer in which workers are habitually employed. 75

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that
it has the substantial capital, investment, tools and the like.76

Based on the conditions for permissible job contracting, we rule that respondent-contractors are labor-only contractors.

There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors, DFI, and
DARBMUPCO did not offer any proof that respondent-contractors were not engaged in labor-only contracting. In this regard, we cite
our ruling in Caro v. Rilloraza,77 thus:

"In regard to the first assignment of error, the defendant company pretends to show through Venancio Nasol's own testimony that he
was an independent contractor who undertook to construct a railway line between Maropadlusan and Mantalisay, but as far as the
record shows, Nasol did not testify that the defendant company had no control over him as to the manner or methods he employed in
pursuing his work. On the contrary, he stated that he was not bonded, and that he only depended upon the Manila Railroad for money
to be paid to his laborers. As stated by counsel for the plaintiffs, the word independent contractor means 'one who exercises
independent employment and contracts to do a piece of work according to his own methods and without being subject to control of his
employer except as to result of the work.' Furthermore, if the employer claims that the workmen is an independent contractor, for
whose acts he is not responsible, the burden is on him to show his independence.

Tested by these definitions and by the fact that the defendant has presented practically no evidence to determine whether
Venancio Nasol was in reality an independent contractor or not, we are inclined to think that he is nothing but an intermediary
between the defendant and certain laborers. It is indeed difficult to find that Nasol is an independent contractor; a person
who possesses no capital or money of his own to pay his obligations to them, who files no bond to answer for any fulfillment of his
contract with his employer and specially subject to the control and supervision of his employer, falls short of the requisites or
conditions necessary for the common and independent contractor."78 (Citations omitted; emphasis supplied.)

To support its argument that respondent-contractors are the employers of respondent-workers, and not merely labor-only contractors,
DFI should have presented proof showing that respondent-contractors carry on an independent business and have sufficient
capitalization. The record, however, is bereft of showing of even an attempt on the part of DFI to substantiate its argument.

DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are independent contractors. Nowhere
in the NLRC Resolution does it say that the respondent-contractors are independent contractors. On the contrary, the NLRC declared
that "it was not clearly established on record that said [respondent-]contractors are independent, xxx." 79

Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As will be seen below,
respondent-contractors made the admissions and declarations on two occasions: first was in their Formal Appearance of Counsel and
Motion for Exclusion of Individual Party-Respondents filed before the LA; and second was in their Verified Explanation and
Memorandum filed before this Court.

Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have been engaged by DFI and
DARBMUPCO.80 They admitted that they do not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials, and they recruited workers to perform activities directly related to the principal operations of their
employer.81

Before this Court, respondents-contractors again admitted that they are labor-only contractors. They narrated that:

1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by petitioner, Diamond Farms,
Inc. (DFI) to recruit farm workers, who are the complaining [respondent-workers] (as represented by Southern
Philippines Federation of Labor (SPFL) in this appeal by certiorari), in order to perform specific farm activities, such as
pruning, deleafing, fertilizer application, bud inject, stem spray, drainage, bagging, etc., on banana plantation lands awarded
 to private respondent, Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) and on
banana planted lands owned and managed by petitioner, DFI.

2. All farm tools, implements and equipment necessary to performance of such farm activities were supplied by petitioner
DFI to respondents Voltaire Lopez, Jr., et. al. as well as to respondents-SPFL, et. al. Herein respondents Voltaire Lopez,
Jr. et. al. had no adequate capital to acquire or purchase such tools, implements, equipment, etc.

3. Herein respondents Voltaire Lopez, Jr., et. al. As well as respondents-SPFL, et. al. were being directly supervised,
controlled and managed by petitioner DFI farm managers and supervisors, specifically on work assignments and
performance targets. DFI managers and supervisors, at their sole discretion and prerogative, could directly hire and
terminate any or all of the respondents-SPFL, et. al., including any or all of the herein respondents Voltaire Lopez, Jr., et. al.

4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein respondents Voltaire Lopez, Jr., et. al.,
and correspondingly submitted to petitioner DFI. Payment of wages to respondents-SPFL, et. al. were being paid for by
petitioner DFI thru herein respondents Voltaire Lopez, [Jr.], et. al. The latter were also receiving their wages/salaries from
petitioner DFI for monitoring/leading/recruiting the respondents-SPFL, et. al.

5. No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et al., nor to herein
respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent DARBMUPCO directly intervene much less supervise any or all
of [the] respondents-SPFL, et. al. including herein respondents Voltaire Lopez, Jr., et. al.82 (Emphasis supplied.)

The foregoing admissions are legally binding on respondent-contractors.83 Judicial admissions made by parties in the pleadings, or in
the course of the trial or other proceedings in the same case are conclusive and so does not require further evidence to prove
them.84 Here, the respondent-contractors voluntarily pleaded that they are labor-only contractors; hence, these admissions bind them.

A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee relationship
between the principal, and the workers of the labor-only contractor; the labor-only contractor is deemed only as the agent of the
principal.85 Thus, in this case, respondent-contractors are the labor-only contractors and either DFI or DARBMUPCO is their
principal.

We hold that DFI is the principal.

Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an agreement with a job contractor,
either for the performance of a specified work or for the supply of manpower. 86 In this regard, we quote with approval the findings of
the CA, to wit:

The records show that it is DFI which hired the individual [respondent-contractors] who in turn hired their own men to work
in the 689.88 hectares land of DARBMUPCO as well as in the managed area of the plantation. DFI admits [that] these
[respondent-contractors] worked under the direction and supervision of the DFI managers and personnel. DFI paid the [respondent-
contractors] for the services rendered in the plantation and the [respondent-contractors] in turn pay their workers after they
[respondent-contractors] received payment from DFI. xxx DARBMUPCO did not have anything to do with the hiring, supervision and
payment of the wages of the workers-respondents thru the contractors-respondents. xxx87 (Emphasis supplied.)

DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of respondent-contractors
that they sent their billing to DFI for payment; and that DFIs managers and personnel are in close consultation with the respondent-
contractors.88

DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it (DARBMUPCO) owns the awarded
plantation where respondent-contractors and respondent-workers were working;89 and therefore DARBMUPCO is the ultimate
beneficiary of the employment of the respondent-workers.90

That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers were working is
immaterial. This does not change the situation of the parties. As correctly found by the CA, DFI, as the principal, hired the
respondent-contractors and the latter, in turn, engaged the services of the respondent-workers.91 This was also the unanimous finding
of the SOLE,92 the LA,93 and the NLRC.94 Factual findings of the NLRC, when they coincide with the LA and affirmed by the CA are
accorded with great weight and respect and even finality by this Court. 95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the power of control on the part of the
principal over the workers of the contractor, under the facts, prove the employer-employee relationship between the former and the
latter, thus:

[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employer-employee relationship
between the principal and the employees of the supposed contractor." In this case, the employer-employee relationship between
Petron and petitioners becomes all the more apparent due to the presence of the power of control on the part of the former
over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee relationship between
the parties.1wphi1 The four elements of an employment relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the power to control the employees conduct.

Of these four elements, it is the power to control which is the most crucial and most determinative factor, so important, in fact,
that, the other elements may even be disregarded.

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not detract from the
conclusion that there exists an employer-employee relationship between the parties due to Petrons power of control over the
petitioners. One manifestation of the power of control is the power to transfer employees from one work assignment to another. Here,
Petron could order petitioners to do work outside of their regular "maintenance/utility" job. Also, petitioners were required to report
for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being implemented within the bulk plant. All these imply control. In an
industry where safety is of paramount concern, control and supervision over sensitive operations, such as those performed by the
petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which,
if mishandled or not properly attended to, may cause serious injuries and damage to property and the environment. Naturally,
supervision by Petron is essential in every aspect of its product handling in order not to compromise the integrity, quality and safety of
the products that it distributes to the consuming public.97 (Citations omitted; emphasis supplied)

That DFI is the employer of the respondent-workers is bolstered by the CAs finding that DFI exercises control over the respondent-
workers.98 DFI, through its manager and supervisors provides for the work assignments and performance targets of the respondent-
workers. The managers and supervisors also have the power to directly hire and terminate the respondent-workers.99 Evidently, DFI
wields control over the respondent-workers.

Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation under the BPPA, 100 and that
under the terms of the BPPA, no employer-employee relationship exists between DFI and the respondent-workers,101 to wit:

UNDERTAKING OF THE FIRST PARTY

xxx

3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general welfare of its
members working in the plantation and specifically render free and harmless the SECOND PARTY [DFI] of any expense, liability or
claims arising therefrom. It is clearly recognized by the FIRST PARTY that its members and other personnel utilized in the
performance of its function under this agreement are not employees of the SECOND PARTY.102 (Emphasis supplied)

In labor-only contracting, it is the law which creates an employer-employee relationship between the principal and the workers of the
labor-only contractor.103

Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-workers are not employees of
DFI is not controlling, as the proven facts show otherwise. The law prevails over the stipulations of the parties. Thus, in Tabas v.
California Manufacturing Co., Inc.,104 we held that:

The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of
agreement.1wphi1 Hence, the fact that the manpower supply agreement between Livi and California had specifically designated the
former as the petitioners' employer and had absolved the latter from any liability as an employer, will not erase either party's
obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm. xxx105 (Emphasis
supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of DFI. Under Article 106 of the
Labor Code, DFI shall be solidarily liable with the respondent-contractors for the rightful claims of the respondent-workers, to the
same manner and extent as if the latter are directly employed by DFI. 106

WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30, 2006 Resolution of the
Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.

SO ORDERED.
G.R. No. 171664 March 6, 2013

BANKARD, INC., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION- FIRST DIVISION, PAULO BUENCONSEJO,BANKARD
EMPLOYEES UNION-AWATU, Respondents.

DECISION

MENDOZA, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to review, reverse and set aside the October 20, 2005
Decision1 and the February 21, 2006 Resolution2 of the Court of Appeals {CA), in CA-G.R. SP No. 68303, which affirmed the May
31, 2001 Resolution3 and the September 24, 2001 Order4 of the National Labor Relations Commission (NLRC) in Certified Cases No.
000-185-00 and 000-191-00.

The Facts

On June 26, 2000, respondent Bankard Employees Union-AWATU (Union) filed before the National Conciliation and Mediation
Board (NCMB) its first Notice of Strike (NOS), docketed as NS-06-225-00,5 alleging commission of unfair labor practices by
petitioner Bankard, Inc. (Bankard), to wit: 1) job contractualization; 2) outsourcing/contracting-out jobs; 3) manpower rationalizing
program; and 4) discrimination.

