What should support a 3rd party claim in execution stage

A third-party claim must be supported by an affidavit stating the claimant’s

title to, or right to possession of the property, and the grounds therefor. In other
words, a mere affidavit will not suffice. The circumstances supporting the third-party
claimant’s ownership or possession of the levied properties must be specified. Here,
both the Labor Arbiter and the NLRC found that the Deed of Absolute Sale involving
the sewing machines between petitioner (3 rd party claimant) and Marlon Viado
(employer respondent before the NLRC) is spurious. Likewise, the Court of
Appeals found that no copy of the said document is on file with the Clerk of Court.
The appellate court aptly held that the absence of such document is “itself a badge
of fraud and simulation that could make any court suspicious and wary of imputing
any legitimacy and validity to the same, and actually militates against its use as
basis for petitioner’s claim. (Bacos vs. Arcega, GR No 152343, January 18, 2008)

NLRC cannot modify final and executory judgments

It does not escape our attention that upon respondents’ appeal from the
Labor Arbiter’s Order computing the benefits due to petitioners, the NLRC modified
the final and executory Decision of the Court of Appeals (Special Sixteenth Division)
when it decreed that the monetary award due to petitioners should be computed up
to June 20, 1995 only (not October 28, 1999), thus, amounting to a lesser amount.

We sustain petitioners’ contention that NLRC, in modifying the award of the

Court of Appeals, committed grave abuse of discretion amounting to lack or excess
of jurisdiction. Quasi-judicial agencies have neither business nor power to modify or
amend the final and executory Decisions of the appellate courts. Under the principle
of immutability of judgments, any alteration or amendment which substantially
affects a final and executory judgment is void for lack of jurisdiction. We thus rule
that the Order dated March 30, 2001 of the NLRC directing that the monetary award
should be computed from June 1994, the date petitioners were dismissed from the
service, up to June 20, 1995 only, is void. (Azucena Magallanes vs. Sun Yat Sen
Elementary School, GR No. 160876, January 18, 2008)

Quitclaim or release executed by one, authorized by SPA, not

automatically sustained; ‘Dire necessity’, a ground for invalidation

The P150,000 compromise is rather measly when taken in light of the more
than P2.5 million judgment on appeal to the NLRC. Petitioners already won on the
arbiter level P2.5 million pesos. It is highly improbable that they would suddenly
agree to accept P150,000 as compromise for the P2.5 million. In effect, petitioners
agreed to waive more than 94% of what they expect to receive from Powertech.

NLRC 1STQ 2008 CASE DIGEST 1

We note that the compromise is a mere 6% of the contingent sum that may be
received by petitioners. (Arellano, et al. vs. Powertech Corporation, GR No.
150861, January 22, 2008)

We give credence to the admission of Gestiada (attorney in fact) that he

received the P150,000.00 as payment for his own backwages. In his letter to Atty.
Evangelista, Gestiada said that he was pressured by Powertech to sign the waiver
and quitclaim for petitioners in order to receive his share in the P2.5 million
judgment. Having no stable job after his dismissal, Gestiada had no other choice
but to breach his fiduciary obligation to petitioners. He succumbed to the pressure
of Powertech in signing the waiver, release and quitclaim in exchange for the
P150,000.00. In short, he colluded with Powertech to the detriment of petitioners.
Powertech knew that Gestiada had plenary authority to act for petitioners in the
labor case. It had prior dealings with him. It also knew that Gestiada was
authorized to negotiate for any amount “he may deem just and reasonable” and to
sign waivers and quitclaims on behalf of petitioners. Powertech obviously used that
knowledge, capitalized on the vulnerable position of Gestiada in entering into the
agreement and took advantage of the situation to the disadvantage of petitioners.
(supra)

Compelling economic reason not a requisite for redundancy to exist

Astorga (employee) also states that the justification advanced by SMART

(employer) is not true because there was no compelling economic reason for
redundancy. But contrary to her claim, an employer is not precluded from adopting
a new policy conducive to a more economical and effective management even if it is
not experiencing economic reverses. Neither does the law require that the
employer should suffer financial losses before he can terminate the services of the
employee on the ground of redundancy (Smart Communications vs. Astorga, GR
No. 148132, January 28, 2008)

Actual notice is not sufficient compliance with Section 283 of the

Labor Code

SMART’s assertion that Astorga cannot complain of lack of notice because

the organizational realignment was made known to all the employees as early as
February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization
cannot replace the formal and written notice required by the law. In the written
notice, the employees are informed of the specific date of the termination, at least a
month prior to the effectivity of such termination, to give them sufficient time to find
other suitable employment or to make whatever arrangements are needed to
cushion the impact of termination. In this case, notwithstanding Astorga’s

NLRC 1STQ 2008 CASE DIGEST 2

knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination. But such notice
was received by Astorga barely 2 weeks before the effective date of termination, a
period very much shorter than that required by law. (supra)

Stiffer penalty for non-compliance with one month notice

If the dismissal is based on a just cause under Article 282 but the employer
failed to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee, and (2) if the dismissal is based on an authorized cause
under Article 283 but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative. We deem it proper to increase
the amount of the penalty to P50,000.00 (supra citing Jaka Food Processing
Corporation vs. Pacat)

The four-fold test as applied

Power to Hire: Respondent (employee) was first connected with Agro-

Commercial Security Agency, which assigned him to assist TAPE (employer) in its
live productions. When the security agency’s contract with RPN-9 expired in 1995,
respondent was absorbed by TAPE. Clearly, respondent was hired by TAPE.
Respondent presented his identification card to prove that he is indeed an
employee of TAPE. In a business establishment, an identification card is usually
provided not just as a security measure but to mainly identify the holder thereof as a
bona fide employee of the firm who issues it.

Payment of Wages: Respondent claims to have been receiving P5,444.44

as his monthly salary while TAPE prefers to designate such amount as talent fees.
Wages, as defined in the Labor Code, are “remuneration or earnings, however
designated xxx” It is beyond dispute that respondent received a fixed amount as
monthly compensation for the services he rendered to TAPE.

Power of Dismissal: The Memorandum informing respondent of the

discontinuance of his service proves that TAPE had the power to dismiss
respondent.

