Labor Law refers to a set of legal provisions designed to protect the rights and welfare of

workers, while also regulating the relationship between employers and employees. It
provides guidelines on employment standards, the treatment of workers, and the
responsibilities of both employers and employees in the workplace.
The primary purpose of Labor Law is to ensure fair treatment, safety, and the proper
compensation of workers. It includes provisions about wages, working conditions, benefits,
and termination of employment. Additionally, it helps resolve disputes between employers
and employees, aiming for a balanced and fair relationship.
The Labor Code of the Philippines is the main body of law that governs labor and
employment issues in the country. It covers a wide range of topics such as:
1. Employment Standards - Rules on minimum wage, working hours, and overtime pay
to ensure that employees are fairly compensated.
2. Employment Relations - The regulations regarding hiring, promotion, discipline, and
termination of employees, ensuring that workers are treated fairly and justly.
3. Social Protection - Provisions on benefits such as Social Security System (SSS), health
insurance, 13th-month pay, and service incentive leave, which aim to provide social
safety nets for workers.
4. Labor Rights - Protection of freedom of association and the right to join labor unions,
engage in collective bargaining, and go on strike if necessary.
5. Occupational Safety and Health - Regulations ensuring that workers are provided with
safe working conditions and are protected from hazardous work environments.
General Principles
Constitution
Article II, Section The State affirms labor 1. Labor as a Primary Socio-Economic Force
18 as a primary social This part of the statement recognizes labor as
economic force. It one of the key driving forces of the economy
shall protect the rights and society. Workers, through their skills,
of workers and knowledge, and effort, contribute to the
promote their creation of goods, services, and wealth.
welfare. Without their contribution, businesses,
industries, and entire economies cannot
function. The acknowledgment of labor as a
"primary force" emphasizes its central role in
building and sustaining a nation’s economic
and social structure.
• Why is this important? Labor is not
just about physical or mental work—it
represents the collective effort that
keeps society running. From factory
workers to farmers, healthcare
workers to teachers, and every other
profession, their work fuels economic
growth and improves societal
conditions. Recognizing labor in this
way places value on workers and their
essential contributions.
The Role of the State

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 The statement declares that the state has a
duty to protect workers’ rights and promote
their welfare. This means the government is
responsible for creating laws, policies, and
systems that ensure workers are treated fairly
and can enjoy a good quality of life.
• Examples of Rights to Be Protected:
o Fair Wages: Ensuring workers
are paid adequately for their
labor.
o Safe Working Conditions:
Protecting workers from
harmful or unsafe
environments.
o Freedom of Association:
Allowing workers to form or
join unions and engage in
collective bargaining.
o Job Security: Safeguarding
workers against unfair
termination or exploitation.
o Work-Life Balance: Promoting
policies like reasonable work
hours, parental leave, and rest
days.
Promoting Workers' Welfare
Beyond protecting rights, the state is also
tasked with actively enhancing the quality of
life for workers. This involves not just
addressing immediate concerns like wages
but also ensuring long-term stability and
opportunities for growth.
• How Can the State Promote Welfare?
o Social Programs: Providing
healthcare, housing, and
education for workers and
their families.
o Opportunities for
Advancement: Investing in
training programs and skill
development to help workers
grow professionally.
o Economic Protections:
Offering unemployment
benefits, retirement pensions,
and insurance programs to

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 provide security during
challenging times.

Article XIII, Section The State shall afford Full Protection to Labor: Local, Overseas,
3 full protection to Organized, and Unorganized
labor, local and The state pledges to protect all forms of labor,
overseas, organized regardless of whether workers are employed
and unorganized, and locally or abroad, or whether they belong to
promote full unions (organized) or not (unorganized). This
employment and broad commitment ensures no worker is left
equality of out of the protective scope of the law.
employment • Key Protections Include:
opportunities for all. o Ensuring workers' safety and
dignity regardless of location
It shall guarantee the or industry.
rights of all workers to o Addressing the vulnerabilities
self-organization, of overseas workers, who may
collective bargaining face exploitation or abuse in
and negotiations, and foreign countries.
peaceful concerted o Supporting unorganized
activities, including workers, such as freelancers or
the right to strike in informal workers, who might
accordance with law. lack representation or
They shall be entitled resources to defend their
to security of tenure, rights.
humane conditions of Promoting Full Employment and Equality of
work, and a living Opportunities
wage. They shall also The state aims to:
participate in policy • Create Jobs: Ensure everyone has
and decision-making access to meaningful and stable
processes affecting employment.
their rights and • Equal Opportunities: Prevent
benefits as may be discrimination based on gender, age,
provided by law. race, or social status, ensuring fairness
in hiring, promotion, and treatment.
The State shall By promoting full employment and equality,
promote the principle the state fosters an inclusive economy where
of shared every individual has the chance to contribute
responsibility and succeed.
between workers and Workers’ Rights to Self-Organization and
employers and the Collective Action
preferential use of The law guarantees workers several
voluntary modes in fundamental rights:
settling disputes, • Self-Organization: Workers can form
including conciliation, and join unions or labor groups to
and shall enforce their protect their interests.
mutual compliance

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 therewith to foster • Collective Bargaining: Unions or
industrial peace. groups can negotiate wages, benefits,
and working conditions with
The State shall employers on behalf of workers.
regulate the relations • Peaceful Concerted Activities:
between workers and Workers have the right to protest,
employers, demonstrate, or even strike, provided
recognizing the right they follow legal processes.
of labor to its just These rights empower workers to voice their
share in the fruits of concerns and ensure fair treatment while
production and the maintaining lawful practices to prevent
right of enterprises to disorder.
reasonable returns to Security of Tenure, Humane Work Conditions,
investments, and to and Living Wage
expansion and Workers are entitled to specific protections
growth. that safeguard their well-being:
• Security of Tenure: Workers cannot be
terminated without just or lawful
cause.
• Humane Work Conditions: Employers
must provide a safe, respectful, and
healthy work environment.
• Living Wage: Workers must be paid
enough to cover basic needs such as
food, shelter, and clothing, ensuring a
decent standard of living.
These provisions aim to uphold the dignity of
labor and protect workers from exploitation
or unfair treatment.
Participation in Policy and Decision-Making
Workers have the right to participate in
shaping policies and decisions that impact
their rights and benefits. This ensures their
voices are heard in crafting laws, regulations,
and workplace policies.
• Example: Workers might be consulted
in drafting rules about wages, safety
standards, or labor dispute resolution
processes.
Shared Responsibility Between Workers and
Employers
The state emphasizes shared responsibility as
a principle to promote fairness and harmony:
• Workers and employers should work
together to maintain a productive and
peaceful workplace.

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 • Voluntary methods like conciliation
and negotiation should be prioritized
to resolve disputes, rather than
resorting to adversarial measures like
strikes or lawsuits.
This approach helps foster industrial peace,
benefiting both sides and ensuring stable
economic growth.
Regulating Worker-Employer Relations
The state actively governs the relationship
between workers and employers to balance
their rights and responsibilities:
• Labor’s Share in Production: Workers
are entitled to a fair share of the
profits generated by their labor.
• Enterprise Growth and Sustainability:
Employers have the right to earn
reasonable profits, reinvest in their
businesses, and expand.
This balance ensures that workers benefit
from their contributions while encouraging
employers to continue investing and growing,
creating a mutually beneficial system.

ARIEL M. REYES, PETITIONER, VS. RURAL BANK OF SAN RAFAEL (BULACAN) INC., FLORANTE
VENERACION, CELERINA SABARIAGA, ALICIA FLOR KABILING, FIDELA MANAGO, CEFERINO
DE GUZMAN, AND RIZALINO QUINTOS, RESPONDENTS.

This case involves a Petition for Review on Certiorari (a formal request asking a higher court
to review a decision made by a lower court or tribunal), challenging the July 22, 2016
Decision and March 8, 2017 Resolution issued by the Court of Appeals (CA), which upheld
the September 30, 2014 Decision made by the National Labor Relations Commission (NLRC).
The NLRC had previously denied the appeal of petitioner Ariel M. Reyes (Reyes) and reversed
the earlier February 24, 2014 Decision by the Labor Arbiter (a judge in labor-related
disputes), which had ruled that Reyes had been illegally dismissed and was entitled to receive
certain monetary claims. The Court of Appeals also denied Reyes' Motion for
Reconsideration (a request to review and change the decision made). The factual
antecedents (events that happened before the legal case) of this case reveal that Rural Bank
of San Rafael (RBSR), a domestic banking corporation, became involved in an issue where
several stockholders complained about discrepancies in the prices of stock subscriptions.
These discrepancies were found in the original receipts given to stockholders and their
duplicate copies. The problem was serious enough to potentially damage the reputation and
integrity of the bank. RBSR's investigation uncovered that the original receipts showed prices
ranging from P250.00 to P275.00, but the duplicate copies indicated only P100.00.
Furthermore, the signatures on the receipts also differed: the original receipts were signed
by the President of RBSR, Flordeliza Cruz, while the duplicate copies were signed by the
Treasury Head Emilline C. Bognot or the Branch Manager Reynaldo Eusebio, Jr. Upon

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discovering this, the RBSR Board of Directors (the governing body of the bank) took action
by approving a Report on Crimes and Losses (a report required by law to inform the Bangko
Sentral ng Pilipinas (BSP), the central bank of the Philippines, of any financial misconduct).
They directed Reyes, the Compliance Officer (the person responsible for ensuring that the
bank follows legal and regulatory rules), to certify the report. However, Reyes refused to do
so, arguing that no independent investigation had been conducted, and that he could not
validate the report because there was not enough evidence or data, and he was being
pressured to sign the document without proper verification.

Afterwards, Reyes argued that instead of being provided with the hard copies of the reports
and their original attachments (documents needed for him to properly verify and certify the
accuracy of the report), RBSR issued two show cause orders (formal notices requiring Reyes
to explain why disciplinary action should not be taken against him) and placed him on
preventive suspension (a temporary suspension from work while an investigation is
conducted) for neglect of duty (failure to perform his responsibilities properly). In response,
RBSR claimed that several administrative hearings (meetings held to allow employees to
present their side of the story) were scheduled to address Reyes' situation, but Reyes failed
to attend any of them.
On March 25, 2013, Reyes, along with Bognot and Eusebio (the two other individuals
primarily accused of theft or misappropriation of funds due to the anomaly), filed a
Complaint (a formal legal document alleging wrongdoing) against the respondents (the
people or entities being accused in the case) for illegal suspension (unlawful suspension from
work) and money claims (demands for unpaid compensation). An Amended Complaint (a
revised complaint that includes additional claims) was later filed to add the claim of illegal
dismissal (unjust termination of employment), since Reyes, along with the others, was
eventually dismissed (fired) from their positions at RBSR.

In a Decision dated February 24, 2014, Labor Arbiter (a government official who resolves
labor disputes) Reynaldo V. Abdon found that RBSR had illegally dismissed Reyes, Bognot,
and Eusebio. The ruling was primarily based on RBSR's failure to submit a Position Paper (a
document in which a party presents its side of the case) and evidence during the
proceedings, which forced the arbiter to make a decision based solely on the evidence
provided by the complainants. According to the Labor Arbiter, the complainants were
wrongfully dismissed without a valid reason and were denied due process (the legal
requirement that the state must respect all legal rights owed to a person). In this case, they
were summarily dismissed (fired immediately without a hearing).
The Labor Arbiter pointed out that it is the employer's responsibility to provide proof that
the employee was terminated for a just or authorized cause (a lawful reason for firing
someone), but RBSR failed to do so because it did not submit its Position Paper or any
evidence during the proceedings. Therefore, the ruling concluded that the complainants'
dismissals were illegal.
The dispositive portion (the part of the decision that determines the final judgment) of the
Decision ordered that the respondents, including the Rural Bank of San Rafael Bulacan and
the individual respondents (the board members of the bank), must pay the complainants
their back wages (unpaid wages from the time of wrongful dismissal), separation pay
(compensation for the loss of employment), accrued leave benefits (unused vacation or sick
leave), and proportionate 13th month pay (a portion of the annual bonus based on the

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number of months worked). The amounts to be paid were detailed for each complainant:
Reyes, Bognot, and Eusebio.
Additionally, the respondents were ordered to pay the complainants' attorney's fee (the cost
of legal representation) amounting to P197,773.33. However, any other claims made by the
complainants were denied because they lacked sufficient basis.
Following this ruling, the respondents appealed the decision to the National Labor Relations
Commission (NLRC) (the body responsible for reviewing labor disputes).

In its Decision dated September 30, 2014, the National Labor Relations Commission (NLRC),
a government body that handles labor disputes, reversed the Labor Arbiter's earlier ruling.
The NLRC applied a liberal interpretation (an approach that allows for a more flexible and
generous understanding of the rules) and relaxed procedural rules (formal rules governing
how cases should be handled), determining that substantial justice (the fair and just outcome
of a case) should prevail over technicalities (strict adherence to procedural rules). As a result,
the NLRC permitted the respondents to submit evidence that had not been presented during
the initial hearings, even though the case was already on appeal (a legal process where a
decision is reviewed by a higher court or body). On the main issue of the case, the NLRC
found that the complainants were not illegally dismissed. The respondents were able to meet
the burden of proof (the obligation to provide evidence) to show that they had a just cause
(a lawful reason) to terminate the complainants' employment. Therefore, the dispositive
portion (the part of the decision that determines the outcome) of the NLRC ruling stated that
the appeal (request for a review) was granted, meaning the previous decision of the Labor
Arbiter was overturned, and the complaint was dismissed for being without merit (lack of
valid reason or evidence).
Feeling dissatisfied with this ruling, Reyes and Bognot filed a Petition for Certiorari (a formal
request asking a higher court to review the decision of a lower court, claiming that there was
an abuse of discretion or lack of jurisdiction) before the Court of Appeals (CA). They accused
the NLRC of committing grave abuse of discretion (a situation where a decision-maker uses
their power in an unreasonable or unfair way) that amounted to a lack or excess of
jurisdiction (exercising powers beyond what is legally allowed). They argued that the NLRC
improperly relaxed procedural rules and allowed the respondents to submit evidence for the
first time, even though the case was already on appeal. Meanwhile, Eusebio (another
complainant) chose not to continue with his case.