On July 3, 2000, the initial conference was held where the Union clarified the issues cited in the NOS. On July 5, 2000, the Union held
its strike vote balloting where the members voted in favor of a strike. On July 10, 2000, Bankard asked the Office of the Secretary of
Labor to assume jurisdiction over the labor dispute or to certify the same to the NLRC for compulsory arbitration. On July 12, 2000,
Secretary Bienvenido Laguesma (Labor Secretary) of the Department of Labor and Employment (DOLE) issued the order certifying
the labor dispute to the NLRC.6

On July 25, 2000, the Union declared a CBA bargaining deadlock. The following day, the Union filed its second NOS, docketed as
NS-07-265-00,7 alleging bargaining in bad faith on the part of Bankard. Bankard then again asked the Office of the Secretary of Labor
to assume jurisdiction, which was granted. Thus, the Order, dated August 9, 2000, certifying the labor dispute to the NLRC, was
issued.8

The Union, despite the two certification orders issued by the Labor Secretary enjoining them from conducting a strike or lockout and
from committing any act that would exacerbate the situation, went on strike on August 11, 2000. 9

During the conciliatory conferences, the parties failed to amicably settle their dispute. Consequently, they were asked to submit their
respective position papers. Both agreed to the following issues:

1. Whether job contractualization or outsourcing or contracting-out is an unfair labor practice on the part of the management.

2. Whether there was bad faith on the part of the management when it bargained with the Union. 10

As regards the first issue, it was Bankards position that job contractualization or outsourcing or contracting-out of jobs was a
legitimate exercise of management prerogative and did not constitute unfair labor practice. It had to implement new policies and
programs, one of which was the Manpower Rationalization Program (MRP) in December 1999, to further enhance its efficiency and
be more competitive in the credit card industry. The MRP was an invitation to the employees to tender their voluntary resignation,
with entitlement to separation pay equivalent to at least two (2) months salary for every year of service. Those eligible under the
companys retirement plan would still receive additional pay. Thereafter, majority of the Phone Center and the Service Fulfilment
Division availed of the MRP. Thus, Bankard contracted an independent agency to handle its call center needs.11

As to the second issue, Bankard denied that there was bad faith on its part in bargaining with the Union. It came up with counter-offers
to the Unions proposals, but the latters demands were far beyond what management could give. Nonetheless, Bankard continued to
negotiate in good faith until the Memorandum of Agreement (MOA) re-negotiating the provisions of the 1997-2002, Collective
Bargaining Agreement (CBA) was entered into between Bankard and the Union. The CBA was overwhelmingly ratified by the Union
members. For said reason, Bankard contended that the issue of bad faith in bargaining had become moot and academic.12
On the other hand, the Union alleged that contractualization started in Bankard in 1995 in the Records Communications Management
Division, particularly in the mailing unit, which was composed of two (2) employees and fourteen (14) messengers. They were hired
as contractual workers to perform the functions of the regular employees who had earlier resigned and availed of the
MRP.13 According to the Union, there were other departments in Bankard utilizing messengers to perform work load considered for
regular employees, like the Marketing Department, Voice Authorizational Department, Computer Services Department, and Records
Retention Department. The Union contended that the number of regular employees had been reduced substantially through the
management scheme of freeze-hiring policy on positions vacated by regular employees on the basis of cost-cutting measures and the
introduction of a more drastic formula of streamlining its regular employees through the MRP. 14

With regard to the second issue, the Union averred that Bankards proposals were way below their demands, showing that the
management had no intention of reaching an agreement. It was a scheme calculated to force the Union to declare a bargaining
deadlock.15

On May 31, 2001, the NLRC issued its Resolution16 declaring that the management committed acts considered as unfair labor practice
(ULP) under Article 248(c) of the Labor Code. It ruled that:

The act of management of reducing its number of employees thru application of the Manpower Rationalization Program and
subsequently contracting the same to other contractual employees defeats the purpose or reason for streamlining the employees. The
ultimate effect is to reduce the number of union members and increasing the number of contractual employees who could never be
members of the union for lack of qualification. Consequently, the union was effectively restrained in their movements as a union on
their rights to self-organization. Management had successfully limited and prevented the growth of the Union and the acts are clear
violation of the provisions of the Labor Code and could be considered as Unfair Labor Practice in the light of the provisions of Article
248 paragraph (c) of the Labor Code. 17

The NLRC, however, agreed with Bankard that the issue of bargaining in bad faith was rendered moot and academic by virtue of the
finalization and signing of the CBA between the management and the Union. 18

Unsatisfied, both parties filed their respective motions for partial reconsideration.1wphi1 Bankard assailed the NLRC's finding of
acts of ULP on its part. The Union, on the other hand, assailed the NLRC ruling on the issue of bad faith bargaining.

On September 24, 2001, the NLRC issued the Order 19 denying both parties' motions for lack of merit.

On December 28, 2001, Bankard filed a petition for certiorari under Rule 65 with the CA arguing that the NLRC gravely abused its
discretion amounting to lack or excess of jurisdiction when:

1. It issued the Resolution, dated May 31, 2001, particularly in finding that Bankard committed acts of unfair labor practice;
and,

2. It issued the Order dated September 24, 2001 denying Bankard's partial motion for reconsideration. 20

The Union filed two (2) comments, dated January 22, 2002, through its NCR Director, Cornelio Santiago, and another, dated February
6, 2002, through its President, Paulo Buenconsejo, both praying for the dismissal of the petition and insisting that Bankard's resort to
contractualization or outsourcing of contracts constituted ULP. It further alleged that Bankard committed ULP when it conducted
CBA negotiations in bad faith with the Union.

Ruling of the Court of Appeals

The CA dismissed the petition, finding that the NLRC ruling was supported by substantial evidence.

The CA agreed with Bankard that job contracting, outsourcing and/or contracting out of jobs did not per se constitute ULP, especially
when made in good faith and for valid purposes. Despite Bankard's claim of good faith in resorting to job contractualization for
purposes of cost-efficient operations and its non-interference with the employees' right to self-organization, the CA agreed with the
NLRC that Bankard's acts impaired the employees right to self-organization and should be struck down as illegal and invalid pursuant
to Article 248(c)21 of the Labor Code. The CA thus, ruled in this wise:

We cannot agree more with public respondent. Incontrovertible is the fact that petitioner's acts, particularly its promotion of the
program enticing employees to tender their voluntary resignation in exchange for financial packages, resulted to a union dramatically
reduced in numbers. Coupled with the management's policy of "freeze-hiring" of regular employees and contracting out jobs to
contractual workers, petitioner was able to limit and prevent the growth of the Union, an act that clearly constituted unfair labor
practice.22

In its assailed decision, the CA affirmed the May 31, 2001 Resolution and the September 24, 2001 Order of the NLRC.

Aggrieved, Bankard filed a motion for reconsideration. The CA subsequently denied it for being a mere repetition of the grounds
previously raised. Hence, the present petition bringing up this lone issue:

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER BANKARD, INC. COMMITTED ACTS OF UNFAIR
LABOR PRACTICE WHEN IT DISMISSED THE PETITION FOR CERTIORARI AND DENIED THE MOTION FOR
RECONSIDERATION FILED BY PETITIONER.23

Ruling of the Court

The Court finds merit in the petition.

Well-settled is the rule that "factual findings of labor officials, who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial
evidence."24 Furthermore, the factual findings of the NLRC, when affirmed by the CA, are generally conclusive on this Court. 25 When
the petitioner, however, persuasively alleges that there is insufficient or insubstantial evidence on record to support the factual findings
of the tribunal or court a quo, then the Court, exceptionally, may review factual issues raised in a petition under Rule 45 in the
exercise of its discretionary appellate jurisdiction.26

This case involves determination of whether or not Bankard committed acts considered as ULP. The underlying concept of ULP is
found in Article 247 of the Labor Code, to wit:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor practices violate the constitutional
right of workers and employees to self-organization, are inimical to the legitimate interests of both labor and management, including
their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt
industrial peace and hinder the promotion of healthy and stable labor-management relations. x x x

The Court has ruled that the prohibited acts considered as ULP relate to the workers right to self-organization and to the observance
of a CBA. It refers to "acts that violate the workers right to organize." 27 Without that element, the acts, even if unfair, are not
ULP.28 Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner
the right of his employees to self-organize.29

In this case, the Union claims that Bankard, in implementing its MRP which eventually reduced the number of employees, clearly
violated Article 248(c) of the Labor Code which states that:

Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the following unfair labor
practice:

xxxx

(c) To contract out services or functions being performed by union members when such will interfere with, restrain or coerce
employees in the exercise of their rights to self-organization;

xxxx

Because of said reduction, Bankard subsequently contracted out the jobs held by former employees to other contractual employees.
The Union specifically alleges that there were other departments in Bankard, Inc. which utilized messengers to perform work load
considered for regular employees like the Marketing Department, Voice Authorizational Department, Computer Services Department,
and Records Retention Department.30 As a result, the number of union members was reduced, and the number of contractual
employees, who were never eligible for union membership for lack of qualification, increased.

The general principle is that the one who makes an allegation has the burden of proving it.1avvphi1 While there are exceptions to this
general rule, in ULP cases, the alleging party has the burden of proving the ULP;31 and in order to show that the employer committed
ULP under the Labor Code, substantial evidence is required to support the claim. 32 Such principle finds justification in the fact that
ULP is punishable with both civil and/or criminal sanctions. 33
Aside from the bare allegations of the Union, nothing in the records strongly proves that Bankard intended its program, the MRP, as a
tool to drastically and deliberately reduce union membership. Contrary to the findings and conclusions of both the NLRC and the CA,
there was no proof that the program was meant to encourage the employees to disassociate themselves from the Union or to restrain
them from joining any union or organization. There was no showing that it was intentionally implemented to stunt the growth of the
Union or that Bankard discriminated, or in any way singled out the union members who had availed of the retirement package under
the MRP. True, the program might have affected the number of union membership because of the employees voluntary resignation
and availment of the package, but it does not necessarily follow that Bankard indeed purposely sought such result. It must be recalled
that the MRP was implemented as a valid cost-cutting measure, well within the ambit of the so-called management prerogatives.
Bankard contracted an independent agency to meet business exigencies. In the absence of any showing that Bankard was motivated by
ill will, bad faith or malice, or that it was aimed at interfering with its employees right to self-organize, it cannot be said to have
committed an act of unfair labor practice.34

"Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally reasonable might conceivably opine otherwise." 35 Unfortunately, the
Union, which had the burden of adducing substantial evidence to support its allegations of ULP, failed to discharge such burden.36

The employers right to conduct the affairs of its business, according to its own discretion and judgment, is well-
recognized.37 Management has a wide latitude to conduct its own affairs in accordance with the necessities of its business. 38 As the
Court once said:

The Court has always respected a company's exercise of its prerogative to devise means to improve its operations. Thus, we have held
that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work
assignments, supervision and transfer of employees, working methods, time, place and manner of work.