Power of Control: Control is manifested in the bundy cards submitted by

respondent in evidence. He was required to report daily and observed definite work
hours. (Television and Production Exponents Inc vs Servana, GR No.167648,
January 28 2008)

NLRC 1STQ 2008 CASE DIGEST 3

Independent contractor different with program employee

The theory that petitioner (employee) is an independent contractor runs

counter to respondent’s (employer) very own allegation that petitioner is a talent or
a program employee. An independent contractor is not an employee of the
employer, while a talent or program employee is an employee. The only difference
between a talent or program employee and a regular employee is the fact that a
regular employee is entitled to all the benefits that are being prayed for. This is the
reason why private respondents try to seek refuge under the concept of an
independent contractor theory. For if petitioner were indeed an independent
contractor, private respondents will not be liable to pay the benefits prayed for in
petitioner’s complaint. (supra)

Availing of death & compensation benefits under POEA Standard

Employment Contract

This Court, in Gau Sheng Phils., Inc. v. Joaquin, Hermogenes v. Osco

Shipping Services, Inc., and Prudential Shipping and Management Corporation v.
Sta. Rita, declared that in order to avail of death benefits, the death of the
employee should occur during the effectivity of the employment contract. As
stated in Prudential, the death of a seaman during the term of employment makes
the employer liable to his heirs for death compensation benefits. Once it is
established that the seaman died during the effectivity of his employment contract,
the employer is liable. However, if the seaman dies after the termination of his
contract of employment, his beneficiaries are not entitled to the death benefits
enumerated above.

Seagull Ship Management and NFD International Manning Agents are about
seafarers’ claims for disability, and not death, benefits after repatriation. On the
other hand, Interorient Maritime concerns the death of a seafarer who was killed in-
transit while being repatriated. In the said case, a seafarer who was suffering from
a mental disorder was shot when he attempted to attack a policeman while at a
stopover in Bangkok, Thailand. He was already repatriated and was heading to
Manila when the incident occurred. The Court, finding that the death was not due to
his willful act, and noting that the responsibility of the employer is to see to it that
the seafarer is duly repatriated to the point of hiring (Manila), ruled that the
seafarer’s death is compensable. Otherwise stated, when said seafarer died, his
contract was still in effect since termination of employment occurs when the
seafarer signs off from the vessel and arrives at the point of hire.

Meanwhile, the case of Wallem Maritime Services Inc. is about a seafarer

whose employment contract was preterminated due to “mutual consent.” The
Court found that said seafarer’s discharge was due to his already deteriorating

NLRC 1STQ 2008 CASE DIGEST 4

physical condition, as buttressed by the fact that he was hospitalized two days after
his arrival in the Philippines and that he died three months after xxx. In said case,
the Court allowed recovery of death benefits after finding that there was a
reasonable connection between the seafarer’s job and his lung infection which
developed into septicemia and caused his death.

Even if we are to consider the possibility of compensation for the death after
the termination of the employment contract on account of a work-related illness, the
outcome of this case would still not be akin to our resolution in Wallem. In the said
case, there appears to be substantial evidence that the seafarer was suffering from
the illness while he was still on-board and that said illness was the reason for the
termination of the employment contract. There is none in the case at bar.
(Klaveness Maritime Agency Inc. vs Beneficiaries of Late Allas GR No. 168560
January 28, 2008)

Retroactive effect of administrative rulings

Petitioner’s claim that the DOLE Order (to the effect that teacher's overload
pay must not be considered in the computation of 13th-month pay) should not
be made to apply to the present case because said Order was issued only in
1996, approximately four years after the present case was initiated before the
Regional Arbitration Branch of the NLRC, is not without basis. The general rule
is that administrative rulings and circulars shall not be given retroactive
effect.

Nevertheless. it is a settled rule that when an administrative or executive

agency renders an opinion or issues a statement of policy, it merely interprets
a pre-existing law and the administrative interpretation is at best advisory for
it is the courts that finally determine what the law means.

In the present case, while the DOLE Order may not be applicable, the
Court finds that overload pay should be excluded from the computation of the
13th-month pay of petitioner's members. (Letran Calamba Faculty and
Employees Association vs. NLRC, GR No. 156225, January 29, 2008)

What constitutes in the computation of 13th month pay

In resolving the issue of the inclusion or exclusion of overload pay in the

computation of a teacher's 13th-month pay, it is decisive to determine what “basic
salary” includes and excludes. In this respect, the Court's disquisition in San Miguel
Corporation v. Inciong is instructive, to wit:

NLRC 1STQ 2008 CASE DIGEST 5

 Under PD 851 and its implementing rules, the basic salary of
an employee is used as the basis in the determination of his 13th
month pay. Any compensations or remunerations which are deemed
not part of the basic pay is excluded as basis in the computation of the
mandatory bonus.

In the same manner that payment for overtime work and work performed
during special holidays is considered as additional compensation apart and distinct
from an employee's regular wage or basic salary, an overload pay, owing to its very
nature and definition, may not be considered as part of a teacher's regular or basic
salary, because it is being paid for additional work performed in excess of the
regular teaching load.

The peculiarity of an overload lies in the fact that it may be performed within
the normal eight-hour working day. This is the only reason why the DOLE, in its
explanatory bulletin, finds it proper to include a teacher's overload pay in the
determination of his or her 13th-month pay. However, the DOLE loses sight of the
fact that even if it is performed within the normal eight-hour working day, an
overload is still an additional or extra teaching work which is performed after the
regular teaching load has been completed. Hence, any pay given as compensation
for such additional work should be considered as extra and not deemed as part of
the regular or basic salary. (supra)

Dual notice requirement in termination

In dismissing an employee, the employer has the burden of proving that the
dismissed worker has been served two notices: (1) the first, to inform the employee
of the particular acts or omissions for which the employer seeks his dismissal, and
(2) the second, to inform the employee of his employer’s decision to terminate him.
The first notice must state that the employer seeks dismissal for the act or omission
charged against the employee; otherwise, the notice does not comply with the rules.

There is no dispute that in cases of abandonment of work, notice shall be

served at the worker's last known address. While petitioner (employer) presented
the envelopes of the alleged notices sent to respondent's (employee) last known
address, the contents thereof were not offered in evidence. Thus, the records are
wanting of proof that respondent was properly apprised of the charges against her
and given an opportunity to explain her side, as petitioner maintains. Evidently, it is
clear that respondent's dismissal was effected without the notice required by law.
Thus, petitioner failed to satisfy the two-notice requirement. (Coca Cola Bottlers vs.
Garcia, GR No.159625, January 31, 2008).