In its Decision dated July 22, 2016, the Court of Appeals (CA) affirmed the NLRC's ruling and
concluded that there was no grave abuse of discretion (a situation where the decision-maker
acts unreasonably or unfairly) in the NLRC's decision to relax its procedural rules (the formal
steps and rules that guide the legal process). The CA explained that the respondents' failure
to file their Position Paper (a document outlining their arguments and evidence) and submit
their evidence was justified. The CA accepted the explanation that the respondents were not
given summons (official notice to appear in court), nor were they notified about the
scheduled preliminary conference (an initial meeting to discuss the case) and further
hearings after the amended complaint (a complaint that has been changed or updated) was
filed. After resolving this procedural issue, the CA moved on to the substance of the case and
ruled that the petitioners (Reyes and Bognot) were validly dismissed (their termination was
lawful) for a just and valid cause (legitimate reason for dismissal).

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The dispositive portion (the section of the decision that dictates the final ruling) of the CA's
decision reads that the Petition for Certiorari (a request to review the case) was denied, and
the NLRC's decision and Resolution were affirmed in toto (completely or in full).
Following this, Reyes and Bognot filed a Motion for Reconsideration (a formal request for the
decision to be reviewed and changed), but the CA denied it in a Resolution dated March 8,
2017. Undeterred, Reyes took the case to the Supreme Court through a Petition for Review
on Certiorari (a formal request asking the highest court to review the decision made by the
Court of Appeals). Bognot, however, chose not to continue and did not join Reyes in the
petition.

In this case, the issues to be resolved were whether the Court of Appeals (CA) erred in
affirming the NLRC's Decision that reversed the ruling of the Labor Arbiter, and whether
Reyes was illegally dismissed. The Court ruled that the appeal was meritorious (justified and
valid). The CA was found to have made a mistake by affirming the NLRC Decision, and the
Court explained that respondents (the bank and its directors) were not denied due process
(the legal right to a fair trial or hearing). The Court disagreed with the NLRC's liberal
interpretation of the procedural rules (the formal legal procedures), meaning that they
should not have been so lenient in allowing the respondents to present their evidence late,
as it wasn't justified under the circumstances. Reyes argued that the CA abused its discretion,
which refers to the court making an unreasonable decision, by accepting the NLRC's Decision
that the procedural rules could be relaxed. This was because the issue of procedural leniency
was not raised before the Labor Arbiter, the first official to handle the case. Reyes also
pointed out that the appeal filed by the respondents did not meet the necessary grounds for
filing an appeal, which are the legal reasons required for a party to request a higher court to
review a decision. On the other hand, the respondents argued that both the NLRC and the
CA were correct in allowing them to present their evidence, even if it was belated (submitted
later than required), claiming that if they were not allowed, their right to due process would
have been violated. They further claimed that no summons (official notice) was sent to them
after the amended complaint was filed. However, the Court disagreed with the respondents'
reasoning, stating that they were wrong in their claim.

Due process has been described as a "malleable concept" (something flexible and adaptable)
based on fairness and equity (fairness and justice for all parties involved). At its core, it is
simply the reasonable opportunity for every party to be heard, which means that everyone
involved should be given a chance to present their side of the case. The late constitutionalist
Father Joaquin G. Bernas, S.J., explains this further by emphasizing that in both judicial
(court-related) and administrative (government-related) proceedings, the essential element
of procedural due process is the need for notice (informing the party involved) and a real
opportunity to be heard. This does not necessarily require an actual hearing (a formal
meeting), but just a meaningful chance for a party to voice their side. For example, someone
who refuses to attend a hearing is not denied due process if the decision is made without
waiting for them. Also, the requirement of due process can still be fulfilled if a subsequent
hearing occurs where the person can be heard later on.
In applying this principle to the case, a review of the records (official documents) shows that
during the proceedings before the arbiter (a legal official who resolves disputes), the
respondents (the bank and its directors) were given enough chances to present their side.
The arbiter's observations (noted findings) include the fact that after the complainants

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(Reyes, Bognot, and Eusebio) filed their amended complaint (updated legal claim), they
submitted their Position Paper (written document stating their case). The respondents,
however, failed to appear at the scheduled hearing, although their counsel (lawyer) and
representative (someone authorized to act for them) came earlier than the hearing time and
got a photocopy of the amended complaint. In response, the arbiter set another conference
date for the respondents to submit their Position Paper. The complainants also manifested
(expressed) that if the respondents did not submit the paper by the next scheduled meeting,
the case would be considered ready for a decision ex-parte (without the respondents’
participation).

On June 19, 2013, only the complainants (Reyes, Bognot, and Eusebio) attended the hearing
and requested that the case be submitted for a decision since the respondents (the bank and
its directors) failed to appear or submit their position paper (a written document stating their
arguments), despite being given plenty of time to do so. This fact, which is not in dispute,
reveals that the respondents missed at least two scheduled hearings: one on June 4, 2013,
and the other on June 19, 2013. Notably, the respondents failed to attend the June 19, 2013
hearing even though the arbiter (the official overseeing the case) had previously instructed
them to be present. Additionally, by this time, the respondents had already received a copy
of the amended complaint (an updated version of the legal complaint), which would have
allowed them to respond thoughtfully.
The respondents explained their absence in their Memorandum (a written statement of their
position) filed before the Court of Appeals (CA), arguing that they were not given a summons
(a formal legal notice) after the amended complaint was filed. They also claimed that there
was no mandatory conciliation and mediation conference (a required meeting aimed at
resolving the issue before proceeding with a trial) for two sessions. The respondents further
stated that they had not received a copy of the complainants' position paper. The CA, siding
with the respondents, ruled that their failure to submit a position paper and present
evidence, or attend the scheduled preliminary conference (a meeting to prepare the case for
trial), was justified. The NLRC (National Labor Relations Commission), which reviewed the
case, accepted the respondents’ explanation, finding that they were not deliberately
delaying or obstructing the proceedings, and concluded that their failure to attend or present
evidence was due to not being properly notified. Therefore, the CA agreed with the NLRC’s
decision that the respondents' procedural oversights were not intentional. However, the
court disagreed with this explanation, believing the respondents should have been held
accountable for their actions.

While it is true that the arbiter (the official overseeing the case) failed to issue a summons (a
formal legal notice), this mistake does not automatically violate the respondents' right to due
process (fair treatment in the legal system). This is because the respondents had already
received a copy of the amended complaint (an updated version of the original legal
complaint) and had been notified about the June 19, 2013 hearing. According to Section 3
of the 2011 NLRC Rules of Procedure (the rules governing labor disputes), summons must be
issued within two days after receiving a complaint to inform the respondent about the case
and provide them the opportunity to respond. However, in this case, issuing the summons
would have been unnecessary because the respondents already had the amended complaint
and knew about the hearing date. Additionally, the respondents did not explain their absence
during the June 4, 2013 hearing. The NLRC (National Labor Relations Commission), which

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 reviewed the case, confirmed this by noting that while the complainants filed the amended
complaint and position paper on June 4, 2013, the respondents were absent. The arbiter
sent a notice to the respondents, instructing them to attend the hearing on June 19, 2013,
but a registry return card (a receipt proving delivery of mail) showed that the respondents
did not receive the notice until June 20, 2013. Despite this, both the Labor Arbiter and NLRC
agreed that the respondents were aware of the amended complaint, missed the June 4 and
June 19 hearings, and failed to explain their absences.
Moreover, the respondents did not show any initiative to assert their right to a fair trial or
participate in the case, despite having had the opportunity to do so from June 2013 to
February 2014 when the arbiter's decision was made. There was no evidence of the
respondents trying to reopen the proceedings or submitting their position paper (a written
statement of their arguments) to the arbiter. Given that the respondents knew about the
complaint filed against them, they should have acted quickly to defend themselves. The
Court (the highest legal authority in this case) criticized the respondents for their negligence
(lack of proper care or attention) and disrespect for the legal process. The Court found that
their failure to take any action, even in the simplest matters, reflected a careless attitude
toward the legal system, which it cannot tolerate.

While the Court (the highest legal authority in this case) acknowledges and appreciates the
NLRC (National Labor Relations Commission) and the CA (Court of Appeals) for upholding
substantial justice (justice that focuses on fairness and the real issues of a case), it
emphasizes that this principle must always be balanced with respect for and honest efforts
to follow procedural rules (the established guidelines or steps that must be followed in legal
proceedings). It cannot always be about achieving substantial justice, especially when it
comes at the cost of ignoring or disrespecting the procedural rules that exist to ensure fair
and organized legal processes. In the case Tible & Tible Company, Inc. v. Royal Savings and
Loan Association, the Court explained that while courts have the discretion to relax or
overlook technical rules, this must be done carefully and in the right context. Technicalities
or minor errors in procedure should not always be set aside in favor of substantive rights, as
doing so could ultimately result in injustice rather than justice. The Court further stressed
that the rules (guidelines for legal proceedings) should generally be followed, and only in
exceptional circumstances should they be relaxed. This is because the rules are designed to
prevent delays, promote the orderly conduct of business, and ensure justice is dispensed
properly. In essence, adjective law (the body of law that deals with the procedures for
enforcing rights, as opposed to substantive law, which defines the rights themselves) is
critical to ensure that legal actions are carried out efficiently, and litigants (those involved in
the case) are heard in the correct manner and at the right time. Procedural rules (the specific
steps and methods followed in legal proceedings) are essential to the orderly administration
of justice (the fair and organized operation of the legal system) and are not meant to be
ignored. Ignoring these rules can lead to arbitrary or unfair decisions. However, in labor cases
(legal cases involving workers and employers), the Court has allowed some flexibility. The
Court has previously stated that strict adherence to procedural rules is not always necessary
in labor cases and that evidence can be submitted for the first time on appeal (when a case
is reviewed by a higher court) to ensure justice is served. Nonetheless, even in these cases,
the Court emphasized that labor officials should strive to ascertain the facts of the case as
quickly and objectively as possible while balancing the need for due process (fair treatment)
and the technicalities of the law.

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 While a liberal policy (an approach that allows more flexibility in the application of rules) can
be applied to procedural rules in legal cases, it must still be based on reason and fairness.
The liberal application of procedural rules is subject to two conditions: (1) a party must
provide a clear and reasonable explanation for any delays in submitting evidence; and (2) a
party must prove the allegations they are trying to support with the evidence. These
requirements are essential to ensure that the liberal approach to procedural rules does not
result in unfairness or delay in resolving the case. The liberal construction (interpretation) of
the rules should not be used to allow the unjust continuation of a case or to prevent a proper
resolution of the matter. In this case, the Court found that the respondents (the individuals
who are defending against the case) failed to adequately explain their failure to participate
in the legal proceedings, and as a result, the liberal policy was not applicable. This went
against the earlier decisions of the NLRC and the CA (Court of Appeals), both of which had
allowed for more relaxed procedural rules. Additionally, the policy of relaxed procedural rules
in labor cases is intended to benefit employees, not employers.
Regarding the respondents' argument about procedural mistakes made by the arbiter (the
official overseeing the case), they pointed out that the 2011 NLRC Rules of Procedure (rules
governing how labor disputes are handled) require the Labor Arbiter to issue a summons
(formal notice to a party to appear in court) within two days after receiving a complaint or
amended complaint. They also argued that there was a failure to conduct the mandatory
conciliation and mediation conference (a process where the parties are required to attempt
to settle their dispute before going to trial) in two settings. However, despite pointing out
these procedural lapses, the respondents later argued that the rules should be relaxed (made
less strict) in their favor. This change in position was seen by the Court as inconsistent and
unfair, as they had initially demanded that the rules be strictly followed. Therefore, the Court
concluded that the respondents were not entitled to a liberal interpretation of the rules, as
such leniency is generally given in labor cases to protect the rights of employees, not
employers.

The principles found in labor rules, laws, and regulations are rooted in the Constitution,
which strongly safeguards workers' rights and aims to promote social justice. Specifically,
Article II, Section 18 of the 1987 Constitution emphasizes the importance of labor as a vital
economic force, stating that the State will protect workers' rights and welfare. Article XIII,
Section 3 further asserts that the State will fully protect workers, both local and overseas,
whether organized or unorganized, and will strive to ensure equal employment opportunities
for all. Additionally, Article 4 of PD 442 (the Labor Code) states that any uncertainties in
interpreting the provisions of the Labor Code or its rules should be resolved in favor of the
worker. These laws are designed to address the inherent power imbalance between workers
(labor) and employers (capital), as workers often face disadvantages in the employment
relationship. This inequality is why labor proceedings are designed to be informal, aiming to
resolve disputes amicably and without the need for lawyers, recognizing that most
employees cannot afford legal representation or handle the formal, adversarial nature of a
legal battle. In cases where an employee does not have legal knowledge or resources, the
Court understands that they cannot always comply with every legal technicality, unlike
employers who are more likely to have access to legal counsel. Therefore, to level the playing
field, liberal interpretation (flexible application) of procedural rules can be applied to help
employees. Section 2 of the 2011 NLRC Rules supports this by stating that the rules should

11 | P a g e
 be interpreted liberally to achieve the goals of the Constitution, the Labor Code, and other
related laws, while also ensuring that labor disputes are resolved fairly, quickly, and
affordably. This aligns with the constitutional goal of providing special protection to labor,
emphasizing that those with less in life should have more in law, meaning that employees
should receive more legal protection to balance the inequities they face in the workplace.

In the case of Vicente v. Employees' Compensation Commission, the Court emphasized its
strong commitment to the welfare of government workers, particularly those in lower-
ranking positions whose hard work and dedication often go unnoticed. Despite receiving little
recognition, these workers continue to faithfully fulfill their duties. The Court acknowledged
that social security laws, which are meant to benefit these workers, should be interpreted
liberally (with flexibility) in their favor, underscoring that the law’s sympathetic stance
supports the rights of its beneficiaries. The Court also highlighted that it was addressing the
worker's long struggle for their rightful benefits. In line with this, Prof. Azucena explained
that when applying and interpreting the provisions of the Labor Code and its implementing
regulations, the welfare of the worker should be the primary consideration. This approach
reflects the liberal and compassionate spirit of the law, as stated in Article 4 of the Labor
Code, which aims to broaden the applicability of the law to help more employees access
benefits. This is part of the State's policy to give maximum protection and assistance to labor.
However, this doesn't mean that rules can never be relaxed in favor of the employer.
Protection of labor and resolving doubts in favor of labor cannot justify injustice. Justice
belongs to all people, regardless of their economic status, and should not be compromised
because someone is economically disadvantaged. In some cases, a liberal interpretation of
rules can benefit the employer, but this must be done cautiously and only in situations where
the employer would face injustice without it. In such cases, the relaxation of rules for the
employer must be stricter than that for workers. Unfortunately for the respondents in this
case, their situation does not warrant a liberal interpretation in their favor.