This is so because the law on unfair labor practices is not intended to deprive employers of their fundamental right to prescribe and
enforce such rules as they honestly believe to be necessary to the proper, productive and profitable operation of their business. 39

Contracting out of services is an exercise of business judgment or management prerogative. Absent any proof that management acted
in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer. 40Furthermore, bear in
mind that ULP is punishable with both civil and/or criminal sanctions. 41 As such, the party so alleging must necessarily prove it by
substantial evidence. The Union, as earlier noted, failed to do this. Bankard merely validly exercised its management prerogative. Not
shown to have acted maliciously or arbitrarily, no act of ULP can be imputed against it.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 68303, dated October 20, 2005,
and its Resolution, dated February 21, 2006, are REVERSED and SET ASIDE. Petitioner Bankard, Inc. is hereby declared as not
having committed any act constituting Unfair Labor Practice under Article 248 of the Labor Code.

SO ORDERED.
G.R. No. 181719 April 21, 2014

EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C. FUNTANOZ, GERARDO F. PUNZALAN, FREDDIE M.

MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB FINANCE EMPLOYEES ASSOCIATION FFW
CHAPTER (FEDERATION OF FREE WORKERS), Petitioners,
vs.
JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE), Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the March 23, 2007 decision2 and the February 11, 2008
resolution3 of the Court of Appeals (CA) in CA G.R. SP No. 91952. These assailed CA rulings annulled and set aside the December 1,
2004 decision4 and the July 21, 2005 resolution5 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No.
029753-01 (NLRC NCR Case No. 06-06112-99). The NLRC rulings, in turn, fully affirmed the September 29, 2000 decision 6 of
Labor Arbiter (LA) Jovencio LL Mayor, Jr. The LA's decision ordered the petitioners Eugene S. Arabit, Edgardo C. Sadsad, Lowell C.
Funtanoz, Gerardo F. Punzalan, Freddie M. Mendoza, Emilio B. Belen and Violeta C. Diumanos reinstatement to their former
positions without loss of seniority rights and the payment of full backwages, computed from the time of their dismissal on May 30,
1999.

Factual Antecedents

Petitioners were former regular employees of respondent Jardine Pacific Finance, Inc. (formerly MB Finance) (Jardine). The
petitioners were also officers and members of MB Finance Employees Association-FFW Chapter (the Union), a legitimate labor union
and the sole exclusive bargaining agent of the employees of Jardine. The table below shows the petitioners previously occupied
positions, as well as their total length of service with Jardine before their dismissal from employment.

Petitioner Position Number of

Years of
Service

Eugene S. Arabit Field Collector 20 years

Edgardo C. Sadsad Field Collector 3 years

Lowell C. Funtanoz Field Collector 7 years

Gerardo F. Punzalan Field Collector 16 years

Freddie M. Mendoza Field Collector 20 years

Emilio B. Belen Senior Credit Investigator/Field 18 years

Collector- San Pablo Branch

Violeta C. Diumano Senior Accounting 19 years

Clerk/Documentation Clerk-San Pablo Branch

On the claim of financial losses, Jardine decided to reorganize and implement a redundancy program among its employees. The
petitioners were among those affected by the redundancy program. Jardine thereafter hired contractual employees to undertake the
functions these employees used to perform.

The Union filed a notice of strike with the National Conciliation and Mediation Board (NCMB), questioning the termination of
employment of the petitioners who were also union officers. The Union alleged unfair labor practice on the part of Jardine, as well as
discrimination in the dismissal of its officers and members.
Negotiations ensued between the Union and Jardine under the auspices of the NCMB, and both parties eventually reached an amicable
settlement. In the settlement, the petitioners accepted their redundancy pay without prejudice to their right to question the legality of
their dismissal with the NLRC. Jardine paid the petitioners a separation package composed of their severance pay, plus their grossed
up transportation allowance.7

On June 1, 1999, the petitioners and the Union filed a complaint against Jardine with the NLRC for illegal dismissal and unfair labor
practice.

The Labor Arbitration Rulings

Before the LA, the parties decided to limit the issues to two, namely: (a) whether the separation of the petitioners was valid or not; and
(b) whether Jardine committed an unfair labor practice against the Union.

The petitioners alleged before the LA that their dismissal was illegal and was tainted with bad faith as their positions were not
superfluous. They argued that if their positions had really been redundant, then Jardine should have not hired contractual workers to
replace them.8

The petitioners also argued that Jardine was guilty of unfair labor practice for contracting out services that the petitioners previously
held. Unfair labor practice took place under Article 248 of the Labor Code as the petitioners were union officers. 9

The petitioners likewise claimed that Jardines act of hiring contractual employees as replacements was a restraint on the Unions right
to self-organization. The petitioners also pointed out that they were Union officers and panel members in the scheduled collective
bargaining agreement (CBA) negotiations between Jardine and the Union. The petitioners particularly found the company action
objectionable as their employment was terminated when their CBA negotiations were about to commence. 10

Jardine argued in its defense that the company had been incurring substantial business losses from 1996 to 1998. According to Jardine,
its audited financial statements reflect that for 1996, it suffered a net loss of P5,538,960.00; for 1997,11 a net loss in the amount
of P57,274,018.00;12 and a net loss of P95,529,527.00 for 1998.13

Because of these serious business losses, Jardine asserted that it had to lay-off some of its employees and reorganize its ranks to
eliminate positions that were in excess of what its business required. 14

Jardine, however, admitted that it hired contractual employees to replace petitioners in their previous posts. Jardine reasoned out that
no bad faith took place since the hiring of contractual employees was a valid exercise of its management prerogative. 15 Jardine argued
that the distinction between redundancy and retrenchment is not material; an employer resorts to retrenchment or redundancy for the
same reason, namely the economics of business.16 Since Jardine successfully established that it incurred serious business losses, then
termination of employment of the petitioners was valid for all intents and purposes. 17

In reply to the petitioners allegation of unfair labor practice, Jardine argued that had it intended to commit union busting, then it
should not have merely dismissed the seven petitioners; it should have also dismissed other employees who were union officers and
members.18 According to Jardine, the termination of the petitioners services did not interfere with the Union and its remaining
members right to self-organization since Jardine continuously dealt with the Union and recognized it as the sole and exclusive
bargaining representative of its rank-and-file employees.19

The LA ruled in the petitioners favor. In its decision20 dated September 29, 2000, the LA held that the hiring of contractual employees
to replace the petitioners directly contradicts the concept of redundancy which involves the trimming down of the workforce because a
task is being carried out by too many people. 21 The LA explained that the companys action was a circumvention of the right of the
petitioners to security of tenure.22

The LA further held that it was not enough for Jardine to simply focus on its losses. According to the LA, it was error for Jardine to
simply lump together the seven petitioners as employees whose positions have become redundant without explaining why their
respective positions became superfluous in relation to the other positions and employees of the company. 23

On the petitioners allegation of unfair labor practice, the LA held that not enough evidence was presented to prove the claim against
Jardine.

Both parties appealed the LAs decision to the NLRC. In its decision 24 dated December 1, 2004, the NLRC dismissed the appeals and
affirmed the LAs decision in its entirety.25
Jardine moved for the reconsideration of the NLRCs decision, which motion the NLRC also denied in its resolution26 of July 21,
2005. Jardine thereafter sought recourse with the CA via a petition for certiorari under Rule 65.27

The CAs Ruling

In its decision28 dated March 23, 2007, the CA reversed the LAs and the NLRCs rulings, and granted Jardines petition for certiorari.

The CA found that Jardines act of hiring contractual employees in replacement of the petitioners does not run counter to the argument
that their positions are already superfluous.29 According to the CA, the hiring of contractual employees is a management prerogative
that Jardine has the right to exercise.30 In the absence of any showing of malice or arbitrariness on the part of Jardine in implementing
its redundancy program, the courts must not interfere with the companys exercise of a bona fide management decision.31 The CA
cited for this purpose the case of De Ocampo v. National Labor Relations Commission 32 which explains:

The reduction of the number of workers in a company made necessary by the introduction of the services of Gemac Machineries in the
maintenance and repair of its industrial machinery is justified. There can be no question as to the right of the company to contract the
services of Gemac Machineries to replace the services rendered by the terminated mechanics with a view to effecting more economic
and efficient methods of production.

In the same case, We ruled that "(t)he characterization of (petitioners) services as no longer necessary or sustainable, and therefore
properly terminable, was an exercise of business judgment on the part of (private respondent) company. The wisdom or soundness of
such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and malicious action is not shown" (ibid, p. 673).

In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the services rendered by the
mechanics became redundant and superfluous, and therefore properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any proof that the management abused its discretion or acted in a
malicious or arbitrary manner, the court will not interfere with the exercise of such prerogative. 33

The CA further held that Jardine successfully established that for the years 1996 to 1998, the company incurred serious losses.34 The
appellate court also observed that the reduction in the number of workers, made necessary by the introduction of the services of an
independent contractor, is justified when undertaken to implement more economic and efficient methods of production.35

These justifications led to the CAs ruling which annulled and set aside the December 1, 2004 decision and the July 21, 2005
resolution of the NLRC and to its own ruling that the petitioners had not been illegally dismissed.

The CA denied the petitioners subsequent motion for reconsideration. The petitioners are now before this Court on a petition for
review on certiorari under Rule 45 of the Rules of Court.

The Petition

In their petition, the petitioners maintain that the CA gravely abused its discretion and that its ruling is not in conformity with the law
and jurisprudence.

The petitioners argue that there is a difference between financial loss and decline of earnings. They posit that what Jardine actually
experienced was a decline in capital and not substantial financial losses for the years 1996 to 1998. 36

The petitioners also assert that Jardine did not take any remedial measure before it implemented its redundancy program. It simply
hastily terminated the petitioners from the service.37 In support of this argument, the petitioners cited the case of Golden Thread
Knitting Industries, Inc. v. NLRC38 where the Court laid down guidelines to be considered in selecting employees who would be
dismissed from the service in case of redundancy.39 The petitioners contend that the records show that Jardine did not lay down any
basis or criteria in choosing the petitioners for inclusion in the program. 40

According to the petitioners, they are all regular employees whose years of service range from three (3) to twenty (20) years. Since
Jardine immediately terminated their services without evaluating their performance in relation with those of the other employees and
without considering other relevant factors, then Jardines decision was arbitrary and in disregard of the guidelines set by this Court in
Golden Thread.41

Finally, the petitioners also reiterate the findings of the LA and of the NLRC that Jardines act of hiring contractual employees as their
replacements is contrary to Jardines claim that there was redundancy. 42 They also contend that the hiring of new employees negates
Jardines argument that it was suffering from substantial losses. 43Based on these premises, the petitioners posit that the CA erred in
annulling and setting aside the NLRCs decision, and pray instead for its reinstatement.

The Courts Ruling

We resolve to GRANT the petition.

Procedural consideration: the nature
of a Rule 45 petition

We emphasize at the outset that the current petition was brought under Rule 45 of the Rules of Court. As a rule, only questions of law
may be raised on appeal under this remedy.44 This is in contrast with a petition for certiorari brought under Rule 65 where the review
centers on the jurisdictional errors the lower court or tribunal may have committed. 45

We thus limit our review to errors of law which the CA might have committed. A question of law arises when there is doubt as to
what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by
the litigants or any of them.46

"In ruling for legal correctness, we have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the case was
correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in a labor case. In question
form, the question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the
case?"47

In this context, the primary question we confront is: did the CA correctly rule that the NLRC committed grave abuse of discretion
when it found that Jardine validly terminated the petitioners employment because of redundancy?