NLRC 1STQ 2008 CASE DIGEST 6

Non-rigid application of rule on certification against forum shopping

While the general rule is that the certificate of non-forum shopping must be
signed by all the plaintiffs in a case and the signature of only one of them is
insufficient, the Court has stressed that the rules on forum shopping, which were
designed to promote and facilitate the orderly administration of justice, should not
be interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective. Strict compliance with the provision regarding the certificate of
non-forum shopping underscores its mandatory nature in that the certification
cannot be altogether dispensed with or its requirements completely disregarded. It
does not, however, prohibit substantial compliance therewith under justifiable
circumstances considering especially that although it is obligatory, it is not
jurisdictional.

In recent decisions, the Court has consistently held that when all the
petitioners share a common interest and invoke a common cause of action or
defense, the signature of only one of them in the certification against forum
shopping substantially complies with the rules (Pacquing vs. Coca Cola Philippines,
GR No. 157966, January 31, 2008)

Sales route helpers or cargadores or pahinantes are regular

workers

The pivotal question of whether respondent's sales route helpers or

cargadores or pahinantes are regular workers of respondent has already been
resolved in Magsalin v. National Organization of Working Men, thus:

The argument of petitioner that its usual business or trade is

softdrink manufacturing and that the work assigned to respondent
workers as sales route helpers so involves merely “post production
activities,” one which is not indispensable in the manufacture of its
products, scarcely can be persuasive. If, as so argued by petitioner
company, only those whose work are directly involved in the
production of softdrinks may be held performing functions necessary
and desirable in its usual business or trade, there would have then
been no need for it to even maintain regular truck sales route helpers.
The nature of the work performed must be viewed from a perspective
of the business or trade in its entirety and not on a confined scope.

NLRC 1STQ 2008 CASE DIGEST 7

 The repeated rehiring of respondent workers and the continuing need for
their services clearly attest to the necessity or desirability of their services in the
regular conduct of the business or trade of petitioner company. The Court of
Appeals has found each of respondents to have worked for at least one year with
petitioner company. While this Court, in Brent School, Inc. vs. Zamora, has upheld
the legality of a fixed-term employment, it has done so, however, with a stern
admonition that where from the circumstances it is apparent that the period has
been imposed to preclude the acquisition of tenurial security by the employee, then
it should be struck down as being contrary to law, morals, good customs, public
order and public policy. xxx The fact that respondent workers have agreed to be
employed on such basis and to forego the protection given to them on their security
of tenure, demonstrate nothing more than the serious problem of impoverishment of
so many of our people and the resulting unevenness between labor and capital. A
contract of employment is impressed with public interest. The provisions of
applicable statutes are deemed written into the contract, and “the parties are not at
liberty to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other.” (supra)

Strict compliance in perfecting appeal by employer; appeal bond is

jurisdictional

The Court reiterates the settled rule that an appeal from the decision of the
Labor Arbiter involving a monetary award is only deemed perfected upon the
posting of a cash or surety bond within ten (10) days from such decision (citing
Article 223). Contrary to petitioners’ assertion, the appeal bond is not merely
procedural but jurisdictional. Without said bond, NLRC does not acquire jurisdiction
over the appeal. Indeed, non-compliance with such legal requirements is fatal and
has the effect of rendering the judgment final and executory.

Evidently, the NLRC did not acquire jurisdiction over petitioners’ appeal
within the ten (10)-day reglementary period to perfect the appeal as the appeal
bond was filed eight (8) days after the last day thereof. Thus, the Court cannot
ascribe grave abuse of discretion to the NLRC or error to the Court of Appeals in
refusing to take cognizance of petitioners’ belated appeal. (Roos Industrial
Construction Inc. vs. NLRC, GR No. 172409, February 4, 2008)

No distinction between period to appeal and perfection of appeal to

NLRC

In addition, petitioners cannot take refuge behind the Court’s ruling in Star
Angel. Pertinently, the Court stated in Computer Innovations Center v. National
Labor Relations Commission,

NLRC 1STQ 2008 CASE DIGEST 8

 Moreover, the reference in Star Angel to the distinction
between the period to file the appeal and to perfect the appeal has
been pointedly made only once by this Court in Gensoli v. NLRC thus,
it has not acquired the sheen of venerability reserved for repeatedly-
cited cases. The distinction, if any, is not particularly evident or
material in the Labor Code; hence, the reluctance of the Court to
adopt such doctrine. Moreover, the present provision in the NLRC
Rules of Procedure, that “the filing of a motion to reduce bond shall
not stop the running of the period to perfect appeal” flatly contradicts
the notion expressed in Star Angel that there is a distinction between
filing an appeal and perfecting an appeal.

Ultimately, the disposition of Star Angel was premised on the

ruling that a motion for reduction of the appeal bond necessarily stays
the period for perfecting the appeal, and that the employer cannot be
expected to perfect the appeal by posting the proper bond until such
time the said motion for reduction is resolved. The unduly stretched-
out distinction between the period to file an appeal and to perfect an
appeal was not material to the resolution of Star Angel, and thus could
properly be considered as obiter dictum. (supra)

A CBA entered into during the effectivity of a statute that resulted

in wage distortion is sufficient remedy against such distortion

Interestingly, such gap (wage distortion) as re-established by virtue of the

CBA is more than a substantial compliance with R.A. No. 6640 (the passage of
which resulted in distortion). We hold that the Court of Appeals erred in not taking
into account the provisions of the CBA viz-a-viz the wage increase under the said
law. In National Federation of Labor v. NLRC, we held:

We believe and so hold that the re-establishment of a

significant gap or differential between regular employees and casual
employees by operation of the CBA was more than substantial
compliance with the requirements of the several Wage Orders (and of
Article 124 of the Labor Code). That this re-establishment of a
significant differential was the result of collective bargaining
negotiations, rather than of a special grievance procedure, is not a
legal basis for ignoring it.