In the case of Reyes versus RBSR, the key issue revolves around the alleged illegal dismissal
of Reyes by his employer. Contrary to the conclusions drawn by both the National Labor
Relations Commission (NLRC) and the Court of Appeals (CA), it is asserted that Reyes was, in
fact, illegally dismissed. According to the records, RBSR issued a "Show Cause Order and
Preventive Suspension" to Reyes, dated March 22, 2013. This document details an incident
that took place during a Regular Board Meeting on February 12, 2013, where the Corporate
Secretary of RBSR sent Reyes a SES Form 6G (which is a report concerning crimes and losses)
related to a discrepancy in the purchase price of stocks bought by some stockholders. The
document further states that Reyes refused to accept the SES Form 6G up until the deadline
of February 22, 2013, citing that it had been sent to him via electronic mail (email), which he
apparently did not acknowledge as a valid method of communication. The use of the phrase
"bare the records" means that these findings are plainly presented in the official case
records, reflecting the facts of the case. This Show Cause Order is central to the case as it is
related to the issue of whether Reyes’s actions, or lack thereof, justified the subsequent
disciplinary action taken by RBSR, which ultimately led to his dismissal.

In the case of Reyes versus RBSR, the documents issued to Reyes outline a series of events
and charges leading to his eventual termination. The first document, a Show Cause Order
and Preventive Suspension dated March 22, 2013, accuses Reyes of failing to perform his

12 | P a g e
 duties as a Compliance Officer. Specifically, it states that he delayed transactions and failed
to act despite repeated reminders, which resulted in significant prejudice (harm or damage)
to the Bank. This failure to perform his job led to the preventive suspension, which was
effective immediately for thirty (30) days without pay. Reyes was given access to the bank
records during this period to help explain his actions. The charge against him could fall under
two possible reasons for termination under the Labor Code: willful disobedience (the
intentional refusal to follow orders) or gross and habitual neglect of duty (a repeated failure
to perform one’s responsibilities). The second document, dated April 4, 2013, notified Reyes
of a hearing scheduled for April 10, 2013, concerning his administrative case (the formal
process to investigate the actions of an employee). The third document, a Show Cause Order
dated April 19, 2013, changed the charges against Reyes to involve theft or misappropriation
(wrongful use or taking of funds) and covering up such an offense. The final document, a
Notice of Termination dated April 26, 2013, confirmed that after considering all the
documents, records, testimonies, and admissions, Reyes was found to have committed
enough offenses that caused significant loss and damage to the Bank. The decision was made
to terminate Reyes, asserting that there was sufficient and just cause for his dismissal based
on the severity of the offenses, the harm caused, and the sensitive nature of his position.

In this case, Reyes was informed of the charges against him and was given ample opportunity
to explain his side, with full access to the necessary records and documents of the Bank.
Despite these opportunities, he failed or refused to submit any explanation or evidence.
Moreover, he did not attend the scheduled hearing where he could have addressed the
allegations. These failures were taken into account when deciding the administrative case (a
formal process to evaluate the actions of an employee). Under Book Five, Rule XXIII, Section
2 of the Omnibus Rules Implementing the Labor Code, which outlines the standards of due
process (fair treatment), there are clear requirements that must be followed for a
termination based on just causes as defined in Article 282 of the Labor Code. These standards
include: (a) a written notice detailing the grounds for termination and providing the
employee with reasonable time to explain their side; (b) a hearing where the employee has
the chance to present their defense, possibly with legal assistance, and respond to the
charges; and (c) a written notice of termination served on the employee once it is
determined, after considering all the facts, that there are substantial grounds for their
dismissal. These procedures were not followed properly in Reyes' case, which played a
significant role in assessing the legality of his dismissal.

In King of Kings Transport, Inc. v. Mamac, the court elaborated on the concept of procedural
due process in labor proceedings, emphasizing the steps that must be followed before
terminating an employee. First, when serving the first written notice, the employer must
clearly specify the grounds (reasons) for the termination and provide the employee with the
opportunity to explain their side within a reasonable period. A reasonable opportunity
means the employee should have at least five calendar days to prepare their defense, consult
with a union representative or lawyer, and gather evidence. The notice must also include a
detailed narration of facts (specific details explaining why the employee is being charged)
and identify which company rules were violated or which grounds for dismissal under Article
282 of the Labor Code are being invoked.
Second, after the initial notice, the employer should hold a hearing or conference where the
employee can defend themselves, present evidence, and rebut any evidence presented by

13 | P a g e
 the employer. During this session, the employee can be assisted by a representative or
lawyer, and it also offers an opportunity for the parties to try to settle the dispute amicably.
Third, if the employer decides that the termination is justified, they must issue a written
notice of termination, which must indicate that the employer has carefully considered all the
facts and circumstances and that there are sufficient grounds to justify the severance of
employment.
In Reyes' case, the court observed that although he was given the opportunity to explain
himself, the charges against him were unclear and vague. The first charge appeared to be
related to insubordination (refusing to follow orders) or neglect of duty, but the show cause
order later shifted the accusation to participation in theft or misappropriation of funds,
which was not proven nor specifically mentioned as the reason for his dismissal. The
termination letter issued to Reyes used general and vague statements without specifying
which particular company rules he violated. This lack of clarity in the notice did not meet the
requirements set by the Labor Code and its implementing rules, leading the court to
conclude that Reyes' dismissal was not valid due to the failure to comply with the due process
procedures. Consequently, the court found that there was no valid cause for Reyes'
termination.

The Court of Appeals (CA) held that Reyes, in his role as Compliance Officer, had a duty to
promptly certify the Report on Crimes and Losses regarding the irregularities in the bank.
Since Reyes unjustifiably failed to act on the report, the CA found his termination to be valid.
They reasoned that Reyes was deliberately delaying his actions due to his possible complicity
in the anomaly (wrongdoing). The CA also mentioned that further investigation could have
been conducted after the initial report was filed, but the refusal to certify it was unjustified,
especially since the report was important for the bank’s interests. As such, they considered
his refusal as willful disobedience, which is a valid cause for termination under Article 297
(formerly Article 282) of the Labor Code, which deals with just causes for dismissal.
However, the Supreme Court disagreed with this view. The Court did not find Reyes’ actions
to be enough to justify his dismissal under willful disobedience, which is a serious offense
involving the intentional refusal to comply with a lawful and reasonable order from an
employer. The Court's disagreement suggests that the evidence or reasoning provided by the
CA may not have been sufficient to justify the termination of Reyes, especially since there
was a lack of clarity or specific, proven misconduct.

In the case of Dongon v. Rapid Movers and Forwarders Co., Inc., the Court clarified the
requirements for willful disobedience to be considered a valid ground for dismissal. The
employee's actions must be intentional (willful) and the order violated must be reasonable,
lawful, clearly communicated to the employee, and related to their duties. Willfulness
(intentional behavior) must be accompanied by a wrongful and perverse (twisted or
malicious) attitude, making the employee’s actions contrary to proper subordination (respect
for authority). Furthermore, for an act to justify dismissal, it must harm the employer’s
business interests or personal welfare. In the case of Reyes, the Court acknowledged that his
refusal to certify the Report on Crimes and Losses was intentional. However, it did not agree
that his refusal was driven by a malicious or perverse attitude that warranted dismissal. The
Court found that Reyes genuinely believed that the report could not be validated due to a
lack of necessary data and evidence. His reasoning was supported by findings from the Court
of Appeals (CA), which explained that Reyes refused to sign the report because no

14 | P a g e
 independent investigation had been conducted and the report lacked essential information.
This was further supported by Memorandum No. 2013-020 and Memorandum No. 2013-
022, both of which were sent by Reyes to the officers of RBSR, detailing deficiencies in the
report and offering recommendations to make it compliant with Bangko Sentral ng Pilipinas
(BSP) regulations. The Court, therefore, found no evidence to support the claim that Reyes
was involved in the alleged theft or misappropriation by others, which was suggested by his
employer.

In response to Reyes' defense, the respondents argue that Reyes failed to conduct a personal
investigation and judgment regarding the discrepancies, which he claimed were necessary
to validate the Report on Crimes and Losses. According to Circular No. 587, Series of 2007,
Subsection X162.4 (d.2), an initial report may be submitted within the deadline, even if the
investigation is not complete, as long as a final report is submitted within 20 days after the
conclusion of the investigation. Respondents contend that Reyes’ refusal to submit an initial
report was a clear case of gross negligence (a severe failure to perform one's duties). They
argue that he could have submitted an initial report and conducted his investigation later,
independent of the Audit Committee or Management.
Despite this, the Court recognizes that while respondents may feel frustrated and even angry
about Reyes' actions, dismissing him for a single instance of disobedience is overly harsh and
unjustified. The Court points out that the penalty for submitting the report late is a minor
monetary fine of P150.00 to P450.00 per day, which further emphasizes that dismissing
Reyes for his refusal to comply was a disproportionate response to the violation.
The Court also cites Justice Bellosillo's observation in the Alhambra Industries, Inc. v. National
Labor Relations Commission case, emphasizing that employment is not merely an ordinary
job but a vital economic resource for families, making the termination of employment an
issue of social justice. Dismissal should not be taken lightly as it has significant consequences
for the employee's livelihood and the well-being of their family.
Thus, the Court ruled in favor of Reyes and reversed the Court of Appeals decision, reinstating
the Labor Arbiter’s ruling. Reyes' dismissal was found to be unjust, and he is entitled to
backwages (wages owed to him from the time of his dismissal until the final decision), though
all other matters not directly addressed in this modification remain unchanged.

Labor Code
Declaration of The State shall afford Protection to Labor
Basic Policy – protection to labor, The state pledges to safeguard the rights and
Article 3, Labor promote full welfare of all workers. This means:
Code of the employment, ensure • Protecting workers from exploitation:
Philippines equal work Ensuring they are not subjected to
opportunities unfair wages, unsafe working
regardless of sex, race conditions, or unjust treatment.
or creed, and regulate • Advocating for workers' interests:
the relations between Introducing laws and policies that
workers and prioritize the well-being and dignity of
employers. The State workers over exploitation or abuse.
shall assure the rights By providing this protection, the state
of workers to self- acknowledges the importance of workers as a
organization,

15 | P a g e
 collective bargaining, cornerstone of economic and social
security of tenure and development.
just and humane Promotion of Full Employment
conditions of work. The state commits to creating an economy
where everyone who wants to work can find
a job. Full employment means:
• Generating enough jobs to match the
needs of the workforce.
• Encouraging industries and sectors to
expand and hire more workers.
• Supporting policies that boost
economic growth to sustain long-term
job creation.
This ensures that people can contribute to
society, support their families, and improve
their quality of life.
Equal Work Opportunities Regardless of Sex,
Race, or Creed
The state aims to eliminate discrimination in
employment:
• Equality in hiring and promotion: No
one should be denied opportunities
because of their gender, ethnicity, or
religious beliefs.
• Fair treatment in the workplace:
Ensuring all workers are treated with
respect and given equal access to
benefits, training, and career growth.
• Closing the gender gap: Promoting
initiatives to achieve equal pay for
equal work and fair representation in
leadership roles.
This principle fosters inclusivity and diversity,
creating a workforce that reflects fairness and
equality.
Regulation of Worker-Employer Relations
The state plays a vital role in managing the
relationship between workers and employers.
It ensures that:
• Employers fulfill their obligations to
workers (e.g., paying fair wages,
providing benefits, and maintaining
safe working environments).
• Workers respect the rights of
employers, including their ability to
run businesses efficiently and
sustainably.

16 | P a g e
 By regulating this relationship, the state
prevents conflict, ensures justice, and
promotes harmony in the workplace.
Assurance of Workers’ Rights
The passage guarantees several fundamental
rights for workers:
• Self-Organization: Workers have the
right to form and join labor unions or
associations to protect their interests.
• Collective Bargaining: Unions can
negotiate with employers to secure
better wages, benefits, and working
conditions.
• Security of Tenure: Workers cannot be
unjustly dismissed; they are entitled
to stability and job security unless
there is a valid reason for termination.
• Just and Humane Conditions of Work:
Workplaces must be safe, fair, and
dignified. Workers should not be
overburdened, subjected to unsafe
environments, or treated unfairly.
These guarantees empower workers to stand
up for their rights and demand better
treatment while also ensuring that their well-
being is respected.

Construction in All doubts in the What Does It Mean?

favor of Labor – implementation and • "Doubts in implementation and
Article 4, Labor interpretation of the interpretation": This refers to
Code of the provisions of this situations where the meaning, scope,
Philippines Code, including its or application of a labor law or rule is
implementing rules unclear, uncertain, or open to multiple
and regulations, shall interpretations.
be resolved in favor of • "Resolved in favor of labor": In such
labor. cases, the law must be interpreted or
applied in a way that benefits and
protects the rights and welfare of
workers, rather than favoring
employers or other parties.
Why Is This Principle Important?
This principle is rooted in the idea that
workers are often in a more vulnerable
position compared to employers in terms of
power, resources, and influence. To address
this imbalance, labor laws are designed to
provide extra protection to workers, ensuring

17 | P a g e
 fairness and equity. By resolving doubts in
favor of labor, the law ensures that:
• Workers’ rights are prioritized and
safeguarded.
• Employers cannot exploit ambiguities
in the law to the detriment of workers.
• The principle of social justice is
upheld, giving workers a fair chance in
disputes or unclear legal scenarios.
Examples in Practice
• Case of Unjust Dismissal: If a worker is
terminated and there is ambiguity
about whether the dismissal was
lawful, the interpretation that benefits
the worker (e.g., reinstatement or
compensation) would apply.
• Disputes Over Wages or Benefits: If
there is a disagreement about how
much a worker is entitled to and the
law is unclear, the interpretation that
grants the higher benefit or wage to
the worker would prevail.
• Unclear Work Conditions: If there is
uncertainty about whether a
workplace condition meets the "just
and humane" standard, the ruling
would favor the worker's perspective.
Ensuring Fairness
This principle does not mean employers are
automatically at a disadvantage or that they
are always in the wrong. Instead, it serves to
level the playing field in situations where the
law is not explicit or detailed enough to
provide clear answers. It ensures that
workers’ rights are not overlooked due to
technicalities or loopholes.
Broader Implications
By mandating that all doubts be resolved in
favor of labor, this provision reinforces the
idea that labor laws are pro-worker in nature.
It aligns with the goal of protecting the dignity
of workers and addressing the inherent
inequalities in the employer-employee
relationship.

18 | P a g e
 FERNANDO G. MANAYA, petitioner,
vs.
ALABANG COUNTRY CLUB INCORPORATED, respondent.