Redundancy in contrast with retrenchment

Jardine, in its petition for certiorari with the CA, posited that the distinction between redundancy and retrenchment is not material. 48 It
contended that employers resort to these causes of dismissal for purely economic considerations.49 Jardine further argued that the
immateriality of the distinction between these two just causes for dismissal is shown by the fact that redundancy and retrenchment are
found and lumped together in just one single provision of the Labor Code (Article 283 thereof).

We cannot accept Jardines shallow understanding of the concepts of redundancy and retrenchment in determining the validity of the
severance of an employer-employee relationship. The fact that they are found together in just one provision does not necessarily give
rise to the conclusion that the difference between them is immaterial. This Court has already ruled before that retrenchment and
redundancy are two different concepts; they are not synonymous; thus, they should not be used interchangeably. 50 The clear
distinction between these two concepts was discussed in Andrada, et al., v. NLRC,51 citing the case of Sebuguero v. NLRC,52 where
this Court clarified:

Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the
enterprise. A position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number
of factors, such as over hiring of workers, decreased volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of employment initiated by the
employer through no fault of the employees and without prejudice to the latter, resorted to by management during periods of business
recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of
automation. Simply put, it is an act of the employer of dismissing employees because of losses in the operation of a business, lack of
work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by this Court.

These rulings appropriately clarify that redundancy does not need to be always triggered by a decline in the business. Primarily,
employers resort to redundancy when the functions of an employee have already become superfluous or in excess of what the business
requires. Thus, even if a business is doing well, an employer can still validly dismiss an employee from the service due to redundancy
if that employees position has already become in excess of what the employers enterprise requires.
From this perspective, it is illogical for Jardine to terminate the petitioners employment and replace them with contractual employees.
The replacement effectively belies Jardines claim that the petitioners positions were abolished due to superfluity. Redundancy could
have been justified if the functions of the petitioners were transferred to other existing employees of the company.

To dismiss the petitioners and hire new contractual employees as replacements necessarily give rise to the sound conclusion that the
petitioners services have not really become in excess of what Jardines business requires. To replace the petitioners who were all
regular employees with contractual ones would amount to a violation of their right to security of tenure. For this, we affirm the
NLRCs ruling, citing the LAs decision, when it ruled:

In the case at bench, respondents did not dispute that after laying-off complainants herein, they engaged the services of an agency to
perform the tasks use (sic) to be done by complainants. This is [in direct] contradiction to the concept of redundancy which precisely
requires the trimming down of the [workforce] because a task is being carried out by just too many people. The subsequent contracting
out to an agency the functions or duties that used to be the domain of individual complainants herein is a circumvention of their
constitutional rights to security of tenure, and therefore illegal. 53

Guidelines in implementing redundancy

We recognize that management has the prerogative to characterize an employees services as no longer necessary or sustainable, and
therefore properly terminable. 54

The CA also correctly cited De Ocampo, et al., v. NLRC55 when it discussed that Jardines decision to hire contractual employees as
replacements is a management prerogative which the company has the right to undertake to implement a more economic and efficient
operation of its business.56

In De Ocampo, this Court held that, in the absence of proof that the management abused its discretion or acted in a malicious or
arbitrary manner in replacing dismissed employees with contractual ones, judicial intervention should not be made in the companys
exercise of its management prerogative.57

The employers exercise of its management prerogative, however, is not an unbridled right that cannot be subjected to this Courts
scrutiny. The exercise of management prerogative is subject to the caveat that it should not performed in violation of any law and that
it is not tainted by any arbitrary or malicious motive on the part of the employer. 58

This Court, in several cases, sufficiently explained that the employer must follow certain guidelines to dismiss employees due to
redundancy. These guidelines aim to ensure that the dismissal is not implemented arbitrarily and is not tainted with bad faith against
the dismissed employees.

In Golden Thread Knitting Industries, Inc. v. NLRC, 59 this Court laid down the principle that the employer must use fair and
reasonable criteria in the selection of employees who will be dismissed from employment due to redundancy. Such fair and reasonable
criteria may include the following, but are not limited to: (a) less preferred status (e.g. temporary employee); (b) efficiency; and (c)
seniority. The presence of these criteria used by the employer shows good faith on its part and is evidence that the implementation of
redundancy was painstakingly done by the employer in order to properly justify the termination from the service of its employees. 60

As the petitioners pointed out, the records are bereft of indications that Jardine employed clear criteria when it decided who among its
employees, who held similar positions as the petitioners, should be removed from their posts because of redundancy. Jardine never
bothered to explain how and why the petitioners were the ones dismissed. Jardines acts became more suspect given that the
petitioners were all union officers and some of them were panel members in the scheduled CBA negotiations between Jardine and the
Union.

Aside from the guidelines for the selection of employees who will be terminated, the Court, in Asian Alcohol Corp. v. NLRC, 61 also
laid down guidelines for redundancy to be characterized as validly undertaken by the employer. The Court ruled:

For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1) written
notice served on both the employees and the Department of Labor and Employment at least one month prior to the intended date of
retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service,
whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and accordingly abolished. 62

Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine informed the Department of Labor
and Employment of the petitioners separation from the service due to redundancy on April 30, 1999, one month before their
terminations effectivity. Also, the petitioners were given their individual separation packages, composed of their severance pay, plus
their grossed up transportation allowance.

Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines are interrelated to ensure good faith in
abolishing redundant positions; the employer must clearly show that it used fair and reasonable criteria in ascertaining what positions
are to be declared redundant.

In this cited case, the employer took pains to discuss and elaborate on the reasons why the position of the private respondent was the
one chosen by the employer to be abolished. We quote the Courts ruling:

In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was terminated. Also, the water from
the wells had become salty due to extensive prawn farming nearby and could no longer be used by Asian Alcohol for its
purpose.1awp++i1 The wells had to be closed and needless to say, the services of Carias, Martinez and Sendon had to be terminated
on the twin grounds of redundancy and retrenchment.

xxxx

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site. At their current
production level, the new management found that it was more cost efficient to maintain only nine (9) mechanics. In choosing whom to
separate among the ten (10) mechanics, the management examined employment records and reports to determine the least efficient
among them. It was private respondent Amacio who appeared the least efficient because of his poor health condition.63

Jardine never undertook what the employer in Asian Alcohol did.1wphi1 Jardine was never able to explain in any of its pleadings
why the petitioners positions were redundant. It never even attempted to discuss the attendant facts and circumstances that led to the
conclusion that the petitioners positions had become superfluous and unnecessary to Jardines business requirements. Thus, we can
only speculate on what actually happened.

As the LA correctly found, Jardine lumped together the seven petitioners into one group whose positions had become redundant. This
move was despite the fact that not all of them occupied the same positions and performed the same functions.64 Under the
circumstances of the case, Jardines move was thus illegal. We affirm the LAs ruling that fair play and good faith require that where
one employee will be chosen over the others, the employer must be able to clearly explain the merit of the choice it has taken.65

To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian Alcohol, we find that at two levels,
Jardine failed to set the required fair and reasonable criteria in the termination of the petitioners employment, leading to the
conclusion that the termination from the service was arbitrary and in bad faith.

The first level, based on Asian Alcohol, is broader as the case recognized distinctions on a per position basis. At this level, Jardine
failed to explain why among all of the existing positions in its organization, Jardine chose the petitioners posts as the ones which have
already become redundant and terminable.1wphi1

The second level, derived from Golden Thread, is more specific. Here the distinction narrows down to the particular employees
occupying the same positions which were already declared to be redundant. At this level, Jardines lapse is shown by its failure to
explain why among all of its employees whose positions were determined to be redundant, the petitioners were the ones selected to be
dismissed from the service.

Notably, the LA and the NLRC also arrived at the same conclusion that the redundancy program was not valid because Jardine hired
contractual employees as replacements, thus, contradicting underlying reasons of redundancy. The CA significantly chose to disregard
these coherent labor findings without fully justifying its move. At the very least, this was an indicator that something was wrong
somewhere in these dismissals. It was clear legal error for the CA to recognize grave abuse of discretion when none occurred.

WHEREFORE, we hereby GRANT the petition. We REVERSE the decision dated March 23, 2007 and the resolution dated February
11, 2008 of the Court of Appeals in CA G.R. SP No. 91952, and uphold the decision dated December 1, 2004 and the resolution dated
July 21, 2005 of the National Labor Relations Commission which affirmed in its entirety the September 29, 2000 decision of the
Labor Arbiter.

SO ORDERED.
G.R. No. 168613 March 5, 2013

ATTY. MA. ROSARIO MANALANG-DEMIGILLO, Petitioner,

vs.
TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES (TIDCORP), and its BOARD OF
DIRECTORS, Respondents.

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

G.R. No. 185571

TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES, Petitioner,

vs.
MA. ROSARIO S. MANALANG-DEMIGILLO, Respondent.

DECISION

BERSAMIN, J.:

A reorganization undertaken pursuant to a specific statutory authority by the Board of Directors of a government-owned and
government-controlled corporation is valid.

Antecedents

On February 12, 1998, the Philippine Export and Foreign Loan Guarantee was renamed Trade and Investment Development
Corporation of the Philippines (TIDCORP) pursuant to Republic Act No. 8494 entitled An Act Further Amending Presidential Decree
No. 1080, As Amended, by Reorganizing And Renaming the Philippine Export and Foreign Loan Guarantee Corporation, Expanding
Its Primary Purpose, and for Other Purposes.

Republic Act No. 8494 reorganized the structure of TIDCORP. The issuance of appointments in accordance with the reorganization
ensued. Petitioner Rosario Manalang-Demigillo (Demigillo) was appointed as Senior Vice President (PG 15) with permanent status,
and was assigned to the Legal and Corporate Services Department (LCSD) of TIDCORP.

In 2002, TIDCORP President Joel C. Valdes sought an opinion from the Office of the Government Corporate Counsel (OGCC)
relative to TIDCORPs authority to undertake a reorganization under the law, whose Section 7 and Section 8 provide as follows:

Section 7. The Board of Directors shall provide for an organizational structure and staffing pattern for officers and employees of the
Trade and Investment Development Corporation of the Philippines (TIDCORP) and upon recommendation of its President, appoint
and fix their remuneration, emoluments and fringe benefits: Provided, That the Board shall have exclusive and final authority to
appoint, promote, transfer, assign and re-assign personnel of the TIDCORP, any provision of existing law to the contrary
notwithstanding. x x x

Section 8. All incumbent personnel of the Philippine Export and Foreign Loan Guarantee Corporation shall continue to exercise their
duties and functions as personnel of the TIDCORP until reorganization is fully implemented but not to exceed one (1) year from the
approval of this Act. The Board of Directors is authorized to provide for separation benefits for those who cannot be accommodated in
the new structure. All those who shall retire or are separated from the service on account of the reorganization under the preceding
Section shall be entitled to such incentives, as are authorized by the Corporation, which shall be in addition to all gratuities and
benefits to which they may be entitled under existing laws.