(P.I Manufacturing Inc. vs. P.I. Manufacturing Supervisors and Foreman Association
et al., GR No. 167217, February 4, 2008)

NLRC 1STQ 2008 CASE DIGEST 9

Extent of prayer for “such other reliefs”

Respondent (employee) indeed prayed for “other just and equitable relief,” (in
her position paper) but the same may not be interpreted so broadly as to include
even those which are not warranted by the factual premises alleged by a party
(such as a claim from the “Provident Fund” benefits of her employer) Thus the
January 24, 2003 Decision of the Court of Appeals correctly stated: “It has been
ruled in this jurisdiction that the general prayer for ‘other reliefs’ is applicable to such
other reliefs which are warranted by the law and facts alleged by the respondent in
her basic pleadings and not on a newly created issue.” (Citibank vs NLRC, GR No.
159302, February 6, 2008).

Serious misconduct

When an employee, despite repeated warnings from the employer,

obstinately refuses to curtail a bellicose inclination such that it erodes the morale of
co-employees, the same may be a ground for dismissal for serious misconduct.
(supra)

Perfection of appeal under Article 128 (Visitorial Power)

In Guico, Jr. v. Hon. Quisumbing, we held that the posting of the proper
amount of the appeal bond under Article 128 (b) is mandatory for the perfection of
an appeal from a monetary award in labor standard cases:

“The next issue is whether petitioner was able to perfect his

appeal to the Secretary of Labor and Employment. Article 128 (b) of
the Labor Code clearly provides that the appeal bond must be "in the
amount equivalent to the monetary award in the order appealed from."
The records show that petitioner failed to post the required amount of
the appeal bond. His appeal was therefore not perfected.”

Just like the petitioner in the present case, the employer in Guico v. Secretary of
Labor had also sought a reduction of the appeal bond due to financial losses arising
from the shutdown of his business; yet, we did not temper the strict requirement of
Article 128 (b) for him. The rationale behind the stringency of such requirement is
that the employer-appellant may choose between a cash bond and a surety bond.

NLRC 1STQ 2008 CASE DIGEST 10

Hence, limitations in his liquidity should pose no obstacle to his perfecting an appeal
by posting a mere surety bond. (Yanson vs Secretary of Labor and Employment,
GR No. 159026, February 11 2008)

Demotion tantamount to constructive dismissal

We have consistently recognized and upheld the prerogative of management to

transfer an employee from one office to another within the business establishment,
provided that there is no demotion in rank or diminution of his 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. xxx

The employer bears the burden of showing that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; and does not 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 employee’s transfer shall be tantamount to
constructive dismissal.

In this case, while the transfer of respondent from Credit and Collection
Manager to Marketing Assistant did not result in the reduction of his salary, there
was a reduction in his duties and responsibilities which amounted to a demotion
tantamount to a constructive dismissal xxx While petitioners claim that the position
of a Marketing Assistant covers a wide area as compared with the position of Credit
and Collection Manager, the latter is reposed with managerial duties in overseeing
petitioners’ business in his assigned area, unlike the former in which he merely
collates raw data. These two positions are not of the same level of authority. There
is also constructive dismissal when an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on the part of the employee as to
foreclose any choice on his part except to resign from such employment. (Norkis
Trading Co. vs. Gnilo, GR No.159730, February 11, 2008)

Appeals from Voluntary Arbitrator’s decision

While it is true that, in accordance with the liberal spirit which pervades the
Rules of Court and in the interest of justice, a petition for certiorari may be
treated as having been filed under Rule 45, the petition for certiorari filed by
petitioner before the CA cannot be treated as such, without the exceptional
circumstances mentioned above, because it was filed way beyond the 15-day
reglementary period within which to file the Petition for Review. AMA received the
assailed Decision of the Voluntary Arbitrator on April 15, 2003 and it filed the
petition for certiorari under Rule 65 before the CA only on June 16, 2003. By parity
of reasoning, the same reglementary period should apply to appeals taken from the

NLRC 1STQ 2008 CASE DIGEST 11

decisions of Voluntary Arbitrators under Rule 43. Based on the foregoing
disquisitions, the assailed Decision of the Voluntary Arbitrator had already become
final and executory and beyond the purview of this Court to act upon. (AMA
Computer College vs. Nacino, GR No. 162739, February 12 2008)

Dismissal on ground of loss of trust and confidence

The basic requisite for dismissal on the ground of loss of confidence is that
the employee concerned holds a position of trust and confidence or is routinely
charged with the care and custody of the employer’s money or property. Moreover,
the breach must be related to the performance of the employee’s function. Also, it
must be shown that the employee is a managerial employee, since the term “trust
and confidence” is restricted to said class of employees. (Enriquez vs BPI, GR No.
172812, February 12, 2008)

When tardiness not condoned by employer

The mere fact that the numerous infractions of respondent (employee) have
not been immediately subjected to sanctions cannot be interpreted as condonation
of the offenses or waiver of the company to enforce company rules. A waiver is a
voluntary and intentional relinquishment or abandonment of a known legal right or
privilege. It has been ruled that “a waiver to be valid and effective must be couched
in clear and unequivocal terms which leave no doubt as to the intention of a party to
give up a right or benefit which legally pertains to him” Hence, the management
prerogative to discipline employees and impose punishment is a legal right which
cannot, as a general rule, be impliedly waived. (It follows that) it is incumbent upon
the employee to adduce substantial evidence to demonstrate condonation or waiver
on the part of management to forego the exercise of its right to impose sanctions for
breach of company rules. (R.B. Michael Press, Escobia vs Galit, GR No. 153510,
February 13 2008)

When non-payment of wages to an absent employee not a penalty

The CA however reasoned out that for respondent’s absences, deductions

from his salary were made and hence to allow petitioners to use said absences as
ground for dismissal would amount to “double jeopardy.” This postulation is
incorrect. Respondent is admittedly a daily wage earner and hence is paid based on
such arrangement. For said daily paid workers, the principle of “a day’s pay for a
day’s work” is squarely applicable. Hence it cannot be construed in any wise that

NLRC 1STQ 2008 CASE DIGEST 12

such nonpayment of the daily wage on the days he was absent constitutes a
penalty. (supra)