This case is about a Petition for Review on Certiorari filed by Fernando G. Manaya (the
petitioner) against the Alabang Country Club Inc. (the respondent), challenging the Decision
of the Court of Appeals. The Court of Appeals granted the petition of Alabang Country Club
and reversed the Resolutions issued by the National Labor Relations Commission (NLRC) on
August 30, 2002, and October 30, 2002. These Resolutions had dismissed the appeal of the
respondent for failing to perfect its appeal within the statutory period, which means that the
appeal was not filed within the required legal timeframe. The Court of Appeals' decision
ordered the NLRC to proceed with the appeal of Alabang Country Club.
The background of the case is that Manaya was hired by the respondent as a maintenance
helper on August 21, 1989, earning ₱198.00 per day. Over time, his role changed to that of
a company electrician, and he continued working for the company until August 22, 1998,
when the Engineering and Maintenance Department Manager, Engr. Ronnie B. de la Cruz,
informed him that his services were no longer needed. Manaya alleged that he was illegally
dismissed without cause and without due process. He claimed that he had not violated any
of the company's policies and was not paid for certain benefits such as service incentive leave
pay, holiday pay, and 13th-month pay. He also argued that after working for about nine years,
he had become a regular employee and, therefore, was entitled to reinstatement with
backwages and other monetary benefits.
In its defense, the respondent denied that Manaya was its employee. The respondent stated
that Manaya was employed by a company called First Staffing Network Corporation (FSNC),
with which Alabang Country Club had a Memorandum of Agreement dated August 21, 1989.
The respondent argued that the hiring was part of a legitimate job contracting arrangement,
meaning Manaya was employed by FSNC and not directly by Alabang Country Club. Because
of this, the respondent claimed that Manaya had no cause of action against them and
requested the dismissal of the case.
In legal terms, Petition for Review on Certiorari is a formal request to a higher court (the
Supreme Court) to review a decision made by a lower court (in this case, the Court of
Appeals). A Memorandum of Agreement is a written agreement outlining the terms of a
partnership or arrangement between two parties. Job contracting refers to a situation where
one company hires another company to provide workers, rather than directly employing
them, which can raise questions about employee rights and responsibilities. Regular
employee refers to someone who has worked for an employer long enough to have gained
certain protections under labor law, such as job security and entitlement to benefits.
Reinstatement means bringing the employee back to their job, and backwages are wages
owed to the employee from the time of dismissal until they are reinstated or until the case
is resolved. Due process in this context refers to the proper legal procedures that must be
followed in dismissing an employee, ensuring fairness and legal compliance.

In this case, Fernando G. Manaya (the petitioner) was declared by the Labor Arbiter to be a
regular employee of the Alabang Country Club (respondent), and his dismissal was deemed
illegal because it lacked both a just and valid cause and proper due process. As a result, the
Labor Arbiter ordered that Manaya be reinstated to his original position with full backwages,
which was partially computed at ₱160,724.48, and other benefits. The respondent and First

19 | P a g e
 Staffing Network Corporation were also ordered to pay Manaya additional amounts for
Service Incentive Leave, 13th Month Pay, and attorney's fees of 10% of the total amount due.
The respondent appealed the decision, but the National Labor Relations Commission (NLRC)
dismissed the appeal because it was filed after the statutory period for appeals had passed.
The NLRC found that the respondent's counsel had received the Labor Arbiter's Decision on
December 11, 2000, but the appeal was filed later, on December 26, 2000, which was beyond
the allowed period for filing. According to the NLRC, the failure to file the appeal on time
made the Labor Arbiter's Decision final and executory. Despite the NLRC's ruling, the
respondent filed a Motion for Reconsideration, which was denied, and eventually, a Petition
for Certiorari was filed with the Court of Appeals. In a Decision dated May 9, 2005, the Court
of Appeals ruled in favor of the respondent, ordering the NLRC to proceed with the appeal,
despite the fact that the appeal had been filed late. The petitioner then filed a Motion for
Reconsideration, which was also denied. Not satisfied with the decision, the petitioner
proceeded to file a petition before the Supreme Court, raising the issue of whether the Court
of Appeals erred in allowing the respondent's appeal to proceed even though it was filed
beyond the required period for appeal. The central issue in this case was whether the Labor
Arbiter's finding that Manaya was a regular employee of Alabang Country Club was correct.
In legal terms, a regular employee is someone who has worked for a company long enough
to gain certain protections under labor law, such as protection against dismissal without
cause and entitlement to benefits. Due process refers to the legal procedures that must be
followed in employment decisions, especially those that could lead to dismissal. Backwages
are the wages an employee is entitled to receive after being wrongfully dismissed, calculated
from the time of the dismissal until the resolution of the case. Reglementary period refers to
the legally prescribed period within which certain actions, such as filing an appeal, must be
taken. Final and executory means that the decision has become final and cannot be altered,
and there is no further recourse. Certiorari is a legal remedy to challenge a decision or order
issued by a lower court or tribunal, often because of an error of law or jurisdiction. Motion
for Reconsideration is a request to the court to review and change its decision. The issue
raised by the respondent centered on the Labor Arbiter's decision that Manaya was a regular
employee, which was a central point of contention in the case.

In granting the petition, the Court of Appeals based its decision on the case of Aguam v. Court
of Appeals, where the Supreme Court held that legal cases should be decided based on the
merits (substance of the case) rather than technicalities (formalities or procedural errors).
The Court of Appeals agreed with the respondent’s argument that the negligence of its
counsel (lawyer) should not affect the respondent's case. The court accepted that the
respondent's lawyer had abandoned the case, which meant the respondent was not properly
represented by competent counsel at the time. The respondent argued that after receiving
the Labor Arbiter’s Decision on December 15, 2000, it filed its appeal on December 26, 2000,
with a new lawyer, which was within the reglementary period (legal time frame), considering
that December 25, 2000 was a holiday. The Court of Appeals stated that when a client is
represented by a lawyer, any notice sent to the lawyer is considered notice to the client. In
the absence of a formal withdrawal (an official notice stating the lawyer is no longer
representing the client), the court assumed that the previous lawyer still represented the
client, and the receipt of the decision by that lawyer counted as the start of the reglementary
period for filing an appeal. The court further emphasized that negligence by the lawyer,
unless it was gross negligence (extreme carelessness), should not result in depriving the

20 | P a g e
 client of their rights, especially if the judgment was regular and valid on its face. The
respondent, as a client, also had the responsibility to stay in contact with their lawyer and be
aware of the status of their case. The court ruled that the proper date for reckoning the time
for filing the appeal was the date the respondent's counsel received the decision, on
December 11, 2000. The Court of Appeals then addressed whether it was correct to allow
the respondent’s petition despite the appeal being filed later than the reglementary period.
In this regard, the Supreme Court cited Section 1, Rule VI of the 2005 Revised Rules of the
NLRC, which states that decisions of the Labor Arbiter are final and executory unless
appealed within ten (10) calendar days. The court noted that no extension of time to appeal
can be granted, but in some exceptional cases, it has allowed the relaxation of the rules on
reglementary periods. For example, in previous cases like Ramos v. Bagasao and Republic v.
Court of Appeals, the court allowed appeals to proceed even when they were filed late to
prevent gross miscarriage of justice (a serious error that would unfairly harm a party) and to
ensure fairness in the resolution of disputes. The court concluded that technicality should
not prevent a fair and just resolution of the rights of the parties involved.
In this context, merits refers to the substantive aspects of the case that determine its
outcome, while technicalities refer to the formal or procedural rules that might otherwise
hinder the decision-making process. Negligence is the failure to exercise proper care, while
gross negligence implies a serious lack of attention or failure to act, which can affect a
person's rights. Reglementary period is the fixed period within which legal actions must be
filed, and withdrawal refers to the formal process of a lawyer ending their representation of
a client. Miscarriage of justice is a legal term referring to a situation where a mistake in the
legal process leads to an unfair or incorrect outcome. Final and executory means that a
decision is legally binding and cannot be changed.
In this case, the Court emphasized that while the rules should generally be strictly followed,
they can be interpreted more liberally in exceptional situations where circumstances justify
such a deviation from the usual requirements. This principle is supported by previous cases,
where the Court allowed liberal interpretation (flexibility in applying the law) of the rules
under extraordinary circumstances. However, this relaxation of the rules is not without limits;
it is conditioned on the presence of exceptional circumstances. Without such circumstances,
the Court maintains that certain procedural requirements, like those for filing an appeal
within the designated period, should not be overlooked. This is because the right to appeal
is a statutory right (a legal right granted by law), and anyone seeking to use it must follow
the statute (law) or rules governing such appeals. The importance of complying with
reglementary periods (prescribed time limits) is emphasized because these rules ensure
there is no unnecessary delay in the judicial process, allowing for orderly discharge (proper
management) of the court's duties. When the appeal is filed properly and within the legal
time frame, it is considered mandatory (required) and jurisdictional (necessary for the court
to have the authority to hear the case). If the appeal is not filed on time, the decision of the
lower court becomes final and executory (final and enforceable), and no further action can
be taken to change it. Furthermore, the winning party has the right to benefit from the
finality of the case resolution. In this particular case, the Court chose to adhere to the strict
interpretation of the rule because the decision of the Labor Arbiter had already become final
and executory (official and binding), and allowing the appeal would result in unnecessary
delay. The Labor Code requires that when interpreting its provisions, the welfare of workers
must be prioritized, meaning that any doubt in the law should favor the worker. The Court
cited the case of Bunagan v. Sentinel, which clarified that while the National Labor Relations

21 | P a g e
 Commission (NLRC) can be flexible in applying procedural rules, liberal interpretation should
not interfere with the essential purpose of the law, which is to prevent delay in workers'
cases. This is especially important since delay may cause hardship to workers, who might be
forced to accept less than what is owed to them due to dwindling resources. The Court stated
that the respondent did not present enough grounds to reverse the findings of the Labor
Arbiter, particularly since the decision was well-supported by evidence. The respondent
argued that the petitioner was hired through job contracting and not directly by the
respondent, but the Labor Arbiter rejected this argument, finding that the petitioner had
been hired directly by the respondent and that the documentation provided by the
respondent failed to disprove this claim. The Labor Arbiter concluded that the respondent
had not sufficiently proven its case and that the petitioner was indeed a direct employee of
the respondent from the outset. The Labor Arbiter’s decision, therefore, was based on a
thorough evaluation of the evidence and correctly interpreted the law, leading the Court to
affirm the findings.
Here, statutory right refers to a legal right given by legislation, and jurisdictional refers to the
authority of a court to hear a case. Reglementary periods are time limits specified by law or
regulation within which a certain action must be completed. Mandatory means required by
law, while final and executory means that the decision is conclusive and enforceable. Appeal
is a legal process where a higher court reviews the decision of a lower court. Welfare of
workers means prioritizing the well-being and protection of employees in legal matters.
Labor Arbiter is an official who resolves labor disputes, and job contracting is an arrangement
where a company hires workers through a third-party agency.

In this case, the respondent, Alabang Country Club, Inc., provided evidence that it initially
entered into a contract with Supreme Construction for services, but later terminated this
contract and entered into a new agreement with First Staffing Network Corporation (FNSC)
on 16 June 1994. However, despite the end of the contract with Supreme Construction, the
complainant (the worker) continued working for the Alabang Country Club, Inc. until he
formally signed up with FNSC on 11 February 1996. This situation appeared unusual because
when a contractor loses its contract, it is typical for the employees to stop working as well,
but in this case, the complainant was not terminated after the contract with Supreme
Construction ended, which raised doubts about the validity of the employment
arrangement. Furthermore, the contract between Alabang Country Club, Inc. and FNSC listed
positions like waiters, clerks, and janitors but did not include the complainant’s role as an
electrician. This suggests that FNSC may not have been acting as a bona fide (genuine) job
contractor but was instead engaging in "job-only" contracting, which is illegal under labor
law. Job-only contracting occurs when a company supplies workers without providing the
necessary tools, equipment, and investment required to be considered a legitimate
contractor. The law prohibits this kind of arrangement because it circumvents workers’ rights,
such as the right to be recognized as regular employees, with the benefits and protections
that come with that status.
Additionally, FNSC failed to demonstrate that it had the necessary capital, equipment, or
infrastructure to qualify as a legitimate contractor, and it waived its right to present evidence
to support its case. This further suggests that Alabang Country Club, Inc. was attempting to
bypass labor laws to avoid granting workers the rights due to regular employees. The
existence of an employer-employee relationship between the complainant and the
respondent was strengthened by evidence showing that the complainant was allowed to

22 | P a g e
 attend training on refrigeration and air conditioning in 1995, and a certificate was issued to
him by Alabang Country Club, Inc. Furthermore, Article 106 of the Labor Code highlights that
legitimate job contracting is allowed, but labor-only contracting is prohibited. The article also
specifies that if a contractor or subcontractor fails to pay wages in accordance with the law,
the employer (in this case, Alabang Country Club, Inc.) is jointly and severally liable (equally
responsible) for the wages owed to the employees, just as if they were directly employed by
the employer.
Here, bona fide means genuine or legitimate, and jointly and severally liable means that the
employer can be held fully responsible for the payment of wages even if the contractor is at
fault. Job-only contracting refers to arrangements where workers are supplied by a third
party but the contracting company does not have the necessary resources to be a legitimate
contractor.

The Secretary of Labor, under the authority of the law, has the power to issue appropriate
regulations to limit or prevent the contracting out of labor in order to protect the rights of
workers as established under the Labor Code. These regulations may involve making
distinctions between labor-only contracting (where workers are supplied without the
contractor having substantial investment in resources like equipment or machinery) and job
contracting (where a legitimate contractor takes on specific jobs with the necessary
resources). In this context, the Secretary can determine who will be considered the employer
for the purpose of upholding the rights of workers and preventing any violations or
circumvention of the Code. Labor-only contracting occurs when a contractor supplies
workers but does not have enough capital or investment (such as tools, machinery, or
premises) to be considered a legitimate contractor. The workers provided by such a
contractor are engaged in tasks directly tied to the principal employer's main business. In
this situation, the contractor is considered an agent (a representative) of the employer, and
the employer becomes responsible for the workers, just as if they were directly employed by
the employer.
Rule VIII-A, which is part of the Omnibus Rules implementing the Labor Code, further clarifies
the difference between legitimate contracting and labor-only contracting. It describes a
trilateral relationship in legitimate contracting, where there are three parties: the principal
(the employer who farms out work), the contractor or subcontractor (who has the capacity
to independently carry out the work), and the contractual workers (employees hired by the
contractor). In contrast, labor-only contracting is prohibited because the contractor merely
recruits and supplies workers to a principal without having the resources to independently
perform the work, or lacks control over the workers' performance. When substantial capital
or investment (such as machinery, tools, and premises) is absent, and the workers are directly
involved in the principal’s main business, the contractor is deemed to be labor-only
contracting.
In addition, the right to control is a crucial element in determining whether a contractor is
truly independent. This right refers to the employer's ability to determine not just the final
result of the work but also how and by what means it is achieved. The law tests whether a
contractor works according to their own methods or if they are subject to the employer's
control, except for the final results of the work. In legitimate labor contracting, while the
principal employer is not fully liable for all claims by employees, they are jointly and severally
liable (equally responsible) with the contractor for ensuring the employees receive their
wages if the contractor fails to do so.