In Opinion No. 221 dated September 13, 2002, 1 then Government Corporate Counsel Amado D. Valdez opined as follows:

There is no question on the power of the PhilEXIM (also known as TIDCORP) Board of Directors to undertake a reorganization of the
corporations present organizational set-up. In fact, the authority to provide for the corporations organizational structure is among the
express powers granted to PhilEXIM through its Board.

As to the one-year period to implement a reorganization mentioned in Section 8 of RA 8494, it is our considered opinion that the same
provision refers to the initial reorganization to effect transition from the Philippine Export and Foreign Loan Guarantee Corporation
(Philguarantee) to what is now known as the Trade and Investment Corporation of the Philippines (TIDCORP). The one-year period
does not, however, operate as a limitation that any subsequent changes in the organizational set-up pursuant to the authority of the
Board to determine the corporations organizational structure under Section 7 of RA 8494, which is designed to make the corporation
more attuned to the needs of the people or, in this case, the sector of the Philippine economy that it serves, can only be made during
the same one-year period.

On the basis of OGCC Opinion No. 221, the Board of Directors passed Resolution No. 1365, Series of 2002, on October 22, 2002 to
approve a so-called Organizational Refinement/Restructuring Plan to implement a new organizational structure and staffing pattern, a
position classification system, and a new set of qualification standards.

During the implementation of the Organizational Refinement/Restructuring Plan, the LCSD was abolished. According to the List of
Appointed Employees under the New Organizational Structure of TIDCORP as of November 1, 2002, Demigillo, albeit retaining her
position as a Senior Vice President, was assigned to head the Remedial and Credit Management Support Sector (RCMSS). On the
same date, President Valdes issued her appointment as head of RCMSS, such appointment being in nature a reappointment under the
reorganization plan.

On December 13, 2002, President Valdes issued a memorandum informing all officers and employees of TIDCORP that the Board of
Directors had approved on December 11, 2002 the appointments issued pursuant to the newly approved positions under the
Organizational Refinement/Restructuring Plan.

In her letter dated December 23, 2002 that she sent to TIDCORP Chairman Jose Isidro Camacho, however, Demigillo challenged
before the Board of Directors the validity of Resolution No. 1365 and of her assignment to the RCMSS. She averred that she had been
thereby illegally removed from her position of Senior Vice President in the LCSD to which she had been previously assigned during
the reorganization of July 1998. She insisted that contrary to OGCC Opinion No. 221 dated September 13, 2002 the Board of
Directors had not been authorized to undertake the reorganization and corporate restructuring.

On January 31, 2003, pending determination of her challenge by the Board of Directors, Demigillo appealed to the Civil Service
Commission (CSC), raising the same issues.

TIDCORP assailed the propriety of Demigillos appeal to the CSC, alleging that her elevation of the case to the CSC without the
Board of Directors having yet decided her challenge had been improper and a clear case of forum-shopping.

Later on, however, TIDCORP furnished to the CSC a copy of Board Decision No. 03-002 dismissing Demigillos appeal for its lack
of merit, thereby rendering the question about the propriety of Demigillos appeal moot and academic. Board Decision No. 03-002
pertinently reads as follows:

Atty. Demigillo failed to show to the Board that she was prejudiced in the implementation of the TIDCORP organizational
refinements/restructuring. She was reappointed to the same position she was holding before the reorganization. She was not demoted
in terms of salary, rank and status. There was a (sic) substantial compliance with the requirements of RA 6656, particularly on
transparency. More importantly, the said organizational refinements done and adoption of a new compensation structure were made in
accordance with what is mandated under the Charter of the Corporation.

WHEREFORE, foregoing premises considered, the Board decided as it hereby decides to DISMISS the appeal of Atty. Ma Rosario
Demigillo for lack of merit.2

In the meanwhile, by letter dated April 14, 2003, President Valdes informed Demigillo of her poor performance rating for the period
from January 1, 2002 to December 31, 2002, to wit:

After a thorough evaluation/assessment of your job performance for the rating period January 1 to December 21, 2002, it appears that
your over-all performance is Poor.

Records show that you consistently behaved as an obstructionist in the implementation of the Corporate Business Plan. You failed to
demonstrate cooperation, respect and concern towards authority and other members of the company. You also failed to abide by Civil
Service and company policies, rules and regulation. You miserably failed to adapt and respond to changes. You were very resentful to
new approaches as shown by your vehement objection to new improved policies and programs. Instead of helping raise the morale of
subordinate at high levels (sic) and promote career and professional growth of subordinates, you tried to block such efforts towards
this end.

In view of the foregoing and your failure to prove that you have effectively and efficiently performed the duties, functions and
responsibility (sic) of your position, I am constrained to give you a rating of "Poor" for your 2002 performance. 3
On April 28, 2003, Demigillo formally communicated to Atty. Florencio P. Gabriel Jr., Executive Vice President of the Operations
Group, appealing the "poor rating" given her by President Valdes.

In a memorandum dated May 6, 2003, Atty. Gabriel informed Demigillo that he could not act on her appeal because of her "failure to
state facts and arguments constituting the grounds for the appeal and submit any evidence to support the same."4

On May 6, 2003, President Valdes issued a memorandum to Demigillo stating that he found no justification to change the poor rating
given to her for the year 2002.

On August 12, 2003, Demigillo received a memorandum from President Valdes stating that her performance rating for the period from
January 1, 2003 to June 2003 "needs improvement," attaching the pertinent Performance Evaluation Report Form that she was
instructed to return "within 24 hours from receipt." 5

Not in conformity with the performance rating, Demigillo scribbled on the right corner of the memorandum the following comments:
"I do not agree and accept. I am questioning the same. This is pure harassment."

She then appealed the poor performance rating on August 14, 2003, calling the rating a part of Valdes "unremitting harassment and
oppression on her."6

On August 19, 2003, Demigillo reported for work upon the expiration of the 90-day preventive suspension imposed by the Board of
Directors in a separate administrative case for grave misconduct, conduct prejudicial to the best interest of the service, insubordination
and gross discourtesy. In her memorandum of that date, she informed Atty. Gabriel Jr. of her readiness to resume her duties and
responsibilities, but requested to be allowed to reproduce documents in connection with the appeal of her performance rating. She
further requested that the relevant grievance process should commence.

It appears that the Board of Directors rendered Decision No. 03-003 dated August 15, 2003 unanimously dropping Demigillo from the
rolls.7 Demigillo received the copy of Decision No. 03-003 on August 25, 2003.

Decision of the CSC

On October 14, 2004, the CSC ruled through Resolution No. 041092 8 that the 2002 Organizational Refinements or Restructuring Plan
of TIDCORP had been valid for being authorized by Republic Act. No. 6656; that Section 7 of Republic Act No. 8498 granted a
continuing power to TIDCORPs Board of Directors to prescribe the agencys organizational structure, staffing pattern and
compensation packages; and that such grant continued until declared invalid by a court of competent jurisdiction or revoked by
Congress.

The CSC held, however, that TIDCORPs implementation of its reorganization did not comply with Section 6 of Republic Act No.
6656;9 that although there was no diminution in Demigillos rank, salary and status, there was nonetheless a demotion in her functions
and authority, considering that the 2002 reorganization reduced her authority and functions from being the highest ranking legal
officer in charge of all the legal and corporate affairs of TIDCORP to being the head of the RCMSS reporting to the Executive Vice
President and having only two departments under her supervision; and that the functions of Demigillos office were in fact transferred
to the Operations Group.

The CSC further held that the dropping from the rolls of Demigillo did not comply with the mandatory requirement under Section 2,
particularly 2.2 Rule XII of the Revised Omnibus Rules on Appointments and Other Personnel Actions Memorandum Circular No. 40,
Series of 1998.

Subsequently, TIDCORP reinstated Demigillo to the position of Senior Vice President in RCMSS, a position she accepted without
prejudice to her right to appeal the decision of the CSC.

Ruling of the CA

Both Demigillo and TIDCORP appealed the decision of the CSC to the Court of Appeals (CA). Demigillos appeal was docketed as
CA-G.R. SP No. 87285. On the other hand, TIDCORPs appeal was docketed as CA-G.R. SP No. 87295.

In CA-G.R. SP No. 87285, Demigillo partially assailed the CSCs decision, claiming that the CSC erred: (1) in holding that Section 7
of Republic Act No. 8494 granted the Board of Directors of TIDCORP a continuing power to reorganize; (2) in holding that the 2002
TIDCORP reorganization had been authorized by law; and (3) in not holding that the 2002 TIDCORP reorganization was void ab
initio because it was not authorized by law and because the reorganization did not comply with Republic Act No. 6656.10
In CA-G.R. SP No. 87295, TIDCORP contended that the CSC erred: (1) in ruling that Demigillo had been demoted as a result of the
2002 TIDCORP reorganization; and (2) in ruling that TIDCORP had failed to observe the provisions of Section 2, particularly 2.2
Rule XII of the Revised Omnibus Rules on Appointments and Other Personnel Actions (Memorandum Circular No. 40, Series of
1998) on dropping from the rolls, to the prejudice of Demigillos right to due process. 11

On June 27, 2005, the CAs Fourth Division promulgated its decision in CAG.R. SP No. 87285,12 which, albeit affirming the ruling
of the CSC, rendered a legal basis different from that given by the CSC, to wit:

In numerous cases citing Section 20 and Section 31, Book III of Executive Order No. 292, otherwise known as the Administrative
Code of 1987, the Supreme Court ruled in the affirmative that the President of the Philippines has the continuing authority to
reorganize the administrative structure of the Office of the President.

Hence, being the alter ego of the President of the Philippines, the Board of Directors of the private respondent-appellee is authorized
by law to have a continuous power to reorganize its agency. 13

Anent Demigillos contention that the 2002 reorganization effected was invalid, the CA ruled:

x x x. In this jurisdiction, reorganizations have been regarded as valid provided they are pursued in good faith. Reorganization is
carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient.