Observance of dual notice requirement

In King of Kings Transport v. Mamac, we had the occasion to further

elucidate on the procedure relating to the twin notice and hearing requirement, thus:
(1) The first written notice to be served on the employees
should contain the specific causes or grounds for termination against
them, and a directive that the employees are given the opportunity to
submit their written explanation within a reasonable period.
“Reasonable opportunity” under the Omnibus Rules means every kind
of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be
construed as a period of at least five (5) calendar days from receipt of
the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data
and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently
prepare their explanation and defenses, the notice should contain a
detailed narration of the facts and circumstances that will serve as
basis for the charge against the employees. A general description of
the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among
the grounds under Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should

schedule and conduct a hearing or conference wherein the
employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support
of their defenses; and (3) rebut the evidence presented against them
by the management. During the hearing or conference, the
employees are given the chance to defend themselves personally,
with the assistance of a representative or counsel of their choice.
Moreover, this conference or hearing could be used by the parties as
an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified,

the employers shall serve the employees a written notice of
termination indicating that: (1) all circumstances involving the charge

NLRC 1STQ 2008 CASE DIGEST 13

 against the employees have been considered; and (2) grounds have
been established to justify the severance of their employment. (supra)

Solidary liability in case of failure to comply with procedural due

process

In view of the infirmities in the proceedings, we conclude that termination of

respondent was railroaded in serious breach of his right to due process. And as a
consequence of the violation of his statutory right to due process and following
Agabon, petitioners are liable jointly and solidarily to pay nominal damages to the
respondent in the amount of PhP 30,000 (supra)

Non-diminution of benefits

TSPIC also maintains that charging the overpayments made to the 16

respondents through staggered deductions from their salaries does not constitute
diminution of benefits. We agree with TSPIC. Diminution of benefits is the unilateral
withdrawal by the employer of benefits already enjoyed by the employees. There is
diminution of benefits when it is shown that: (1) the grant or benefit is founded on a
policy or has ripened into a practice over a long period; (2) the practice is consistent
and deliberate; (3) the practice is not due to error in the construction or application
of a doubtful or difficult question of law; and (4) the diminution or discontinuance is
done unilaterally by the employer. As correctly pointed out by TSPIC, the
overpayment of its employees was a result of an error. This error was immediately
rectified by TSPIC upon its discovery. We have ruled before that an erroneously
granted benefit may be withdrawn without violating the prohibition against non-
diminution of benefits. (TSPIC Corp. vs TSPIC Employees Union (FFW), GR No.
163419, February 13 2008)

Valid grounds of termination

Under the Labor Code, an employee may be validly terminated on the

following grounds: (1) just causes under Art. 282; (2) authorized causes under Art.
283; (3) termination due to disease under Art. 284; and (4) termination by the
employee or resignation under Art. 285. Another cause for termination is dismissal
from employment due to the enforcement of the union security clause in the CBA.
(Alabang Country Club Inc vs NLRC, GR No. 170287, February 14 2008)

NLRC 1STQ 2008 CASE DIGEST 14

Union shop and maintenance of membership shop

There is union shop when all new regular employees are required to join the
union within a certain period as a condition for their continued employment. There
is maintenance of membership shop when employees who are union members as
of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are
promoted or transferred out of the bargaining unit or the agreement is terminated.
(supra)

Termination under union security clause, requisites

In terminating the employment of an employee by enforcing the union

security clause, the employer needs only to determine and prove that: (1) the union
security clause is applicable; (2) the union is requesting for the enforcement of the
union security provision in the CBA; and (3) there is sufficient evidence to support
the union’s decision to expel the employee from the union. These requisites
constitute just cause for terminating an employee based on the CBA’s union
security provision. (supra)

Employer’s observance of due process in termination cases

pursuant to union security clause

The CA and the three respondents (employees) err in relying on Malayang

Samahan, as its ruling has no application to this case. In Malayang Samahan, the
union members were expelled from the union and were immediately dismissed from
the company without any semblance of due process. Both the union and the
company did not conduct administrative hearings to give the employees a chance to
explain themselves. In the present case, the Club (employer) has substantially
complied with due process. The three respondents were notified that their dismissal
was being requested by the Union, and their explanations were heard. Then, the
Club, through its President, conferred with said respondents during the last week of
October 2001. The three respondents were dismissed only after the Club reviewed
and considered the documents submitted by the Union vis-à-vis the written
explanations submitted by said respondents. Under these circumstances, we find
that the Club had afforded the three respondents a reasonable opportunity to be
heard and defend themselves. (supra)

The time of filing of complaint before the DOLE Regional Director

determines question of jurisdiction

NLRC 1STQ 2008 CASE DIGEST 15

 In support of their position, petitioners (employer) call the attention of this
Court to the fact that Rule II, Section 3 of the Rules on the Disposition of Labor
Standards Cases in the Regional Offices stipulates:

Section 3. Complaints where no employer-employee

relationship actually exists. – Where employer-employee relationship
no longer exists by reason of the fact that it has already been severed,
claims for payment of monetary benefits fall within the exclusive and
original jurisdiction of the labor arbiters. Accordingly, if on the face of
the complaint, it can be ascertained that employer-employee
relationship no longer exists, the case, whether or not accompanied
by an allegation of illegal dismissal, shall immediately be endorsed by
the Regional Director to the appropriate Branch of the National Labor
Relations Commission (NLRC).

It follows, petitioners contend, that where the employer-employee

relationship no longer exists by the fact of its severance, claims for payment of
monetary benefits fall within the exclusive and original jurisdiction of the Labor
Arbiters. Petitioners claim that the supervening event of private respondents’
voluntarily resigning from petitioners’ employ in the course of the proceedings in
CAR00-9507-CI-25 automatically ousted public respondent DOLE-CAR Director
Maraan of his jurisdiction to continue to hear and determine said case. xxx
Petitioners’ reliance on Rule II, Section 3 of the Rules on the Disposition of Labor
Standards Cases in the Regional Offices is inappropriate.

While it is true that the quoted provision states that where employee-
employer relations have been severed, complaints or claims for payment of
monetary benefits fall within the exclusive and original jurisdiction of Labor Arbiters;
however, such is not the case in the present Petition. To emphasize, at the time
private respondents (employees) instituted CAR00-9507-CI-25 by filing a complaint
with the DOLE-CAR Regional Office, they were still employees of petitioners.
Private respondents Gomez and Tupas filed the Complaint on 19 May 1995 before
the DOLE-CAR Regional Office, seeking a routine inspection to be conducted on
petitioner Rizal Security relative to underpayment in wages and nonpayment of
other benefits under the Labor Code. At the time of filing of the Complaint on said
date, the employer-employee relationship between private respondents and
petitioner Rizal Security had not yet been severed. As alleged by petitioner Rizal
Security itself, deemed as an admission on its part, the employer-employee
relations between petitioner Rizal Security and private respondents were terminated
on 1 September 1995, or more than three months after the institution of CAR00-
9507-CI-25 before the DOLE Regional Office.