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 In this case, despite the respondent’s claim that there is no employer-employee relationship
between it and the petitioner, and its assertion that the petitioner was employed by the
contractor, the facts and circumstances of the case suggest otherwise. The law clearly states
that in labor-only contracting, the contractor is an agent of the principal employer, and the
principal employer is responsible for the workers as if they had been hired directly by them.
This is done to prevent the circumvention of labor laws and ensure workers' rights are
upheld.
In legal terms, capital or investment refers to the resources that a contractor must have to
be considered a legitimate business entity, and jointly and severally liable means that two or
more parties are equally responsible for a liability. Agent refers to someone acting on behalf
of another party (in this case, the employer).

In this case, the Labor Code and its accompanying implementing rules grant the Labor Arbiter
the authority to be the primary trier of facts in labor-related cases. This means that the Labor
Arbiter is entrusted with determining the truth of the facts presented by both parties
involved in a dispute, relying on the evidence provided and their interactions with the parties
and their witnesses. During the conciliation phase (a process where the parties try to settle
their dispute), the Labor Arbiter is able to directly discuss and understand the factual matters
at hand. This gives the Labor Arbiter a unique advantage in making informed decisions based
on these discussions. As a result, the findings of the Labor Arbiter are given significant weight
and credibility.
In this particular case, the decision of the Court of Appeals made on 9 May 2005 was
reversed, and the Labor Arbiter's decision from 20 November 2000 was reinstated. The case
was remanded, meaning it was sent back to the Labor Arbiter for the immediate execution
of their decision. No costs were awarded, meaning that neither party was required to pay
legal fees.
The decision was signed by Minita V. Chico-Nazario, an Associate Justice, with the
concurrence of Consuelo Ynares-Santiago, the Chairperson, and other Associate Justices,
Ma. Alicia Austria-Martinez and Antonio Eduardo B. Nachura.
The Attestation part indicates that the conclusions made in the decision were discussed and
agreed upon by the justices before being assigned to the writer of the opinion of the court’s
division. The Certification section confirms that the conclusions were reached after
consultation, as required by Section 13, Article VIII of the Constitution.

CELIAR. ATIENZA, PETITIONER, VS. NOEL SACRAMENTO SALUTA, RESPONDENT.

This case involves a Petition for Review on Certiorari, which is a request made to the Supreme
Court to review and possibly reverse the decisions made by the Court of Appeals (CA) and
the National Labor Relations Commission (NLRC). Specifically, the April 21, 2017 Decision and
August 9, 2017 Resolution of the Court of Appeals were being questioned, as the CA had
affirmed with modifications the April 27, 2016 Decision and the June 21, 2016 Resolution of
the NLRC. These decisions reversed and set aside the October 29, 2015 Decision of the Labor
Arbiter, who initially ruled in favor of the respondent, Noel Sacramento Saluta. The case
centers on the issue of illegal dismissal, non-payment of wages, overtime pay, holiday pay,
premium pay for work on holidays and rest days, illegal deductions, and the issuance of a
certificate of employment.

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 The case began when Noel Sacramento Saluta, the respondent, filed a complaint against
Celia R. Atienza, the petitioner, and CRV Corporation for illegal dismissal and other
employment-related claims. Saluta alleged that he was hired by CRV Corporation in May
2012 as a company driver, specifically to drive for Celia R. Atienza, one of the top officials of
the company, with a monthly salary of P9,000.00.
The situation turned problematic on December 11, 2014, when Saluta, while driving on the
North Luzon Expressway, accidentally hit the rear of another vehicle, leading to a damage
cost of P15,000.00. While the company initially advanced the payment, the amount was to
be deducted from Saluta's monthly salary. Additionally, authorities confiscated his driver's
license and issued him a Temporary Operator's Permit (TOP), which is a temporary driving
permit issued in place of a regular driver’s license.
Later, on December 23, 2014, Saluta informed Celia Atienza that he needed to take a leave
from work to claim his driver’s license since his Temporary Operator’s Permit (TOP) had
expired. However, Saluta claimed that Atienza refused to excuse him from work due to her
scheduled appointments that day. Since it was illegal for him to drive without a valid license,
Saluta felt compelled to go the following day, December 24, 2014, to retrieve his license.
Consequently, he failed to report to work as required. Prior to taking leave, he arranged for
another company driver to drive for Atienza. However, when Atienza found out that Saluta
was not at work, she called him and allegedly said, "kung hindi ka makakapag-drive ngayon,
mabuti pa maghiwalay na tayo" (if you can’t drive today, we might as well part ways). Saluta
interpreted this statement as a verbal termination of his employment.

In this case, Noel Sacramento Saluta (respondent) went to CRV Corporation on Christmas Eve
to inquire about his employment status after having been verbally told by Celia R. Atienza
(petitioner) that they might part ways. He learned from the General Manager of the
company, Rodolfo Reyes, that his employment had indeed been terminated. Respondent
then requested his last salary, but this request was denied on the grounds that he had not
reimbursed the company for the P15,000.00 that the company had advanced to him earlier
for damages caused during a car accident. This led Saluta to file a complaint against CRV
Corporation and Atienza on April 7, 2015. The complaint included allegations of illegal
dismissal, non-payment of wages, overtime pay, holiday pay, premium pay for work on
holidays and rest days, illegal deductions, and the issuance of a certificate of employment.
In response, Atienza (petitioner) argued that Saluta had not been dismissed but instead had
abandoned his job. She claimed that Saluta had taken a leave of absence without permission
and failed to report to work after December 23, 2014. Petitioner further contended that
Saluta was not an employee of CRV Corporation but was hired as her personal driver with a
monthly salary of P9,000.00 and free board and lodging. Her claim was that his job was
limited to driving her and her family wherever they needed to go. According to Atienza, the
issue arose after Saluta was involved in a car accident in December 2014 while driving her
brother-in-law's car, for which he admitted fault. Petitioner provided him with a loan of
P15,000.00 to cover the damages, but this amount was to be deducted from his salary.
On December 22, 2014, Saluta sought permission to go to Pampanga to sign papers, which
petitioner granted under the condition that he would report for work the following day.
However, Saluta did not show up on December 23, 2014, instead calling petitioner to inform
her that he would not be at work because his driver's license had expired and needed
renewal. That was the last time petitioner heard from Saluta. Petitioner later learned that on
December 27, 2014, Saluta asked Reyes for his remaining salary for the period December 16

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 to 22, 2014, but was informed that his salary could not be released until he repaid the
P15,000.00 loan. Despite this, Reyes extended a personal loan of P4,000.00 to Saluta, which
he promised to repay. On January 7, 2015, Saluta communicated with Reyes one last time,
stating that he would not be returning to work. Petitioner was surprised to later find out that
Saluta had filed a complaint for illegal dismissal more than three months after his last
communication.

In this case, the Labor Arbiter issued a Decision on October 29, 2015, where it dismissed
most of Noel Sacramento Saluta’s claims, except for the issues of illegal deduction and the
issuance of a certificate of employment. The Labor Arbiter concluded that Saluta had failed
to provide substantial evidence proving that he was an employee of CRV Corporation.
However, due to the admission from Celia R. Atienza (petitioner) that Saluta was her personal
driver, the Labor Arbiter considered him as an employee of Atienza instead. The Labor Arbiter
then stated that Saluta’s compensation and any indemnity for dismissal were governed by
certain provisions of the Civil Code. Since Saluta’s monthly salary of P9,000.00 was
considered reasonable under the Civil Code, the Labor Arbiter denied his claims for overtime
pay, holiday pay, and premium pay for work on holidays or rest days because househelpers
and personal service employees are excluded from receiving such benefits under the Labor
Code. Furthermore, the Labor Arbiter found that Saluta was not liable for the P15,000.00
because it was not proven that he was responsible for the accident in December 2014. As
for Saluta’s request for an employment certificate, the Labor Arbiter ruled in his favor
because the Civil Code entitles employees to such a certificate. The Labor Arbiter also
dismissed the illegal dismissal claim, ruling that Saluta had abandoned his job, as there was
no evidence to show that he was terminated or prevented from returning to work. As such,
Saluta forfeited his unpaid salary under the Civil Code.
On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter’s
decision on April 27, 2016. The NLRC agreed that although Saluta failed to provide sufficient
evidence that he was employed by CRV Corporation, Atienza did not contest that Saluta
worked as her personal driver. Since Atienza claimed that Saluta was her personal driver, she
had the burden to prove that no employer-employee relationship existed, which she failed
to do. Reyes, the General Manager of CRV Corporation, had even lent Saluta a personal loan,
further supporting the idea that Saluta was employed by the company. The NLRC then found
that Saluta was indeed an employee of CRV Corporation and not just a personal driver to
Atienza.
Regarding the issue of illegal dismissal or job abandonment, the NLRC determined that both
parties failed to provide enough evidence to support their claims. Saluta had only made an
uncorroborated statement that he was verbally terminated, while Atienza claimed to have
heard from Reyes that Saluta would not be returning to work. Because Atienza failed to prove
that Saluta abandoned his job and did not disprove his claim of verbal termination, the NLRC
concluded that Saluta had been illegally dismissed. As a result, the NLRC ordered CRV
Corporation and Atienza to pay Saluta full backwages from December 2014, separation pay
equivalent to one month’s salary for each year of service, wage differentials, holiday pay,
13th month pay, and service incentive leave pay starting from May 2012. However, Saluta’s
claims for overtime pay, night shift differential, and premium pay for holidays or rest days
were denied due to a lack of evidence that such benefits were owed or unpaid. Finally, the
NLRC agreed with the Labor Arbiter that Saluta was not liable for the P15,000.00 deduction
from his salary, as there was insufficient proof that he caused the accident.

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 Petitioner filed a Partial Motion for Reconsideration, but this was denied in a Resolution
dated June 21, 2016.

The petitioner, dissatisfied with the Court of Appeals (CA)'s decision, filed a petition for
certiorari, claiming grave abuse of discretion, meaning that the CA made a decision that was
unreasonable or unjust. In its April 21, 2017 decision, the CA agreed with the National Labor
Relations Commission (NLRC), stating that Saluta failed to prove with substantial evidence
(strong enough proof) that he was a company driver of CRV Corporation. However, the CA
felt it necessary to reexamine the evidence presented by the petitioner, given the imbalance
between the employer and the employee in such cases. The CA found that the petitioner
had not provided sufficient evidence to prove that Saluta was her personal driver. Specifically,
the CA noted that the petitioner failed to present Saluta’s employment contract, which would
have included critical information such as the date he was hired, his work description, salary,
and how it was paid. Furthermore, the CA questioned why Saluta was reporting to and
receiving his salary through Reyes, the General Manager of CRV Corporation, if he were
indeed only her personal driver. The petitioner also did not explain why Saluta’s salary was
paid through Automated Teller Machines (ATM) like the rest of the company's employees,
nor did she provide records such as payrolls, a list of personnel, salary vouchers, or Social
Security System (SSS) registration, which would have confirmed her claim that Saluta was just
her personal driver. In fact, the CA found it compelling that CRV Corporation seemed to have
the authority to terminate Saluta, as indicated by the fact that he went to CRV Corporation’s
office to confirm whether he had been terminated after he was verbally dismissed by the
petitioner.
The CA also ruled that the petitioner failed to present evidence to show that Saluta’s
dismissal was for a just or authorized cause and that proper due process (the legal procedure)
was followed in dismissing him. It also found that Saluta's failure to report for work on
December 24, 2014, to renew his driver’s license was reasonable because his Temporary
Operator's Permit (TOP) had expired, and therefore, there was no sufficient reason to justify
his dismissal. The CA also disagreed with the petitioner’s claim that Saluta abandoned his
job, as there was no proof showing that Saluta had the clear intention to sever his employer-
employee relationship with the company. Therefore, the CA affirmed the NLRC's decision
with modifications. The CA imposed a 6% interest per annum (a yearly interest rate) on the
monetary awards granted to Saluta from the time the decision became final until it was fully
paid.
The petitioner then filed a Motion for Reconsideration, asking the CA to review its decision,
but the CA denied the motion in a Resolution dated August 9, 2017. Unmoved, the petitioner
brought the case before the Supreme Court by filing the current Petition for Review on
Certiorari, where she argues that the appellate court (CA) made a mistake in ruling that
Saluta was not her personal driver but was instead a company driver under the employ of
CRV Corporation. The petitioner also contends that Saluta should not be entitled to full
backwages (salaries owed to an employee due to illegal dismissal), separation pay (payment
due to employees upon dismissal without just cause), wage differentials (payment for wages
that were underpaid), holiday pay, 13th month pay, and service incentive leave pay due to
illegal dismissal.

The petitioner argued that the Court of Appeals (CA) made a mistake by ruling that Saluta
was a company driver of CRV Corporation rather than her personal driver, despite Saluta's

27 | P a g e
 failure to provide substantial evidence proving the existence of an employer-employee
relationship between him and the company. The petitioner referenced the High Court's
ruling in Lopez v. Bodega City, which states that in cases of illegal dismissal, it is the employee
(in this case, Saluta) who carries the burden of proving, through substantial evidence, that
there was an employer-employee relationship, not the employer. However, the petitioner
argued that the following circumstances show that Saluta was hired in her personal capacity:
(a) Saluta could not provide an employment contract or any document proving he was a
company driver of CRV Corporation; (b) Saluta received his salary directly from the petitioner,
and the Bank of the Philippine Islands Statements of Cash Deposits and Withdrawals that
Saluta presented did not prove that CRV Corporation was paying him; and (c) Saluta failed to
show that CRV Corporation exercised control over how he performed his duties, which is an
important aspect of establishing an employer-employee relationship. In contrast, the
petitioner argued that she had the power of control over Saluta, meaning she had the
authority to give instructions about when and where he would drive for her and her family,
thus demonstrating she was his employer.
The petitioner further argued that it was incorrect for the CA to rule that Saluta was illegally
dismissed from work, as Saluta had not provided enough substantial evidence to prove he
was dismissed. The petitioner emphasized that Saluta did not try to return to work after he
left on December 23, 2014, and his refusal to return without a valid reason amounted to
abandonment of work. According to the petitioner, Saluta's actions—especially informing
Reyes that he would not return to work—clearly showed that he intended to end his
employment. Since Saluta made the decision to leave without the petitioner’s prior
knowledge, the petitioner argued that she should not be held responsible for illegal
dismissal.
Additionally, the petitioner contended that Saluta was not entitled to full backwages (salaries
owed due to illegal dismissal) or separation pay (payment made to an employee when they
are dismissed or resign). The petitioner argued that Saluta, as a family driver who abandoned
his job without a valid reason, forfeited his unpaid salary under Article 149 of the Labor Code.
The petitioner also pointed out that Saluta was not entitled to separation pay because
someone who abandons their job or resigns voluntarily does not qualify for this benefit.
Furthermore, the petitioner argued that the CA made a mistake in granting Saluta’s claims
for wage differentials, holiday pay, 13th month pay, and service incentive leave pay, as family
drivers are explicitly excluded from these benefits under the Labor Code.