In the case at bench, it is our considered opinion that except for her allegations, the petitioner-appellant (Demigillo) failed to present
sufficient evidence that the reorganization effected in 2002 did not bear the earmarks of economy and efficiency. Good faith is always
presumed.14

The CA held that Demigillo could not be reinstated to her previous position of Senior Vice President of the LCSD in view of the
legality of the 2002 reorganization being upheld. 15

With respect to CA-G.R. SP No. 87295, the CAs Special Former Thirteenth Division promulgated a decision on November 28,
2008,16 denying TIDCORPs appeal, and holding that Demigillo had been demoted and invalidly dropped from the rolls by
TIDCORP, explaining:

We do not need to stretch Our imagination that respondent Demigillo, one of the highest ranking officers of the corporation, was
indeed demoted when she was designated to be the head of merely one sector. She may have retained her title as SVP, but she was
deprived of the authority she previously enjoyed and stripped of the duties and responsibilities assigned to her under the Legal and
Corporate Services. In utter disregard of respondent Demigillos right to security of tenure, petitioner TIDCORP demoted her in the
guise of "reorganization."

xxxx

Next, petitioner TIDCORP asserts that respondent Demigillo was legally dropped from the rolls. This is a delirious supposition which
does not deserve merit at all.

xxxx

Petitioner TIDCORP did not bother to adduce proof that it complied with the rudiments of due process before dropping Demigillo
from the rolls. She was not given the chance to present evidence refuting the contentious ratings as her employer refused to discuss
how it arrived at such assessment. Her unceremonious dismissal was made even more apparent as she was never advised of the
possibility that she may be separated from service if her rating would not improve for the next evaluation period. 17

Issues

Demigillo filed before this Court a petition for review on certiorari assailing the CA decision in CA-G.R. SP No. 87285 (G.R. No.
168613), asserting that the CA gravely erred: (1) in holding that the Board of Directors of TIDCORP was an alter ego of the President
who had the continuing authority to reorganize TIDCORP; and (2) in holding that the reorganization of TIDCORP effected in 2002
was valid considering her alleged failure to present evidence sufficiently showing that the reorganization did not bear the earmarks of
economy and efficiency.18Corollarily, she sought her reinstatement to a position comparable to her former position as Senior Vice
President in the LCSD.19
Likewise, TIDCORP appealed through a petition for review on certiorari, praying for the reversal of the decision promulgated in CA-
G.R. SP No. 87295 (G.R. No. 185571), contending that the CA erred: (1) in ruling that Demigillo had been demoted as a result of the
TIDCORP 2002 reorganization; and (2) in ruling that Demigillo had not been legally dropped from the rolls. 20

On March 8, 2011, the Court En Banc consolidated G.R. No. 168613 and G.R. No. 185571. 21

Ruling of the Court

We deny the petition for review of Demigillo (G.R. No. 168613) for its lack of merit, but grant the petition for review of TIDCORP
(G.R. No. 185571).

G.R. No. 168613

In its comment in G.R. No. 168613,22 TIDCORP argues for the application of the doctrine of qualified political agency, contending
that the acts of the Board of Directors of TIDCORP, an attached agency of the Department of Finance whose head, the Secretary of
Finance, was an alter ego of the President, were also the acts of the President.

TIDCORPs argument is unfounded.

The doctrine of qualified political agency, also known as the alter ego doctrine, was introduced in the landmark case of Villena v. The
Secretary of Interior.23 In said case, the Department of Justice, upon the request of the Secretary of Interior, investigated Makati
Mayor Jose D. Villena and found him guilty of bribery, extortion, and abuse of authority. The Secretary of Interior then recommended
to the President the suspension from office of Mayor Villena. Upon approval by the President of the recommendation, the Secretary of
Interior suspended Mayor Villena. Unyielding, Mayor Villena challenged his suspension, asserting that the Secretary of Interior had
no authority to suspend him from office because there was no specific law granting such power to the Secretary of Interior; and that it
was the President alone who was empowered to suspend local government officials. The Court disagreed with Mayor Villena and
upheld his suspension, holding that the doctrine of qualified political agency warranted the suspension by the Secretary of Interior.
Justice Laurel, writing for the Court, opined:

After serious reflection, we have decided to sustain the contention of the government in this case on the broad proposition, albeit not
suggested, that under the presidential type of government which we have adopted and considering the departmental organization
established and continued in force by paragraph 1, section 12, Article VII, of our Constitution, all executive and administrative
organizations are adjuncts of the Executive Department, the heads of the various executive departments are assistants and agents of the
Chief Executive, and, except in cases where the Chief Executive is required by the Constitution or the law to act in person or the
exigencies of the situation demand that he act personally, the multifarious executive and administrative functions of the Chief
Executive are performed by and through the executive departments, and the acts of the secretaries of such departments, performed and
promulgated in the regular course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of
the Chief Executive. (Runkle vs. United States [1887], 122 U. S., 543; 30 Law. ed., 1167; 7 Sup. Ct. Rep., 1141; see also U. S. vs.
Eliason [1839], 16 Pet., 291; 10 Law. ed., 968; Jones vs. U. S. [1890], 137 U. S., 202; 34 Law. ed., 691; 11 Sup. Ct., Rep., 80; Wolsey
vs. Chapman [1880], 101 U. S., 755; 25 Law. ed., 915; Wilcox vs. Jackson [1836], 13 Pet., 498; 10 Law. ed., 264.)

Fear is expressed by more than one member of this court that the acceptance of the principle of qualified political agency in this and
similar cases would result in the assumption of responsibility by the President of the Philippines for acts of any member of his cabinet,
however illegal, irregular or improper may be these acts. The implications, it is said, are serious. Fear, however, is no valid argument
against the system once adopted, established and operated. Familiarity with the essential background of the type of Government
established under our Constitution, in the light of certain well-known principles and practices that go with the system, should offer the
necessary explanation. With reference to the Executive Department of the government, there is one purpose which is crystal-clear and
is readily visible without the projection of judicial searchlight, and that is the establishment of a single, not plural, Executive. The first
section of Article VII of the Constitution, dealing with the Executive Department, begins with the enunciation of the principle that
"The executive power shall be vested in a President of the Philippines." This means that the President of the Philippines is the
Executive of the Government of the Philippines, and no other. The heads of the executive departments occupy political positions and
hold office in an advisory capacity, and, in the language of Thomas Jefferson, "should be of the Presidents bosom confidence" (7
Writings, Ford ed., 498), and in the language of Attorney-General Cushing (7 Op., Attorney-General, 453), "are subject to the
direction of the President." Without minimizing the importance of the heads of the various departments, their personality is in reality
but the projection of that of the President. Stated otherwise, and as forcibly characterized by Chief Justice Taft of the Supreme Court
of the United States, "each head of a department is, and must be, the President's alter ego in the matters of that department where the
President is required by law to exercise authority." (Myers vs. United States, 47 Sup. Ct. Rep., 21 at 30; 272 U.S. 52 at 133; 71 Law.
Ed., 160). x x x.
The doctrine of qualified political agency essentially postulates that the heads of the various executive departments are the alter egos
of the President, and, thus, the actions taken by such heads in the performance of their official duties are deemed the acts of the
President unless the President himself should disapprove such acts. This doctrine is in recognition of the fact that in our presidential
form of government, all executive organizations are adjuncts of a single Chief Executive; that the heads of the Executive Departments
are assistants and agents of the Chief Executive; and that the multiple executive functions of the President as the Chief Executive are
performed through the Executive Departments. The doctrine has been adopted here out of practical necessity, considering that the
President cannot be expected to personally perform the multifarious functions of the executive office.

But the doctrine of qualified political agency could not be extended to the acts of the Board of Directors of TIDCORP despite some of
its members being themselves the appointees of the President to the Cabinet. Under Section 10 of Presidential Decree No. 1080, as
further amended by Section 6 of Republic Act No. 8494, 24 the five ex officio members were the Secretary of Finance, the Secretary of
Trade and Industry, the Governor of the Bangko Sentral ng Pilipinas, the Director-General of the National Economic and
Development Authority, and the Chairman of the Philippine Overseas Construction Board, while the four other members of the Board
were the three from the private sector (at least one of whom should come from the export community), who were elected by the ex
officio members of the Board for a term of not more than two consecutive years, and the President of TIDCORP who was
concurrently the Vice-Chairman of the Board. Such Cabinet members sat on the Board of Directors of TIDCORP ex officio, or by
reason of their office or function, not because of their direct appointment to the Board by the President. Evidently, it was the law, not
the President, that sat them in the Board.

Under the circumstances, when the members of the Board of Directors effected the assailed 2002 reorganization, they were acting as
the responsible members of the Board of Directors of TIDCORP constituted pursuant to Presidential Decree No. 1080, as amended by
Republic Act No. 8494, not as the alter egos of the President. We cannot stretch the application of a doctrine that already delegates an
enormous amount of power. Also, it is settled that the delegation of power is not to be lightly inferred. 25

Nonetheless, we uphold the 2002 reorganization and declare it valid for being done in accordance with the exclusive and final
authority expressly granted under Republic Act No. 8494, further amending Presidential Decree No. 1080, the law creating TIDCORP
itself, to wit:

Section 7. The Board of Directors shall provide for an organizational structure and staffing pattern for officers and employees of the
Trade and Investment Development Corporation of the Philippines (TIDCORP) and upon recommendation of its President, appoint
and fix their remuneration, emoluments and fringe benefits: Provided, That the Board shall have exclusive and final authority to
appoint, promote, transfer, assign and re-assign personnel of the TIDCORP, any provision of existing law to the contrary
notwithstanding.

In this connection, too, we reiterate that we cannot disturb but must respect the ruling of the CSC that deals with specific cases coming
within its area of technical knowledge and expertise, 26 absent a clear showing of grave abuse of discretion on its part. That clear
showing was not made herein. Such deference proceeds from our recognition of the important role of the CSC as the central personnel
agency of the Government having the familiarity with and expertise on the matters relating to the career service.

Worthy to stress, lastly, is that the reorganization was not arbitrary and whimsical. It had been formulated following lengthy
consultations and close coordination with the affected offices within TIDCORP in order for them to come up with various functional
statements relating to the new organizational setup. In fact, the Board of Directors decided on the need to reorganize in 2002 to
achieve several worthy objectives, as follows:

(1) To make the organization more viable in terms of economy, efficiency, effectiveness and make it more responsive to the
needs of its clientles by eliminating or minimizing any overlaps and duplication of powers and functions;

(2) To come up with an organizational structure which is geared towards the strengthening of the Corporation's overall
financial and business operations through resource allocation shift; and

(3) To rationalize corporate operations to maximize resources and achieve optimum sustainable corporate performance vis-a-
vis revised corporate policies, objectives and directions by focusing the Corporation's efforts and resources to its vital and
core functions.27

The result of the lengthy consultations and close coordination was the comprehensive reorganization plan that included a new
organizational structure, position classification and staffing pattern, qualification standards, rules and regulations to implement the
reorganization, separation incentive packages and timetable of implementation. Undoubtedly, TIDCORP effected the reorganization
within legal bounds and in response to the perceived need to make the agency more attuned to the changing times.
Having found the 2002 reorganization to be valid and made pursuant to Republic Act No. 8494, we declare that there are no legal and
practical bases for reinstating Demigillo to her former position as Senior Vice President in the LCSD. To be sure, the reorganization
plan abolished the LCSD, and put in place a set-up completely different from the previous one, including a new staffing pattern in
which Demigillo would be heading the RCMSS, still as a Senior Vice President of TIDCORP. With that abolition, reinstating her as
Senior Vice President in the LCSD became legally and physically impossible.