It is but axiomatic that the jurisdiction of a tribunal, including a quasi-judicial

officer or government agency, over the nature and subject matter of a petition or

NLRC 1STQ 2008 CASE DIGEST 16

complaint is determined by the material allegations therein, the character of the
relief prayed for, and the law existing at the time of the filing of the complaint or
petition.

Considering that it is uncontroverted that there still existed an employer-

employee relationship between petitioner Rizal Security and private respondents at
the time of filing of the complaint on 19 May 1995, and that the case is one involving
violations of labor standard provisions of the Labor Code, this Court finds that
DOLE-CAR Director Maraan properly retained jurisdiction to hear and decide
CAR00-9507-CI-25 and issue the assailed Order dated 24 January 1996, pursuant
to the power vested in him by Article 128(b) of the Labor Code (Rizal Security
Services vs. Maraan, GR No. 124915, February 18, 2008)

No refusal to bargain

The union merely bases its claim of refusal to bargain on a letter written by
Nestlé (employer) where the latter laid down its position that “unilateral grants, one-
time company grants, company-initiated policies and programs, which include, but
are not limited to the Retirement Plan, Incidental Straight Duty Pay and Calling Pay
Premium, are by their very nature not proper subjects of CBA negotiations and
therefore shall be excluded therefrom.” But said letter is not tantamount to refusal
to bargain. In thinking to exclude the issue of Retirement Plan from the CBA
negotiations, Nestlé cannot be faulted for considering the same benefit as
unilaterally granted, considering that eight out of nine bargaining units have
allegedly agreed to treat the Retirement Plan as a unilaterally granted benefit.

This is not a case where the employer exhibited an indifferent attitude

towards collective bargaining, because the negotiations were not the unilateral
activity of the bargaining representative. Nestlé’s desire to settle the dispute and
proceed with the negotiation being evident in its cry for compulsory arbitration is
proof enough of its exertion of reasonable effort at good-faith bargaining. Nestle
never refused to bargain collectively with (the Union). Nestle simply wanted to
exclude the Retirement Plan from the issues to be taken up during CBA
negotiations, on the postulation that such was in the nature of a unilaterally granted
benefit. An employer’s steadfast insistence to exclude a particular substantive
provision is no different from a bargaining representative’s perseverance to include
one that they deem of absolute necessity. Indeed, an adamant insistence on a
bargaining position to the point where the negotiations reach an impasse does not
establish bad faith (Union of Filipro Employees vs. Nestle Philippines, GR No.
158930-31, March 3 2008)

No test of good faith bargaining

NLRC 1STQ 2008 CASE DIGEST 17

 There is no per se test of good faith in bargaining. Good faith or bad faith is
an inference to be drawn from the facts. Herein, no proof was presented to
exemplify bad faith on the part of Nestlé apart from mere allegation. Construing
arguendo that the content of the aforequoted letter laid down a pre-condition to its
agreement to bargain with (the Union), Nestlé’s inclusion in its Position Paper of its
proposals affecting other matters covered by the CBA negates the claim of refusal
to bargain or bargaining in bad faith. (supra)

Corporate Officer/Stockholder not liable absent bad faith

In this case, it is worth mentioning that the LA in his Decision expressly

absolved Uytengsu from any liability, holding that the latter did not act in bad faith
and in excess of his authority. Such finding was not assailed by the private
respondents (claimant-employees) nor did NLRC in its Decision overrule the same.
The liability of Uytengsu was never discussed in the said NLRC decision which, to
the detriment of the private respondents, had lapsed into finality. (Mandaue
Dinghow Dimsum House vs. NLRC, GR No. 161134, March 3, 2008)

Jurisdiction acquired by the Secretary of Labor

It is worthy to note that as regards the power granted to

Regional Director by Article 128 of the Labor Code, as amended, only
two (2) limitations are set forth: first, where the employer contests the
findings of the labor regulations officer, and raises issues which
cannot be resolved without considering evidentiary matters that are
not verifiable in the normal course of inspection, and second, where
the employer-employee relationship no longer exists.

xxx

Both of the above-stated limitations are wanting in this case.

Records show that, when this case was filed on August 29, 2000,
complainants were still employed with respondent CEREBA
(subcontractor) working for KUNWHA’s (contractor) project with the
Vicariate. There was no proof that the subcontracting agreement
between KUNWHA LUZON CONSTRUCTION and CEREBA Builders
was terminated as of July 2000. The letters showing the poor
performance of CEREBA Builders cannot be considered as a notice of
termination of the Subcontracting Agreement for the same do not state
so.

NLRC 1STQ 2008 CASE DIGEST 18

 xxx

Succinctly put, since no written notice was served to

respondent CEREBA Builders terminating the Subcontracting
Agreement, the employer-employee relationship between KUNWHA
and complainants existed until the completion of the subcontracting
agreement on September 18, 2000. Considering this, when the
complainants filed this case on August 29, 2000, the Regional Director
validly acquired jurisdiction over the case. And, jurisdiction once
acquired is not lost upon the instance of the parties but continues until
the case is terminated. (Catholic Vicariate, Baguio City vs. Sto.
Tomas, GR No. 167334, March 7, 2008)

Effect of a finding of labor-only contracting

The third paragraph of Article 106, however, empowers the Secretary of

Labor to make distinctions between permissible job contracting and “labor-only”
contracting, which is a prohibited act further defined under the last paragraph. 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, and the “labor-only” contractor is considered
as a mere agent of the principal, the real employer. (Mandaue Galleon Trade Inc.
vs. Andales, Solitana, GR No. 159668, March 7, 2008)

Implementing rules of Articles 106 to 109

Sections 5 and 7 of the Rules Implementing Articles 106 to 109 of the Labor
Code, as amended reinforce the rules in determining the existence of employer-
employee relationship between employer, contractor or subcontractor, and the
contractor’s or subcontractor’s employee, to wit:

Section 5. Prohibition against labor-only contracting. – Labor-

only contracting is hereby declared prohibited. For this purpose, labor-
only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements
are [is] present:

i) The contractor or subcontractor does not have

substantial capital or investment which relates to the job,
work or service to be performed and the employees
recruited, supplied or placed by such contractor or

NLRC 1STQ 2008 CASE DIGEST 19

 subcontractor are performing activities which are directly
related to the main business of the principal; or

ii) The contractor does not exercise the right to control over
the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the

application of Article 248 (C) of the Labor Code, as amended.