Respondent argued that he was one of the company drivers and a regular employee of CRV
Corporation since May 2012, and that his work was essential to the company's business
operations. He contended that the petitioner claimed he was a personal driver to avoid
paying him the minimum wage required for company drivers. He further argued that, like the
other regular employees of the company, his salaries were paid through ATM, which, in his
view, showed that he was indeed employed by CRV Corporation.
Respondent also claimed that he did not resign or abandon his job, but was illegally
dismissed. He emphasized that his continued pursuit of the illegal dismissal case showed he
never intended to quit his employment. Respondent pointed out that in cases of illegal
dismissal, it is the employer's burden to prove that the dismissal was justified, and if the
petitioner maintained that he resigned, it was her responsibility to prove that he did so
voluntarily. Since the petitioner failed to provide sufficient proof that respondent resigned or
abandoned his position, and because respondent was not afforded due process—meaning

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 he was not given a notice to explain or a notice of termination—respondent concluded that
his dismissal was indeed illegal. As a result, he believed the Court of Appeals (CA) was correct
in granting him money claims, including full backwages, separation pay, wage differentials,
holiday pay, 13th month pay, and service incentive leave pay. Moreover, even though
damages and attorney's fees were not explicitly requested in his complaint, respondent
argued that these should still be awarded since they were raised in his position paper within
the allowed timeframe.

In this case, the Court emphasized that allegations made in a legal complaint must be backed
by competent evidence, meaning evidence that is legally acceptable and credible, and the
burden of proof lies with the party making the allegation. In an illegal dismissal case, the
onus probandi (Latin term meaning "burden of proof") rests on the employer to prove that
the dismissal was for a valid cause. However, before proceeding with a case for illegal
dismissal, it is essential to establish that an employer-employee relationship exists. The
respondent in this case claimed to be an employee of CRV Corporation, and it was his
responsibility to prove this relationship by substantial evidence. In other words, the burden
of proof is on the party making the positive assertion, and since respondent was claiming to
be employed by CRV Corporation, he needed to present sufficient evidence to show that he
was indeed an employee. This evidence should establish the four key elements of an
employer-employee relationship, which include: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control
the employee's conduct.
The Court also pointed out that the issue of whether an employer-employee relationship
exists is a question of fact, meaning it deals with the actual facts of the case, which are
typically determined by examining evidence and testimony. As a general rule, this Court does
not resolve questions of fact because it only reviews errors of law, but in cases where the
factual findings of the Labor Arbiter, the National Labor Relations Commission (NLRC), and
the Court of Appeals (CA) differ, the Court can re-examine the facts. In this particular case,
the findings of the Labor Arbiter were different from those of the NLRC and the CA, which
led the Court to review and re-evaluate the factual issues based on the records of the case.
To determine if an employer-employee relationship exists, jurisprudence (the theory or
philosophy of law) follows the four-fold test, which examines: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee’s work and conduct, often referred to as the "control
test". While there is no specific form of evidence required to prove an employer-employee
relationship, any competent (legally valid) and relevant evidence may be presented, but the
existence of the relationship must still be proven by substantial evidence. Substantial
evidence is defined as the amount of relevant evidence that a reasonable person might
accept as enough to justify a conclusion. In this case, the Court concluded that the
respondent failed to provide sufficient evidence to prove he was a company driver for CRV
Corporation.

In this case, the respondent strongly argued that he was employed as a company driver for
CRV Corporation; however, he did not present any competent or reliable evidence, such as
documentary evidence like an employment contract, company ID, pay slips, or any document
that would prove he was officially part of the company’s payroll. Even though the respondent
claimed that he received his salaries through an ATM, similar to other company employees,

29 | P a g e
 this alone was not enough to prove that the company was his employer. Additionally, the
respondent failed to present any evidence showing how CRV Corporation had the power of
dismissal or control over him, which are essential aspects of an employer-employee
relationship. There was no evidence that the company monitored his work, required him to
clock in to track his hours, or kept track of his absences. Instead, the records showed that
petitioner (the person who hired the respondent) had control over his work by deciding
when the respondent should work, and the respondent had to ask for permission before
taking leave. Moreover, petitioner had the power of dismissal, as evidenced by the
respondent's belief that he was verbally terminated by her. Due to the respondent's failure
to prove his employment with CRV Corporation, the Court agreed with the Labor Arbiter (a
judge in labor disputes) that he was petitioner’s personal/family driver.
Furthermore, the NLRC (National Labor Relations Commission) and the Court of Appeals (CA)
wrongly placed the burden of proving that the respondent was employed by the petitioner
on the petitioner, but the Court clarified that the onus probandi (burden of proof) lies with
the respondent to provide evidence that supports his claim. This is because, as a
fundamental rule, anyone claiming entitlement to benefits under the law must prove their
right to those benefits. Unfortunately, the respondent failed to meet the required burden of
proof, meaning the Court could not agree with his claim.
As for the dismissal of the respondent, it is a well-established principle that in illegal dismissal
cases, the employer has the burden of proving that the dismissal was for a valid or authorized
cause. However, if the respondent does not provide enough evidence to show that they were
actually dismissed, the employer is not required to prove that the dismissal was legal.
Respondent claimed that he was verbally terminated by the petitioner on December 24,
2014, but the petitioner argued that he simply stopped reporting for work after December
23, 2014. The respondent’s bare claim (meaning unsupported or weak statement) of being
dismissed was not backed by sufficient and impartial evidence. Bare allegations, without
proper proof, cannot be considered substantial evidence and are of no legal value.
Additionally, the respondent failed to provide any independent evidence, such as a
statement from Reyes, a person who supposedly confirmed the termination, to corroborate
his dismissal. The fact that the respondent did not receive his salary from December 15 to
December 22, 2014, did not prove his termination, since employees may not receive their
salaries for various reasons. The Court reiterated that each party in a legal dispute must
provide proof of their claims, and mere allegations are not sufficient. In this case, because
the respondent failed to present clear, convincing, and positive evidence of his dismissal, his
claim of illegal dismissal could not be upheld as it was merely conjectural (based on
guesswork) and lacked evidentiary value.

In the case at hand, the Court determined that the respondent did not abandon his work.
Abandonment refers to the deliberate (intentional) and unjustified refusal of an employee to
return to work, and it is considered a neglect of duty, which can justify termination by the
employer. For abandonment to be valid, two things must be proven: (1) failure to report for
work without a valid reason, and (2) a clear intention to sever the employer-employee
relationship. The second factor, the intention to quit, is the more important one and should
be shown by overt acts, meaning actions that clearly show the employee no longer intends
to work. This intention must be proven with clear evidence that it was deliberate and
unjustified.

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 The Court emphasized that the burden of proving abandonment lies with the employer, who
must show evidence that the employee deliberately chose to leave their job, and that the
employer must also follow the required legal procedures (known as due process) when
dismissing an employee.
In this case, the Court concluded that there was no abandonment. While the respondent did
miss work, the petitioner failed to provide any evidence of the respondent’s overt conduct
(clear actions) that would show he intended to quit. It is well-established that simply being
absent or failing to report for work does not automatically mean an employee has
abandoned their job. The respondent’s filing of an illegal dismissal case contradicts the idea
of abandonment, because someone who actively contests their dismissal cannot logically be
said to have abandoned their job. The filing of the case itself shows the respondent’s desire
to return to work, which undermines any claim of abandonment.

The issue at hand revolves around the legal status of family drivers in relation to the Labor
Code and the Kasambahay Law (Republic Act No. 10361, also known as the Domestic
Workers Act). Under the Labor Code, specifically Article 141, family drivers are included in
the definition of domestic or household service. This means that family drivers are
considered as househelpers, and the rules for termination and indemnity for family drivers
are governed by Article 149 of the Labor Code, which addresses the rights of househelpers
when their services are unjustly terminated. Under Article 149, if a househelper (including a
family driver) is unjustly dismissed, they are entitled to compensation for earned salaries and
an additional indemnity for fifteen (15) days. However, if the househelper leaves without a
valid reason, they forfeit any unpaid salary not exceeding fifteen days.
However, the Kasambahay Law specifically repealed Chapter III of the Labor Code, which
covers the rights of househelpers, including family drivers. While the Kasambahay Law
defines who qualifies as a domestic worker or Kasambahay, it excludes family drivers from
this category. Section 4(d) of the Kasambahay Law provides a list of workers considered as
domestic workers, such as househelp, nursemaids (yaya), cooks, gardeners, and laundry
persons, but family drivers are not included in this enumeration. This exclusion is consistent
with the legal principle of expressio unius est exclusio alterius (the express mention of one
thing excludes others). Furthermore, the Implementing Rules and Regulations (IRR) of the
Kasambahay Law also confirms that family drivers are not covered by the law, specifying that
family drivers are excluded from the list of workers entitled to the protections under the
Kasambahay Law.
This exclusion of family drivers from the Kasambahay Law is consistent with a statutory
construction principle that when one category of workers is mentioned explicitly, others not
mentioned are excluded. This interpretation is given considerable weight by the courts, as
the IRR is issued by a government agency tasked with implementing the law and is generally
respected by the courts unless challenged. Additionally, the constitutionality or validity of
such rules cannot be questioned in a collateral attack, meaning that unless a direct legal
challenge is made against the rule, it is presumed to be valid.
The courts also recognize that social justice principles, which favor labor, only apply when
there is genuine doubt about the law's interpretation. In this case, the Kasambahay Law was
clear in its exclusions, and social justice principles cannot be used to expand the law’s
coverage to workers not intended by Congress to be included. Therefore, family drivers, while
once considered under the Labor Code as part of domestic service, are excluded under the
Kasambahay Law.

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 Due to the express repeal (a direct and clear cancellation or invalidation) of the Labor Code
provisions that applied to househelpers (including family drivers) by the Kasambahay Law,
and since the Kasambahay Law does not apply to family drivers, there is a need to go back
to the provisions in the Civil Code, specifically Articles 1689, 1697, and 1699, Section 1,
Chapter 3, Title VIII, Book IV. These articles provide the legal framework for household
service. Article 1689 mandates that household service (the work provided in the home,
including services of family drivers) must always be reasonably compensated. Any agreement
stating that such services are without compensation is considered void (legally invalid). The
compensation must also include other benefits like lodging (a place to stay), food, and
medical attendance. Article 1697 states that if the period for household service is fixed,
neither the employer (referred to as the head of the family) nor the househelper (which
includes family drivers) may terminate the contract before the agreed period ends unless
there is a just cause. If the househelper is unjustly dismissed, they are entitled to their
compensation already earned and an additional indemnity for fifteen days. However, if the
househelper leaves without a justifiable reason, they forfeit any unpaid salary, but only for a
period not exceeding fifteen days. Article 1699 grants the househelper the right to demand
a written statement from the head of the family upon the termination of the service
relationship. This statement should specify the nature (type of work), duration (how long the
work was performed), and the efficiency and conduct of the househelper. The reason for
reverting back to the Civil Code provisions is that, as mentioned earlier, Section 44 of the
Kasambahay Law explicitly repealed the relevant Labor Code provisions concerning family
drivers. Once a statute is expressly repealed, it is no longer legally binding and has no effect.
On the other hand, Article 302 of the Labor Code, which serves as its repealing clause (a
clause that outlines which laws are being repealed), does not affect the Civil Code provisions
because they are not inconsistent with the Labor Code. The general rule is that repeals by
implication (when one law is implied to have repealed another law without directly stating
it) are not favored because laws are presumed to be passed after careful consideration of
existing laws, and the courts are expected to uphold this presumption in the application of
laws.

Since the Kasambahay Law specifically repealed only Articles 141 to 152 in Chapter III of the
Labor Code concerning the Employment of Househelpers, and since the Labor Code did not
repeal the provisions of the Civil Code related to household service, including services
rendered by family drivers who contribute to the needs of a household, the Civil Code
provisions remain in effect. To rule otherwise would leave family drivers without even basic
legal protection, which could not have been the intent (purpose or aim) of the lawmakers
when creating the law. According to Article 1697 of the Civil Code, if the respondent (in this
case, the family driver) was unjustly dismissed, he would be entitled to receive the
compensation he had already earned, plus an indemnity (compensation for unfair treatment)
for 15 additional days. However, if the respondent left his job without a justifiable reason (a
valid, legal excuse), he would forfeit any salary due to him for up to 15 days. In this case, since
there was neither a dismissal nor abandonment (quitting the job without notice or cause),
neither party is entitled to claim indemnity (payment for wrongful actions) from the other.
Essentially, if the employee's failure to work was not due to either abandonment or
termination, then the burden of economic loss (the financial impact) does not fall on the
employer. Each party must bear their own loss. In simpler terms, since the respondent

32 | P a g e
 stopped showing up for work due to a verbal miscommunication (a misunderstanding that
was not formally communicated), this does not justify any form of remuneration (payment
or salary).

In this case, the petitioner is not required to pay the respondent for wage differentials,
holiday pay, 13th month pay, or service incentive leave pay. As determined by the Labor
Arbiter (an official who resolves labor disputes), the P9,000.00 monthly salary the
respondent receives is reasonable and in line with Article 1689 of the Civil Code, which
governs the compensation of household service. This means the petitioner cannot be held
liable for wage differentials (the difference between what the worker was paid and what they
should have been paid according to law). Additionally, the petitioner is not obligated to pay
for holiday pay, 13th month pay, or service incentive leave pay, because family drivers, who
are considered to be in the personal service (a type of employment involving direct, personal
care or assistance) of another person, are exempt from such benefits as outlined in Articles
82, 94, and 95 of the Labor Code, and Section 3(d) of the Implementing Rules of Presidential
Decree No. 851 (a law related to the 13th month pay for employees).
The Court also discusses the appellate court's decision, which found that the respondent was
illegally dismissed and ordered both the CRV Corporation and the petitioner to pay the
respondent various amounts, including backwages (wages owed for the period the employee
was unjustly terminated), separation pay (money owed to an employee upon dismissal), and
the other benefits. However, only the petitioner appealed the decision, not CRV Corporation.
As a result, the decision of the appellate court stands for CRV Corporation because they did
not appeal, meaning the corporation is still held responsible for its part in the decision.
The Court also clarifies that when a judgment is reversed on appeal, it binds (applies) only to
the parties that appealed, unless their rights and obligations are so connected that they
cannot be separated. In such cases, a reversal of the judgment applies to everyone involved.
This is based on the general doctrine of separate juridical personality, which states that a
corporation is a separate legal entity from its stockholders or owners. This means that the
corporate debt (the money the corporation owes) is not the personal debt of its
stockholders, because a corporation has its own distinct personality in the eyes of the law.