Demigillos contention that she was specifically appointed to the position of Senior Vice President in the LCSD was bereft of factual
basis. The records indicate that her permanent appointment pertained only to the position of Senior Vice President. 28 Her appointment
did not indicate at all that she was to hold that specific post in the LCSD. Hence, her re-assignment to the RCMSS was by no means a
diminution in rank and status considering that she maintained the same rank of Senior Vice President with an accompanying increase
in pay grade.

The assignment to the RCMSS did not also violate Demigillos security of tenure as protected by Republic Act No. 6656. We have
already upheld reassignments In the Civil Service resulting from valid reorganizations. 29 Nor could she claim that her reassignment
was invalid because it caused the reduction in her rank, status or salary. On the contrary, she was reappointed as Senior Vice
President, a position that was even upgraded like all the other similar positions to Pay Grade 16, Step 4, Level II. 30 In every sense, the
position to which she was reappointed under the 2002 reorganization was comparable with, if not similar to her previous position.

That the RCMSS was a unit smaller than the LCSD did not necessarily result in or cause a demotion for Demigillo. Her new position
was but the consequence of the valid reorganization, the authority to implement which was vested in the Board of Directors by
Republic Act No. 8494. Indeed, we do not consider to be a violation of the civil servants right to security of tenure the exercise by the
agency where she works of the essential prerogative to change the work assignment or to transfer the civil servant to an assignment
where she would be most useful and effective. More succinctly put, that prerogative inheres with the employer, 31 whether public or
private.

G.R. No. 185571

As earlier stated, TIDCORPs petition for review in G.R. No. 185571 is meritorious.

Anent the first issue in G.R. No. 185571, we have already explained that Demigillo was not demoted because she did not suffer any
diminution in her rank, status and salary under the reorganization. Her reassignment to the RCMSS, a smaller unit compared to the
LCSD, maintained for her the same rank of Senior Vice-President with a corresponding increase in pay grade. The reassignment
resulted from the valid reorganization.

With respect to the second issue, Demigillo was validly dropped from the rolls by TIDCORP as the consequence of the application of
the rules governing her employment. Section 2 (2.2), Rule XII of the Revised Omnibus Rules on Appointments and Other Personnel
Actions (Memorandum Circular No. 40, Series of 1998) provides:

xxxx

2.2 Unsatisfactory or Poor Performance

a. An official or employee who is given two (2) consecutive unsatisfactory ratings may be dropped from the rolls after due
notice. Notice shall mean that the officer or employee concerned is informed in writing of his unsatisfactory performance for
a semester and is sufficiently warned that a succeeding unsatisfactory performance shall warrant his separation from the
service. Such notice shall be given not later than 30 days from the end of the semester and shall contain sufficient information
which shall enable the employee to prepare an explanation.

b. An official or employee, who for one evaluation period is rated poor in performance, may be dropped from the rolls after
due notice. Notice shall mean that the officer or employee is informed in writing of the status of his performance not later
than the 4th month of that rating period with sufficient warning that failure to improve his performance within the remaining
period of the semester shall warrant his separation from the service. Such notice shall also contain sufficient information
which shall enable the employee to prepare an explanation.

Under Section (b), supra, an official or employee may be dropped from the rolls provided the following requisites are present, namely:
(1) the official or employee was rated poor in performance for one evaluation period; (2) the official or employee was notified in
writing of the status of her performance not later than the 4th month of the rating period with sufficient warning that failure to improve
her performance within the remaining period of the semester shall warrant her separation from the service; and (3) such notice
contained adequate information that would enable her to prepare an explanation.
All of the requisites were duly established herein.

As to the first requisite, there is no dispute that President Valdes gave Demigillo a poor performance rating for the annual rating
period from January 1, 2002 to December 31, 2002.

The second requisite speaks of a sixth-month or per semester rating period. Although Demigillos poor rating was made on an annual
basis, that was allowed by the implementing rules of Executive Order No. 292.32 Regarding the need to give her the written notice of
her performance status not later than the 4th month of the rating period, or at the half of the semester, the requirement did not apply
here because her rating was made on an annual basis. By analogy, however, the written notice for an annual rating period could be
sent on the 6th month or in the middle of the year. Nevertheless, this was not expressly provided for in the Civil Service
rules.1wphi1 In any case, it is emphasized that the purpose of the written notice being sent to the affected officer or employee not
later than the 4th month of the rating period has been to give her the sufficient time to improve her performance and thereby avert her
separation from the service. That purpose is the very essence of due process.

In Demigillos case, therefore, what was crucial was whether she had been allowed to enhance her performance within a sufficient
time from her receipt of the written notice of the poor performance rating up to her receipt of the written notice of her dropping from
the rolls. The records show that she was, indeed, given enough time for her to show improvement. She received on April 21, 2003 a
letter from President Valdes that indicated her poor performance rating for the period of January 1, 2002 to December 31, 2002.33 The
Board of Directors issued on August 15, 2003 the decision dropping her from rolls. 34 She received a copy of the decision on August
25, 2003.35 Thereby, she was given almost four months to improve her performance before she was finally dropped from the rolls.

The second requisite further mentions that the written notice must contain sufficient warning that failure to improve her performance
within the remaining period of the semester shall warrant separation from the service. Although the letter informing Demigillo of her
poor performance rating did not expressly state such a warning to her, it stated her gross failures in the performance of her
duties.36 The Performance Evaluation Report Form corresponding to her, which was attached to the memorandum given to her,
reflected her poor performance.36She was notified in writing of the denial of her appeal of the poor rating. 37 It cannot be denied that
the letter of poor rating, the Performance Evaluation Repmi Form, and the denial of her appeal all signified to her that she could be
removed from the service unless she would improve her performance. Thereby, she was given ample warning to improve, or else be
separated from the service. In that regard, she was certainly not a witless person who could have missed the significance of such
events. She was not only a lawyer. 38 She was also a mid-level ranking government official who had been in the government corporate
sector for almost 20 years.39 Her familiarity with the dire consequences of a failure to improve a poor rating under Civil Service rules
was justifiably assumed.

Anent the third requisite, the letter of President Valdes plainly stated the reasons for her poor rating. Her Performance Evaluation
Repmi Form, which was attached to the letter, enumerated several criteria used in measuring her management skills and the
corresponding rating per criterion. The letter even suggested that in order for her to enhance her performance she should undergo
extensive training on business management, a comprehensive lecture program on Civil Service rules and regulations, and a training on
effective public relations. The letter indicated that the contents of the Performance Evaluation Report had been discussed with her.
Moreover, Demigillo formally appealed the poor performance rating, except that TIDCORP denied her appeal. 40All these
circumstances show that she was given more than enough information about the bases for her poor performance rating, enabling her to
appeal properly.

WHEREFORE, we DENY the petition for review on certiorari in G.R. No. 168613; AFFIRM the decision promulgated on June 27,
2005 by the Court of Appeals in its CA-G.R. No. 87285; GRANT the petition for review on certiorari in G.R. No. 185571; SET
ASIDE the decision promulgated on November 28, 2008 by the Court of Appeals in its CA-G.R. No. 87295; and ORDER Atty. MA.
ROSARIO MANALANG-DEMIGILLO to pay the costs of suit.

SO ORDERED.
CARLOS COTIANGCO, LUCIO SALAS, G. R. No. 157139
EDITHA SALONOY, MA. FILIPINA
CALDERON, ROSALINDA ABILAR, Present:
MEDARDA LARIBA, TITO GUTIERREZ,
BENJAMIN LUCIANO, MYRNA FILAMOR CORONA, C.J.,
AND MONIANA NAJARRO, CARPIO,
Petitioners, VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
- versus - ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
THE PROVINCE OF BILIRAN AND THE SERENO,
COURT OF APPEALS, REYES, and
Respondents. PERLAS-BERNABE, JJ.

Promulgated:

October 19, 2011

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

DECISION

SERENO, J.:

Before us is a Petition for Review on Certiorari under Rule 45 seeking a reversal of the Decision of the Court of Appeals
dated 16 July 2002,[1] and its Resolution dated 24 January 2003 which affirmed Resolution No. 000894 dated 30 March 2000 of the
Civil Service Commission (CSC). The CSC Resolution held that petitioners removal from their respective positions in the Biliran
Provincial Health Office as a result of the reorganization of the provincial government was lawful.
Petitioners held permanent appointments as public health workers in the Province of Biliran.
On 23 October 1998, the Sangguniang Panlalawigan (SP) of Biliran passed SP Resolution No. 102, Series of 1998,
approving the revised structure and staffing pattern of the provincial government submitted by its then incumbent governor, Danilo
Parilla.
Pursuant to said Resolution, Governor Parilla issued Executive Order (EO) No. 98-07, Series of 1998, dated 4 November
1998, declaring all positions in the provincial government of Biliran as abolished except those of the Provincial Treasurer and all
elective positions.
EO No. 98-07 was revoked by EO No. 98-08, Series of 1998, which in turn declared all positions under the new staffing
pattern vacant and directed all permanent employees to submit their application within fifteen (15) days from the date of posting of the
approved new staffing pattern on November 4, 1998.
Petitioners filed a suit for Prohibition[2] to question the validity of EO No. 98-08, Series of 1998.
Meanwhile, pursuant to said EO, a Personnel Placement Committee (Committee) was created to screen and evaluate all
applicants for the vacant positions.
Petitioners failed/refused to apply for any position under the new staffing pattern, claiming that to do so would be
inconsistent with their pending suit for prohibition. At any rate, petitioners argue that under Rule VI, Section 9 of Civil Service
Commission (CSC) Resolution No. 91-1631,[3] as well as Sections 5 and 6 of the Rules on Government Reorganization, there should
be a screening of the qualifications of all existing employees, and not merely of those who filed their respective applications under the
new staffing pattern.
As a result of the reorganization, the following positions in the Biliran Provincial Health Service occupied by petitioners
were excluded or abolished:
Dr. Carlos C. Cotiangco --- Provincial Health Officer I
Licio J. Salas ---------------- Administrative Officer II
Edeltha O. Salonoy --------- Senior Bookkeeper I
Ma. Filipina V. Calderon --- Cashier II
Rosalinda A. Abilar --------- Pharmacist III
Medarda S. Lariba ---------- Cook I
Tito G. Gutierrez ------------ Driver II
 Benjamin J. Luciano -------- Cook I

Myrna A. Filamor ----------- Nurse II

Monina Najarro -------------- Medical Technologist
On 13 January 1999, petitioners received their notices of termination/non-reappointment dated 12 January 1999, which stated
that their service was only up to February 11, 1999.
Petitioners appealed to the governor, but he denied their appeal.
Petitioners thereafter filed an appeal to the CSC, which likewise dismissed it in CSC Resolution No. 000894 dated 30 March
2000.[4] The CSC held that petitioners failed to show that the reorganization was tainted with bad faith. They failed to establish that
they were replaced by less qualified employees in terms of status of appointment, performance and merit. The Commission noted that
the reorganization resulted in a significant decrease in the number of positions in the staffing pattern of the Biliran Provincial
Hospital.[5] The CSC further held that the reorganization did not violate the Magna Carta of Public Health Workers (Republic Act No.
7305), because the governor implemented a procedure for the reorganization, as follows:
1. Information dissemination regarding the reorganization to be effected;
2. The Committee was established to screen and evaluate the qualifications of existing employees;
3. Publication and dissemination of the new staffing pattern;
4. Invitation of employees to apply for the new positions; and
5. Notices to appellants that they were not reappointed in the revised organization structure and
staffing pattern.