“Substantial capital or investment” refers to capital stocks and

subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out.

The “right to control” shall refer to the right reserved to the

person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.

Section 7. Existence of an employer-employee relationship. –

The contractor or subcontractor shall be considered the employer of
the contractual employee for purposes of enforcing the provisions of
the Labor Code and other social legislation. The principal, however,
shall be solidarily liable with the contractor in the event of any violation
of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual

employee in any of the following cases, as declared by a competent
authority:

a. where there is a labor-only contracting; or

b. where the contracting arrangement falls within the

prohibitions provided in Section 6 (Prohibitions) hereof. (supra)

Elements of labor-only contracting; Burden of proof

Where the contractor or subcontractor supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among other things; and the workers recruited and
placed by the contractor or subcontractor are performing activities which are directly
related to the principal business of such employer; or (2) where the contractor does

NLRC 1STQ 2008 CASE DIGEST 20

not exercise the right to control the performance of the work of the contractual
employee. xxx Where the employees are tasked to undertake activities usually
desirable or necessary in the usual business of the employer, the contractor is
considered as a “labor-only” contractor and such employees are considered as
regular employees of the employer xxx

MGTI (the adjudged employer) was unable to present any proof that its
contractors had substantial capital. There was no evidence pertaining to the
contractors' capitalization; nor to their investment in tools, equipment or implements
actually used in the performance or completion of the job, work, or service that they
were contracted to render. The law casts the burden on the contractor to prove that
it has substantial capital, investment, tools, etc. Employees, on the other hand,
need not prove that the contractor does not have substantial capital, investment,
and tools to engage in job-contracting (supra)

Requisites of valid retrenchment

For a valid retrenchment, the following requisites must be complied with: (a)
the retrenchment is necessary to prevent losses and such losses are proven; (b)
written notice to the employees and to the DOLE at least one month prior to the
intended date of retrenchment; and (c) payment of separation pay equivalent to
one-month pay or at least one-half month pay for every year of service, whichever is
higher.

Jurisprudential standards for the losses which may justify retrenchment have
been reiterated by this Court in a long line of cases to forestall management abuse
of this prerogative, viz:

Firstly, the losses expected should be substantial and not

merely de minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bonafide nature of the retrenchment
would appear to be seriously in question. Secondly, the substantial
loss apprehended must be reasonably imminent, as such imminence
can be perceived objectively and in good faith by the employer. There
should, in other words, be a certain degree of urgency for the
retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise
laid-off. Because of the consequential nature of retrenchment, it must,
thirdly, be reasonably necessary and likely to effectively prevent the
expected losses. The employer should have taken other measures
prior or parallel to retrenchment to forestall losses, i.e., cut other costs
than labor costs. An employer who, for instance, lays off substantial
numbers of workers while continuing to dispense fat executive

NLRC 1STQ 2008 CASE DIGEST 21

 bonuses and perquisites or so-called “golden parachutes”, can
scarcely claim to be retrenching in good faith to avoid losses. To
impart operational meaning to the constitutional policy of providing “full
protection” to labor, the employer’s prerogative to bring down labor
costs by retrenching must be exercised essentially as a measure of
last resort, after less drastic means - e.g., reduction of both
management and rank-and-file bonuses and salaries, going on
reduced time, improving manufacturing efficiencies, trimming of
marketing and advertising costs, etc.—have been tried and found
wanting.

Lastly, but certainly not the least important, alleged losses if already realized,
and the expected imminent losses sought to be forestalled, must be proved by
sufficient and convincing evidence. (Manatad vs Philippine Telegraph and Telephone
Corp., GR No. 172363, March 7, 2008)

Audited financial statements satisfies required proof of losses

The financial statements reflect that respondent suffered substantial loss in

the amount of P558 Million by 30 June 1998. The Report of SGV & Co.
substantiates the alleged precarious financial condition of the respondent. The
financial statements audited by independent external auditors constitute the normal
method of proving the profit and loss performance of a company xxx No evidence
can best attest to a company’s economic status other than its financial statement.
We defined the evidentiary weight accorded to audited financial statements in Asian
Alcohol Corporation v. National Labor Relations Commission:

The condition of business losses is normally shown by audited

financial documents like yearly balance sheets and profit and loss
statements as well as annual income tax returns. It is our ruling that
financial statements must be prepared and signed by independent
auditors. Unless duly audited, they can be assailed as self-serving
documents. But it is not enough that only the financial statements for
the year during which retrenchment was undertaken, are presented in
evidence. For it may happen that while the company has indeed been
losing, its losses may be on a downward trend, indicating that
business is picking up and retrenchment, being a drastic move, should
no longer be resorted to. Thus, the failure of the employer to show its
income or loss for the immediately preceding year or to prove that it
expected no abatement of such losses in the coming years, may
bespeak the weakness of its cause. It is necessary that the employer
also show that its losses increased through a period of time and that
the condition of the company is not likely to improve in the near future.

NLRC 1STQ 2008 CASE DIGEST 22

 Being guided accordingly, we find that respondent was fully justified in
implementing a retrenchment program since it was undergoing business reverses,
not only for a single fiscal year, but for several years prior to and even after the
program. In a span of six years, respondent realized profits only in one year, in
1997. (supra)

Overall assessment of losses

Even if we take into consideration the figures submitted by petitioner

(employee) and accede to her position that respondent was gaining substantial
profits from its Central Visayas office, said numbers, nonetheless, do not bespeak
respondent’s (employer) overall financial standing in light of the fact that respondent
is operating nationwide and the Central Visayas office is only one of its many
branches. Losses or gains of a business entity cannot be fully assessed by
isolating or selecting only particular branches or offices. (supra)

Considered substantial compliance with notice requirement to DOLE

We also find that the respondent complied with the requisite notices to the
employee and the DOLE to effect a valid retrenchment. Petitioner failed to refute
that she received the written notice of retrenchment from respondent on 16
November 1998. Although respondent failed to furnish DOLE with a formal letter
notifying it of the retrenchment, it still substantially complied with the requirement.
Since the NCMB, the reconciliatory arm of DOLE, supervised the negotiation for
separation package, xxx it would be superfluous to still require respondent to serve
notice of the retrenchment to DOLE. (supra)

Payment of 13th month pay

While employers already paying their employees a 13th month pay or more
in a calendar year or its equivalent at the time of the issuance of PD 851 are already
exempted from the mandatory coverage of said law, PAL cannot escape liability in
this case by virtue thereof.