In this case, CRV Corporation was included in the lawsuit, properly notified, and served with
legal processes, but it did not participate in the case by filing any legal documents or sending
an authorized representative. An i-Report from the Securities and Exchange Commission
(SEC) dated May 14, 2015 revealed that the company status of CRV Corporation was revoked.
However, the revocation did not affect the jurisdiction of the National Labor Relations
Commission (NLRC), since the i-Report did not indicate when the corporation ceased to exist,
and the complaint had already been filed in April 2015. According to Section 122 of Batas
Pambansa Bilang 68, also known as The Corporation Code of the Philippines, a corporation
whose registration has been revoked can still continue to exist as a corporate body for three
years after dissolution to wind up its affairs, which includes prosecuting and defending suits.
The Court further explained that although a reversal of judgment for one party could apply
to all if their interests and liabilities are inseparable, this was not the case for CRV Corporation
and the petitioner. Both parties had separate interests and would not be harmed by a
decision against the other. CRV Corporation would not be harmed if the petitioner were held
liable to pay the respondent’s unpaid wages. Similarly, the petitioner would not suffer any
monetary harm if CRV Corporation was found liable for the unpaid wages.

33 | P a g e
 Even if the petitioner was a top official of CRV Corporation, this fact did not imply that she
would face financial harm from a judgment against the corporation. Like stockholders,
corporate officers and employees have only an inchoate right (a right that has not yet been
fully realized) to the assets of the corporation, which are legally owned by the corporation
due to its separate juridical personality (the legal recognition that a corporation exists as an
independent entity separate from its owners or officers).
The Court also noted that there was no evidence presented that the petitioner had been
authorized, either by a board resolution or by the corporation's by-laws, to represent CRV
Corporation in this case. Because of this, the petitioner's appeal could not benefit CRV
Corporation.
As a result, the Court granted the petition, reversing the previous decisions from the Court
of Appeals, and affirmed the Labor Arbiter’s decision, but only concerning petitioner Celia R.
Atienza.

Concepts
Labor Standards Labor Standards refer Working Hours and Rest Periods
to the set of minimum • Normal Work Hours: Employees are
requirements generally required to work no more
established by law to than 8 hours a day or 48 hours a week.
ensure fair, safe, and • Overtime Pay: Work performed
humane working beyond the standard 8 hours must be
conditions for compensated with an additional 25%
employees. These of the regular hourly rate (or 30% on
standards serve as the rest days and holidays).
baseline protections • Rest Periods: Employees are entitled
for workers, to a one-hour daily meal break and
guaranteeing their weekly rest days, typically 24
rights and promoting consecutive hours after 6 days of
their welfare while work.
also fostering Wages and Benefits
harmonious relations • Minimum Wage: Workers must
between employers receive at least the region-specific
and employees. They minimum wage set by the Regional
are primarily outlined Tripartite Wages and Productivity
in the Labor Code of Boards.
the Philippines • Overtime Pay and Night Differential:
(Presidential Decree Additional pay is required for overtime
No. 442) and related and work performed between 10:00
regulations. PM and 6:00 AM (night differential is
Purpose of Labor 10% of the hourly rate).
Standards • 13th Month Pay: Mandatory annual
Labor Standards aim bonus equivalent to at least one-
to: twelfth of the employee’s basic annual
• Protect salary, to be paid no later than
workers from December 24.
exploitation • Holiday Pay: Workers are entitled to
double pay on regular holidays if they

34 | P a g e
 and unsafe work, or 100% of their daily wage if
conditions. they don’t.
• Ensure • Service Incentive Leave: Employees
equitable who have worked for at least one year
treatment and are entitled to 5 days of paid leave
fair annually.
compensation. Employee Health and Safety
• Promote social • Employers are required to maintain a
justice by workplace that is safe, healthy, and
addressing the compliant with occupational safety
power and health standards set by the
imbalance Department of Labor and
between Employment (DOLE).
employers and • Regular safety inspections and
employees. adequate provisions for personal
• Encourage protective equipment (PPE) are
economic mandated.
productivity • Social Protection and Benefits
and industrial o Social Security System (SSS):
peace Employers must enroll
Enforcement of Labor employees and remit
Standards contributions for retirement,
The Department of disability, maternity, and
Labor and sickness benefits.
Employment (DOLE) is o PhilHealth: Employers must
responsible for provide healthcare coverage
enforcing labor by registering employees with
standards in the the Philippine Health
Philippines. It Insurance Corporation and
conducts workplace making monthly
inspections, contributions.
investigates o Pag-IBIG Fund: Employers
complaints, and must contribute to the Home
ensures compliance Development Mutual Fund,
through penalties and which assists employees with
corrective actions. housing loans and other
benefits.

Prohibition of Unfair Practices

• Labor standards protect against
practices such as:
o Discrimination in hiring, pay,
or promotion based on
gender, race, religion, or
marital status.
o Child labor and forced labor.

35 | P a g e
 o Unjust termination or
dismissal of employees
without due process.
• Termination and Separation
o Employees cannot be
terminated without just or
authorized causes, as defined
by law.
o Terminated workers may be
entitled to separation pay,
which depends on the
grounds for termination and
length of service.

BATONG BUHAY GOLD MINES, INC., PETITIONER, VS. HONORABLE DIONISIO DELA SERNA IN
HIS CAPACITY AS THE UNDERSECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES,
AND THE OTHER COMPLAINANTS* IN CASE NO. NCR-LSED-CI-2047-87; MFT CORPORATION
AND SALTER HOLDINGS PTY. LTD., RESPONDENTS.

This case involves a Petition for Certiorari filed by Batong Buhay Gold Mines, Inc. (BBGMI) to
challenge three orders issued by Undersecretary Dionisio dela Serna of the Department of
Labor and Employment (DOLE). The petition asks for the annulment (cancellation) of these
orders, which were issued on September 16, 1988, December 14, 1988, and February 13,
1989. BBGMI also requested a Prayer for Preliminary Injunction or a Restraining Order, which
are legal tools used to stop actions or enforce temporary orders while the case is being
decided.
The Order of September 16, 1988 outlines the details of the complaint filed by a group of
workers. On February 5, 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion
O. Reyes, and 1,247 other employees filed a complaint against Batong Buhay Gold Mines,
Inc. The complaint covered several allegations related to non-payment of wages and
benefits, and the claims included the following:
1. Non-payment of basic pay and allowances for the period of July 6, 1983, to July 5,
1984, under Wage Order No. 2.
2. Non-payment of basic pay and allowances for the period of June 16, 1984, to October
5, 1986, under Wage Order No. 5.
3. Non-payment of salaries for the period from March 16, 1986, to the present (i.e.,
when the complaint was filed).
4. Non-payment of the 13th-month pay for the years 1985, 1986, and 1987.
5. Non-payment of vacation, sick leave, and compensatory leaves for mine site
employees.
6. Non-payment of salaries for employees who had been placed on forced leaves since
November 1985. If these salaries could not be paid, the employees requested
separation pay as compensation.

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 On February 9, 1987, the Regional Director set a hearing date for February 17, 1987 to
address the complaint. However, on February 17, 1987, the respondent (Batong Buhay Gold
Mines, Inc.) requested a rescheduling of the hearing, which was then set for March 2, 1987.
Meanwhile, on February 27, 1987, the complainants (the workers) filed a Motion for the
issuance of an inspection authority. This motion was a request for the issuance of an official
authorization to inspect the workplace to gather evidence supporting their claims regarding
unpaid wages and benefits.
The entire legal dispute centers around the workers' claims that Batong Buhay Gold Mines,
Inc. violated their rights by failing to pay various wages and benefits. The company, on the
other hand, is contesting the orders and the allegations through the petition for certiorari.

On July 13, 1987, the Labor Standards and Welfare Officers (LSWOs), who are responsible for
investigating labor disputes and ensuring compliance with labor laws, submitted their report
regarding the complaint filed by the workers against Batong Buhay Gold Mines, Inc. The
report included their recommendations on how to resolve the case.
The LSWOs recommended that an Order of Compliance be issued. This is a formal order
directing the company (respondent) to comply with the findings of the investigation and pay
the workers the amounts owed to them. Specifically, the workers were to be paid
P4,818,746.40, which covered several different claims:
1. Unpaid salaries from March 16, 1987, to the present (i.e., the ongoing period at the
time of the complaint).
2. Unpaid ECOLA differentials under Wage Order Nos. 2 and 5. ECOLA stands for
Economic Cost of Living Allowance, which is an additional payment given to workers
to compensate for the increasing cost of living.
3. Unpaid 13th-month pay for the years 1985 and 1986. The 13th-month pay is a
mandatory benefit for workers, typically equivalent to one month’s salary, paid at the
end of the year.
4. Unpaid vacation, sick, and compensatory leave benefits for the years 1984, 1985, and
1986. These benefits are owed to employees for unused leave days they accumulated
over the years.
On July 31, 1987, the Regional Director, who was overseeing the case, adopted the LSWOs'
recommendations. The Regional Director issued an order directing Batong Buhay Gold
Mines, Inc. to pay the workers the amount of P4,818,746.40, as outlined in the report. This
payment was meant to cover the unpaid salaries, ECOLA differentials, 13th-month pay, and
leave benefits for the workers during the specified periods.
After this order was issued, on August 19, 1987, the complainants (the workers) filed an ex-
parte motion. An ex-parte motion is a request made to the court or relevant authority
without the other party being present or notified. In this case, the workers requested that a
writ of execution be issued, which is a legal order to enforce the payment of the amount
owed to them. Along with the writ, they also requested the appointment of a special sheriff.
A special sheriff is an officer assigned to carry out specific tasks, like enforcing court orders,
in this case, ensuring that Batong Buhay Gold Mines, Inc. complied with the payment order.
This marks a crucial step in the case, as it shows the workers were seeking legal enforcement
of the Regional Director's order to ensure they received the money owed to them.

On August 21, 1987, the Regional Director issued an order requiring Batong Buhay Gold
Mines, Inc. (BBGMI) to post a cash or surety bond. A cash or surety bond is a form of security

37 | P a g e
 that ensures the company would comply with the payment order. If the company did not
provide this bond, the writ of execution would be issued, meaning enforcement actions
would begin to collect the owed money.
When BBGMI failed to post the bond as required, the complainants (the workers) filed a
motion for the issuance of a writ of execution, asking for the immediate enforcement of the
order. In response, on September 14, 1987, the Regional Director issued the writ of execution
and appointed Mr. John Espiridion C. Ramos as the Special Sheriff. The role of a Special Sheriff
is to carry out specific tasks assigned by the court, such as executing writs of execution.
The writ of execution directed Sheriff Ramos to do the following:
1. Collect the amount owed from BBGMI, which had been ordered to pay the workers.
2. Deposit the collected amount with the cashier’s office for proper distribution to the
workers under the Regional Director’s supervision.
3. If BBGMI failed to pay, the sheriff was authorized to seize goods from BBGMI. These
goods would be anything that wasn’t exempt from being taken under the law. If there
weren’t enough goods to cover the amount owed, the sheriff could seize real or
immovable property (like land or buildings) to cover the debt.
On September 17, 1987, Sheriff Ramos proceeded with executing the writ. He seized three
Peterbilt trucks (a brand of trucks) and sold them at public auction (a public sale where goods
are sold to the highest bidder). Over several different dates, other materials and motor
vehicles were also seized and sold at auction by the sheriff.
However, on December 11, 1987, BBGMI posted a supersedeas bond, which is a type of bond
that temporarily suspends or stays the enforcement of a court order, giving BBGMI time to
appeal the decision. As a result, the Department of Labor and Employment issued an order
on January 26, 1988, which restrained the complainants and Sheriff Ramos from continuing
to enforce the writ of execution. This meant the enforcement actions (like seizing property)
were paused until the appeal was decided.
BBGMI then appealed the July 31, 1987 order issued by the Regional Director, arguing that
the Regional Director did not have jurisdiction over the case. Jurisdiction refers to the
authority of a court or agency to hear and make decisions in a case.
On September 16, 1988, Undersecretary Dionisio de la Serna, the respondent in the case,
issued the first challenged order. This order upheld the Regional Director’s jurisdiction,
meaning it agreed that the Regional Director had the authority to handle the case. However,
the order also declared the public auction sales conducted by Sheriff Ramos on September
24, 1987, and October 2, 20, 23, and 29, 1987 to be null and void (legally invalid). This meant
that the sales of the seized properties were cancelled. The personal properties that had been
sold and the proceeds (the money from the sales) that were handed over to the
complainants through their lawyer were ordered to be returned to BBGMI and the buyers,
respectively.

On October 13, 1988, the complainants in Case No. NCR-LSED-CI-2047-87 filed a Motion for
Reconsideration. A motion for reconsideration is a formal request asking the court or a
government office to review and reverse or modify a previous decision. In this case, the
complainants were contesting an earlier order. However, this motion was denied, meaning
their request to change the decision was rejected.
On November 7, 1988, a separate party, MFT Corporation, filed a Motion for Intervention. A
motion for intervention is a legal request to become a party to a case, often because the
intervening party believes they have a direct interest in the outcome. MFT Corporation

38 | P a g e
 referred to a Deed of Sale, which is a legal document showing the transfer of ownership of a
property. According to MFT Corporation, the deed showed that Fidel Bermudez, who was
the highest bidder in an auction sale conducted on October 29, 1987, had transferred
ownership of certain properties to MFT Corporation.
Later, on December 2, 1988, another Motion for Intervention was filed—this time by Salter
Holdings Pty., Ltd.. This company claimed that MFT Corporation had assigned its rights to the
disputed properties to them. Their claim was based on a Sales Agreement (a legal contract
where one party agrees to sell and transfer certain assets or rights to another) between MFT
Corporation and Salter Holdings Pty., Ltd.
Both motions for intervention—filed by MFT Corporation and Salter Holdings Pty., Ltd.—
were granted in an order issued on December 14, 1988. This means the court or office
allowed these parties to join the case as interested parties and recognized their claims over
the properties. The order specifically directed the exclusion (removal) of certain properties
from an earlier annulment. An annulment in this context refers to invalidating or canceling
an earlier legal action, such as the auction sale. The properties excluded from annulment
included "one cluster of junk mining machineries, equipment, and supplies" that had been
sold during the auction.
The final decision in this order stated that the motions for reconsideration filed by MFT
Corporation and Salter Holdings Pty., Ltd. were granted. The order from September 16, 1988,
was modified to exclude the disputed properties (including the mining equipment) from
being annulled.