Moreover, it was pointed out that petitioners positions were duplications of other positions. Finally, the CSC ruled that
petitioners could no longer be appointed to other positions as the records show that these do not include their former positions, which
had in fact remained unfilled after the reorganization.
Petitioners moved for reconsideration of the CSC Resolution. This motion was denied for lack of merit by the CSC in its
Resolution No. 010530[6] dated 4 September 2000.
Petitioners elevated the case to the Court of Appeals (CA), citing similar cases (CSC Resolution Nos. 002617, 002624, and
002629 dated 6 March 2001)[7] wherein the CSC found that the Province of Biliran failed to comply with the required procedure with
respect to the other employees who were also not reappointed. Petitioners claimed that in these companion cases, employees of the
province were reinstated on the ground that the reorganization had been implemented in violation of Republic Act No. (R.A.) 6656
and its Implementing Rules, as it was not shown that the subject employees qualifications were assessed or evaluated by the
committee.
In its Decision dated 16 July 2002, the CA affirmed the CSC resolution with modification, in that the Province of Biliran was
directed to take up petitioner Salvador Rosels possible reappointment as Sanitation Inspector I of the Municipality of Caibiran. The
CA held that what petitioners referred to as companion cases involve circumstances different from the case at bench where petitioners
had not presented any concrete evidence to prove their claim. [8]
Petitioners moved for reconsideration of the said Decision but the CA denied their motion. Hence, petitioners filed the
present Rule 45 petition, basically posing the following issue for resolution:
1. Whether or not the reorganization was done in bad faith
2. Whether or not petitioners were denied due process when they were not screened and evaluated for possible appointment to
new positions
We rule to deny the petition.

1. Petitioners failed to show that the reorganization was done in bad faith.
They have not adduced sufficient evidence to establish the existence of bad
faith.

Section 8 of the Magna Carta of Public Health Workers (R.A. 7305) provides that (i)n case of regular employment of public
health workers, their services shall not be terminated except for cause provided by law and after due process.
Nevertheless, a government officer or employees removal from office as a result of a bona fide reorganization is a valid cause
for that employees removal.[9]
Hence, the pertinent issue would be whether the reorganization herein was undertaken in bad faith.
Petitioners claim that the provincial governments reorganization implemented by Governor Parilla was not caused by a desire
to streamline the local bureaucracy to save on resources. They allege that despite the availability of a sufficient number of vehicles for
official use, the provincial government bought five motor vehicles, which were used by provincial officials belonging to the same
political party as that of Governor Parilla. Allegedly, there were also excessive numbers of casuals hired and positions/items
abolished, only to create new ones with substantially the same functions. Petitioners were all appointees of former Governor Wayne
Jaro, who is the political enemy of Governor Parilla.
On the other hand, the provincial government argued, and the CSC found, that the Biliran Province had a total of 162
personnel in 1990. However, this number swelled to 381 personnel in 1998. Reorganization was therefore called for to lessen the
budget allocation for personnel services; and to increase that for development projects, the purchase of medicines and supplies, and
the maintenance of infrastructure.
 It is a basic principle that good faith is presumed and that the party who alleges bad faith has the burden of proving the
allegation. Petitioners therefore had the burden of proving bad faith on the part of the province when it undertook the
reorganization. Section 2 of R.A. 6656 (An Act to Protect the Security of Tenure of Civil Service Officers and Employees in the
Implementation of Government Reorganization) cites instances that may be considered as evidence of bad faith in the removal from
office of a government officer or employee pursuant to a reorganization, to wit:
SECTION 2. No officer or employee in the career service shall be removed except for a valid cause and after due
notice and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has
been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet
the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some
of the following circumstances may be considered as evidence of bad faith in the removals made as a result of
reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party:
(a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or
agency concerned;
(b) Where an office is abolished and other performing substantially the same functions is created;
(c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit;
(d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices
perform substantially the same function as the original offices;
(e) Where the removal violates the order of separation provided in Section 3 hereof. (Underscoring supplied.)

Measured against the foregoing guidelines, petitioners failed to adduce evidence to show bad faith on the part of the Province
in effecting the reorganization.
First, petitioners have failed to show that there was a significant increase in the number of positions in the new staffing
pattern of Biliran Province as a result of the reorganization. On the contrary, it is undisputed that from a high of 120 positions in 1998,
the number of those at the Biliran Provincial Health Office was reduced to only 98 after the reorganization.[10] Even assuming the truth
of petitioners claim that the CSC and the CA committed a misapprehension of facts in equating the number of personnel in the Biliran
Provincial Hospital with the number of personnel in the entire Provincial Health Office, this conclusion cannot be altered in the
absence of glaring error in such apprehension.
Second, petitioners have failed to present evidence that an office performing substantially the same functions as an abolished
office was created as a result of the reorganization. We note that there were four new positions created within the Provincial Health
Office (one Medical Technologist II for the Health Services Group; and one Storekeeper each for Caibiran Community Hospital,
Culaba Community Hospital and Maripipi Community Hospital). None of these positions may be considered as having been created to
perform substantially the same functions as any of the abolished offices. None of the petitioners held the position of Storekeeper; and,
although petitioner Najarro held the position of Medical Technologist II, he was then assigned to the Maripipi Community Hospital,
and not to the Health (Field) Services Group.
Third, petitioners have not shown that there was a reclassification of offices in the department or agency concerned and the
reclassified offices perform substantially the same function as the original offices.
Fourth, petitioners have not adduced evidence that they were replaced by those less qualified in terms of status of
appointment, performance and merit. Alternatively, petitioners have not adduced any evidence to show that their qualifications in
terms of performance and merit are any better than those possessed by the persons who were eventually appointed to the reorganized
positions.
Neither have petitioners been able to demonstrate that their removal from office as a result of the reorganization violated the
order of separation as found in Section 3 of R.A. 6656, particularly, in the provision that those who are least qualified in terms of
performance and merit shall be laid [off] first, length of service notwithstanding.
Petitioners also erroneously insist on the application of the next in rank rule in claiming that they should have been appointed
to the available positions after the reorganization. However, the next in rank rule specifically applies only to promotions and not to
positions created in the course of a valid reorganization. [11] Apart from the fact that the next in rank rule only gives preference to the
person occupying the position next in rank to a vacancy, it does not by any means give him exclusive right to be appointed to the said
vacancy. Indeed, the appointing authority is vested with sufficient discretion to appoint a candidate, as long as the latter possesses the
minimum qualifications under the law.[12]

2. Petitioners were not deprived of due process when they were not screened
and evaluated for possible appointment to new positions, as they had not filed
their applications notwithstanding the invitation for them to do so.

Petitioners allege that they were deprived of their employment without due process of law, because respondent province did
not show proof that its Personnel Placement Committee had screened and evaluated them for possible appointment to new positions.
On the other hand, respondent province argues that petitioners were not considered for the new positions, because they had
not filed their applications notwithstanding the invitation for them to do so.

In response, petitioners argue that under the Implementing Rules of R.A. 6656, qualifications of existing employees, and not
merely those who filed their respective applications under the new staffing pattern, should be screened and evaluated, as follows:
 SECTION 5. Who will be Evaluated. - All officers and employees, including those who have pending
administrative charges, or any derogatory records/reports, shall be evaluated on the basis of standards for
retention/termination as provided for herein. (Underscoring and emphasis supplied.)

Moreover, Section 9 of the same Implementing Rules provides that the Placement Committee shall evaluate the
qualifications and competence of both the applicants and other employees in the agency, to wit:
SECTION 9. Selection and Placement of Personnel.
(1) Within five (5) days from receipt by the agency concerned of its approved staffing pattern, or the Organizational
Staffing and Classification Action Summary (OSCAS), the head of office shall cause copies thereof to be posted in
the bulletin boards and other conspicuous places in its central and regional/field offices.
(2) Officers and employees shall be invited to apply for any of the authorized position. Said Application shall be
considered by the Placement Committee in the placement and selection of personnel.
(3) The Committee shall evaluate/assess the qualifications and competence of the applicants and other employee in
the agency based on the criteria and preference provided for in these Rules.
(4) The Committee shall prepare the Personnel Placement List and submit the same to the appointing authority for
his approval.
(5) Within thirty (30) days from submission of the Personnel Placement List by the Placement Committee, the
appointing authority shall approve, modify or revise the Personnel Placement List which shall then constitute the
New Plantilla of Personnel. (Underscoring and emphasis supplied.)

Petitioners reliance upon the words used in the above portions of the Implementing Rules is misplaced.

R.A. 6656 itself, the law that these Implementing Rules seek to implement, provides only that all officers and employees of
the agency being reorganized shall be invited to apply for any of the positions in the new staffing pattern, and that the (s)aid
application shall be considered by the (Placement) Committee in the placement and selection of personnel, as shown by the following
provision:

SECTION 6. In order that the best qualified and most deserving persons shall be appointed in any reorganization,
there shall be created a Placement Committee in each department or agency to assist the appointing authority in the
judicious selection and placement of personnel. The Committee shall consist of two (2) members appointed by the
head of the department or agency, a representative of the appointing authority, and two (2) members duly elected by
the employees holding positions in the first and second levels of the career service: Provided, That if there is a
registered employee association with a majority of the employees as members, that employee association shall also
have a representative in the Committee: Provided, further That immediately upon approval of the staffing pattern of
the department or agency concerned, such staffing pattern shall be made known to all officers and employees of the
agency who shall be invited to apply for any of the positions authorized therein. Said application shall be considered
by the Committee in the placement and selection of personnel. (Underscoring supplied.)

Clearly, the law mandates that only those who have filed the requisite applications for the subject position may be considered
by the placement committee for possible appointment. The intent of this law is clear enough. After all, it is the submission of the
application form that signals an employees interest in a position. The placement committee cannot spend its limited time and resources
in considering the qualifications of all previous employees of the agency being reorganized, even if they have not signified their
intention to continue working in the said agency. Otherwise, there is a possibility that it would recommend the appointment of a
person to a position in which the latter is not interested. Also, without the filing of the requisite application form, there would hardly
be a basis for evaluating the qualifications of the candidates for employment.

WHEREFORE, premises considered, the petition is denied for lack of merit. The 16 July 2002 Decision and the 24 January
2003 Resolution of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.