It must be stressed that in the 1986-1989 CBA, PAL agreed to pay its
employees 1) the 13th month pay or the mid-year bonus, and 2) the Christmas
bonus. The 13th month pay, guaranteed by PD 851, is explicitly covered or
provided for as the mid-year bonus in the CBA, while the Christmas bonus is
evidently and distinctly a separate benefit. PAL may not be allowed to brush off said
distinction, and unilaterally and arbitrarily declare that for non-regular employees,

NLRC 1STQ 2008 CASE DIGEST 23

their Christmas bonus is the same as or equivalent to the 13th month pay. (PAL vs
PALEA, GR No. 142399, March 12, 2008)

Solidary liability of indirect employer does not cover payment of

separation pay; Exception

However, the afore-quoted provision (Art. 109) must be read in conjunction

with Articles 106 and 107 of the Labor Code, as amended. Taken together, an
indirect employer (as defined by Article 107) can only be held solidarily liable with
the independent contractor or subcontractor (as provided under Article 109) in the
event that the latter fails to pay the wages of its employees (as described in Article
106). Hence, while it is true that the petitioner was the indirect employer of the
complainants (under Art. 107), it cannot be held liable in the same way as the
employer in every respect. The petitioner may be considered an indirect employer
only for purposes of unpaid wages. As this Court succinctly explained in
Philippine Airlines, Inc. v. National Labor Relations Commission

xxx The concept of indirect employer only relates or refers to the

liability for unpaid wages. Read together, Articles 106 and 109 simply
mean that the party with whom an independent contractor deals is
solidarily liable with the latter for unpaid wages, and only to that extent
and for that purpose that the latter is considered a direct employer.
xxx

Further, there is no question that private respondents are operating as an

independent contractor and that the complainants were their employees. There was
no employer-employee relationship that existed between the petitioner (principal or
indirect employer) and the complainants and, thus, petitioner could not have
dismissed the latter from employment. Only private respondents, as the
complainants’ employer, can terminate their services, and should it be done
illegally, be held liable therefor. The only instance when the principal can also be
held liable with the independent contractor or subcontractor for the backwages and
separation pay of the latter’s employees is when there is proof that the principal
conspired with the independent contractor or subcontractor in the illegal dismissal of
the employees,

It is the established fact of conspiracy that will tie the principal or indirect
employer to the illegal dismissal of the contractor or subcontractor’s employees. In
the present case, there is no allegation, much less proof presented, that the
petitioner conspired with private respondents in the illegal dismissal of the latter’s
employees; hence, it cannot be held liable for the same. (Meralco Industrial
Engineering Services Corp. vs. NLRC, GR No. 145402, March 14 2008)

NLRC 1STQ 2008 CASE DIGEST 24

When to hold solidarily liable futile

Although petitioner (principal/indirect employer) is not liable for complainants’

separation pay, petitioner is solidarily liable with the private respondents
(independent contractor) for the judgment awards for underpayment of wages and
non-payment of overtime. Private respondents, however, had already posted a
surety bond in an amount sufficient to cover all the judgment awards due the
complainants, including those for underpayment of wages and non-payment of
overtime pay. The joint and several liability of the principal with the contractor and
subcontractor were enacted to ensure compliance with the provisions of the Labor
Code, principally those on statutory minimum wage. This liability facilitates, if not
guarantees, payment of the workers’ compensation, thus, giving the workers ample
protection as mandated by the 1987 Constitution. With private respondents’ surety
bond, it can therefore be said that the purpose of the Labor Code provision on the
solidary liability of the indirect employer is already accomplished since the interest
of the complainants are already adequately protected. Consequently, it will be futile
to continuously hold the petitioner jointly and solidarily liable with the private
respondents for the judgment awards for underpayment of wages and non-payment
of overtime pay. (supra)

Money claims under the Migrant Workers Act

Section 10 of R.A. 8042 provides:

SECTION 10. Money Claims. – x x x

xxxx

In case of termination of overseas employment without just,

valid or authorized cause as defined by law or contract, the worker
shall be entitled to the full reimbursement of his placement fee with
interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months
for every year of the unexpired term, whichever is less.

x x x x.

NLRC 1STQ 2008 CASE DIGEST 25

 The correct interpretation of this provision was settled in Marsman Manning
Agency Inc. v. NLRC where this Court held that “the choice of which amount to
award an illegally dismissed overseas contract worker, i.e., whether his salaries for
the unexpired portion of his employment contract, or three (3) months’ salary for
every year of the unexpired term, whichever is less,” comes into play only when the
employment contract concerned has a term of at least one (1) year or more. The
employment contract involved in the instant case covers a two-year period but the
overseas contract worker actually worked for only 26 days prior to his illegal
dismissal. Thus, the three months’ salary rule applies. There is a similar factual
milieu between the case at bench and Olarte v. Nayona - both fall under the three
months’ salary rule since the term of the contract is “at least one year or more.”

We are not in accord with the ruling of the CA that respondent (worker)
should be paid his salaries for 14 months and 4 days (on the impression that since
respondent actually worked for 26 days, the unexpired portion of the contract is one
(1) year, eleven (11) months and four (4) days; and payment should therefore be as
follows: For the unexpired one (second) whole year, 3 month rule applies, but as to
the 11 months and 4 days of the first year, in addition to three months (for the
unexpired second year), it awarded full compensation corresponding to the whole
unexpired term of 11 months and 4 days). Records show that his actual
employment lasted only for 26 days. Applying the above provision, and considering
that the employment contract covers a two-year period, respondent is entitled to 6
months’ salary. This is obviously what the law provides. (Flourish Maritime
Shipping vs. Almanzor, GR No. 177948, March 15, 2008)

NLRC 1STQ 2008 CASE DIGEST 26