The paragraph discusses a legal case where Motions for Reconsideration were filed by Batong
Buhay Gold Mining, Inc. (BBGMI) and the respondent employees. A Motion for
Reconsideration is a formal request asking a court or legal body to review and change its
previous decision. In this case, BBGMI and the employees requested that the court
reconsider its earlier decisions, but their motions were denied. This means the court did not
find sufficient reason to change its ruling. These motions were denied in an order dated
February 13, 1989, which is referred to as the third assailed Order. The word "assailed" here
means that the order was attacked or challenged.
After the denials, a petition was filed challenging the decisions made by the public
respondent (likely a government body involved in the case). The petition claimed that there
was grave abuse of discretion in the issuance of the three orders being contested. Grave
abuse of discretion refers to an extreme misuse of legal authority, where the decision-maker
acts beyond their power or in an unreasonable way. The petition argued that the public
respondent either had no jurisdiction (authority) or went beyond their jurisdiction when
issuing those orders.
The paragraph then shifts to discuss two issues arising from the orders:
1. Whether the Regional Director has jurisdiction over the complaint filed by the
employees of BBGMI.
2. Whether the auction sales conducted by the Special Sheriff (an officer in charge of
executing court orders, including sales of property) were valid.
Jurisdiction of the Regional Director:
The first issue is about whether the Regional Director has the legal authority (jurisdiction) to
handle the case. The Regional Director in question works for the Department of Labor and
Employment (DOLE), which enforces labor laws. The complaint in this case was filed by the

39 | P a g e
 employees of BBGMI, and the key question is whether the Regional Director can handle a
labor standards case involving those employees.
The subject labor standards case relates to laws about wages, working hours, employee
benefits, safety, and health. Labor standards are the minimum legal requirements for
workers' rights, like wages and safety rules. This particular case involves issues governed by
Article 128(b) of the Labor Code, which grants the Minister of Labor or their representative
the power to enforce compliance with labor standards after conducting inspections and
hearings.
The Visitorial and enforcement powers allow the Regional Director to ensure that labor laws
are followed, based on findings from labor inspectors or industrial safety engineers. These
powers include issuing orders for compliance and enforcing those orders with writs of
execution (official documents directing authorities to carry out the order). However, the
Regional Director’s powers are limited in cases where employers dispute findings that require
considering evidence outside of routine inspections.
In this case, BBGMI (the petitioner) argued that the Regional Director lacked jurisdiction over
the labor standards case, citing rulings from previous cases (e.g., Zambales Base Inc. vs.
Minister of Labor and Oreshoot Mining Company vs. Arellano). Respondent Undersecretary
Dionisio C. Dela Serna disagreed, arguing that the Regional Director did have jurisdiction. He
referred to Executive Order (E.O.) 111, which amended the Labor Code to clarify that the
Minister of Labor or their representative could handle cases involving employer-employee
relationships, especially when the case could be resolved through inspection and findings
without needing extensive new evidence.
E.O. 111 specifically supports the Regional Director’s jurisdiction over such labor standards
cases, emphasizing that it would make the powers of the Department of Labor and
Employment meaningless if they were not allowed to enforce compliance.
The court agreed with the employees (complainants) and found that the Regional Director
had jurisdiction over the case and could hear and decide on it.

The Court agrees with the public respondent, which means the Court is siding with the
government’s argument in favor of the Regional Director's jurisdiction over such cases. The
case cited by the Court is Maternity Children's Hospital vs. Secretary of Labor, where the
Regional Director was found to have jurisdiction over a complaint filed by employees on May
23, 1986 about underpayment of wages and ECOLAs (benefits given to workers under the
Employees' Compensation Program). The Court ruled that this was a labor standards case,
which is governed by Article 128(b) of the Labor Code, as amended by Executive Order No.
111 (E.O. 111).
The Court in this case explains that prior to the issuance of E.O. 111 on December 24, 1986,
the Regional Director's authority over cases involving money claims (like underpayment of
wages or benefits) was unclear. The complaint in the case was filed before E.O. 111 was in
effect. However, the Court believes that even before E.O. 111, the Regional Director already
had some enforcement powers over such money claims. This power was granted by
Presidential Decree (P.D.) 850, which was issued in December 1975 and shifted the handling
of labor standards cases from the arbitration system (where disputes are settled by a neutral
third party, like a judge) to the enforcement system (where government authorities like the
Regional Director can enforce labor laws directly).
When the Court discusses E.O. 111, it calls the Executive Order a curative statute. A curative
statute is a law passed to correct or remedy a problem or oversight in earlier laws. In this

40 | P a g e
 case, the Court views E.O. 111 as fixing the ambiguity about the Regional Director's power
to handle money claims. The amendment to Article 128(b) of the Labor Code through E.O.
111 made it clear that Regional Directors were empowered to handle cases of uncontested
money claims (claims that the employer does not dispute) where there is still an employer-
employee relationship.
The Court emphasized that E.O. 111 should be treated as a retroactive law, meaning it applies
not only from its date of issuance (December 24, 1986) but also to earlier cases, even those
filed before the Executive Order became law. The Court quoted another case, Progressive
Worker’s Union vs. F.P. Aguas, which held that interpretations of laws by officers (such as
Regional Directors) entrusted with enforcing them are entitled to great respect, especially
when those interpretations align with legislative intent. In other words, the Court supports
the idea that the Regional Director's interpretation of their powers under Article 128(b) and
E.O. 111 should be upheld, because it reflects the government's intent to make enforcement
more direct and accessible.
The Court then addresses the cases of Zambales Base, Inc. vs. Minister of Labor and Oreshoot
Mining Company vs. Arellano. The Court states that the petitioner's reliance on these cases
is misplaced. The Court clarifies that the Zambales Base case is no longer valid because of
the promulgation of E.O. 111, which amended the law and gave clearer jurisdictional
authority to the Regional Director. The Zambales Base decision, in light of the changes
brought by E.O. 111, is no longer applicable. The Court specifically noted that E.O. 111 was
intended to remedy a defect in the previous legal provisions, effectively overturning prior
rulings on jurisdiction.

In the case of Oreshoot Mining Corporation, the legal matter concerned employees who
were dismissed unlawfully and seeking money claims. However, this situation differs from
the one at hand because the case here relates to labor standards, not monetary claims from
employees who were fired. The court explains that the petitioner (the employer) mistakenly
used the wrong basis to support their position. Specifically, the petition involved labor
standards and not monetary claims from terminated employees.
The Court clarifies that if the petitioner had proven that the labor standards case fell under
the exception clause in Article 128 (b) of the Labor Code, the situation might have been
different. This clause has three necessary conditions, called elements, to shift jurisdiction
from the Regional Director to the Labor Arbiter. These elements are:
1. The petitioner disputes the findings of the labor regulations officer and raises issues
about them.
2. There is a need to examine certain evidence to resolve these issues.
3. The matters cannot be verified through normal inspection processes.
The petitioner did not claim any of these factors in their defense, even in their Motion for
Reconsideration on August 20, 1987. In fact, the grounds raised in their motion were:
1. The office had no jurisdiction to hear the case and the order issued on October 31,
1987, was invalid.
2. Batong Buhay Gold Mines, Inc. should not have been the only respondent in the case.
The complaint should have also been directed at the Asset Privatization Trust.
In other documents filed by the petitioner, such as their Urgent Omnibus Motion and various
Oppositions, they didn’t challenge the amounts employees were claiming or argue that labor
standards were not violated. Simply claiming lack of jurisdiction does not meet the conditions

41 | P a g e
 outlined in Article 128 (b) to remove the Regional Director’s jurisdiction. A Motion to Dismiss
is not enough to raise the proper contest under the law.
Additionally, the only instance where the petitioner mentioned the lack of jurisdiction was in
an Appeal Memorandum filed on January 14, 1988. In it, the petitioner argued that the
Regional Director had no jurisdiction because the employer-employee relationship no longer
existed since the company stopped operating in 1985.
The records show that the Labor Standards and Welfare Officers were unable to inspect the
company's documents or premises, despite having the right to do so. The petitioner claimed
that the company was under the receivership of the Development Bank of the Philippines,
which led to the Regional Director ordering a summary investigation. However, the petitioner
refused to cooperate by not attending hearings or submitting their position papers, despite
being given ample opportunities. This refusal was deemed as a waiver of the petitioner’s
right to present evidence.
The case cites a prior ruling in M. Ramirez Industries vs. Secretary of Labor (266 SCRA 111),
which states that if an employer refuses inspection or doesn't submit records like payrolls,
they lose the right to contest the claims made by employees. Therefore, by refusing to
cooperate with the Labor Standards and Welfare Officers and not submitting a position
paper, the petitioner essentially waived their right to challenge the employees’ claims.
Furthermore, the court states that in cases where the employer does not attend hearings or
fails to show up for two consecutive hearings without a valid reason, the hearing officer may
recommend that a compliance order be issued based on the available evidence. This is
consistent with the Rules on the Disposition of Labor Standards Cases.
The petition in this case concerns labor standards, where it is not necessary for the worker
to go through litigation to receive what is legally owed to them. The Department of Labor
exists to ensure that workers' rights are quickly enforced, free of charge.
The claim by the petitioner that the business had closed is a factual issue that could not be
raised for the first time in the Supreme Court. Factual issues are not appropriate for a special
civil action for certiorari, meaning that the petitioner could not introduce these new claims
here. Since the petitioner did not participate in the previous proceedings, the court cannot
consider their factual defenses at this stage.
The decision also discusses the powers of the Regional Director. Specifically, the Regional
Director has "visitorial and enforcement powers" under Article 128 (b) of the Labor Code,
which allows them to inspect employer records and premises to ensure compliance with
labor laws. If the employer contests the findings of the inspection, they must provide
evidence that was not considered during the inspection to challenge the Regional Director’s
findings.
The court also reflects on a previous case Servando's Inc. vs. Secretary of Labor, which caused
some confusion regarding the scope of the Regional Director's powers. This case involved
monetary claims, but the court eventually clarified that the Regional Directors have
jurisdiction over such claims in certain circumstances under RA 6715. However, this ruling
was modified later to limit the Regional Director’s power to adjudicate monetary claims
above a certain amount (P5,000) unless specific conditions are met.
Despite earlier rulings, current laws and decisions (like Francisco Guico, Jr. vs. Secretary of
Labor) upheld the jurisdiction of the Regional Director, even in cases where the claims exceed
P5,000. Under Republic Act 7730, the Regional Director retains the power to issue
compliance orders based on inspections, except when the employer contests the findings
and raises issues that were not part of the inspection process.

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 In this case, the law being discussed is Republic Act 7730 (RA 7730), which is considered a
curative statute. A curative statute is a type of law designed to correct mistakes or issues in
previous laws, particularly to fix situations where something that was once invalid or unclear
is made valid or clarified by the new law. The idea behind a curative statute is that it helps to
address issues or "defects" that hindered the intended legal consequences, ensuring that the
law is aligned with its original purpose. For example, if an earlier law created confusion or
allowed for unfair situations, a curative statute would fix that.
In this context, RA 7730 is seen as fixing a problem in previous interpretations of the law
concerning the jurisdiction (or legal authority) over labor standards cases. Jurisdiction refers
to which legal body or authority has the power to make decisions about a particular type of
case. In the past, there were some overlapping powers between the Regional Director and
Labor Arbiters regarding the authority to handle claims, especially when money was involved
in disputes. This overlap caused confusion about which body had the correct jurisdiction,
which is the "defect" RA 7730 seeks to fix.
RA 7730 is treated as a curative statute because it was designed to eliminate the confusion
caused by the previous court decision in the Servando case, which had extended the powers
of the Regional Director beyond what was originally intended. The law sought to clear up
doubts about whether the Secretary of Labor and Regional Directors could oversee labor
standards cases when the amount of money involved exceeded certain limits, like the P5,000
threshold mentioned in earlier laws. RA 7730 aims to clarify that the Regional Director has
jurisdiction over labor standards cases, regardless of the amount involved, which was an
issue raised by the earlier Servando ruling.
The Servando ruling referred to in the text is significant because it made the Regional
Director's power to handle such cases confusing, especially in relation to cases where the
money claims exceeded P5,000. This ruling was seen as problematic, and RA 7730 was
passed to correct this issue. Congressional records (records of discussions and decisions in
Congress) related to RA 7730 show that the law's goal was to remove these jurisdictional
doubts and make clear the powers of the Secretary of Labor and Employment.
The case mentioned, Briad Agro Development vs. De La Cerna, serves as a precedent in
showing how a previous law, RA 6715, was treated as curative to address similar jurisdictional
confusion. In that case, RA 6715 was passed to resolve overlapping jurisdiction between
Labor Arbiters and the Regional Director, a similar situation that RA 7730 is designed to fix
for labor standards cases.
In essence, RA 7730 clarifies the visitorial and enforcement powers of the Secretary of Labor
and makes sure that these powers apply appropriately to labor standards cases, as intended,
without confusion or limitations caused by previous rulings. This makes the law curative, or
corrective, because it removes any uncertainty about the jurisdiction of the Regional Director
over such cases.
After reviewing all the legal points, the Court concludes that RA 7730 should apply to this
case, ensuring that the Regional Director had the right to issue orders and enforce labor
standards in the situation at hand. Therefore, there was no grave abuse of discretion when
the Regional Director issued the Order on September 16, 1988.
Finally, the case also discusses the auction sales that took place due to the writ of execution
issued by the Regional Director, which led to multiple sales of the employer’s property. The
legality of these sales will be considered in the next issue for resolution.

43 | P a g e
 In the case at hand, the public respondent (the authority responsible for issuing decisions in
this case) declared that the five auction sales conducted by the Special Sheriff Ramos were
null and void. This means the sales were declared legally invalid, and the auction transactions
were not recognized. The reason for this decision was that the prices at which the properties
were sold were deemed to be "scandalously low"—meaning the prices were so low that it
raised serious doubts about the fairness and validity of the auction sales.
To break this down, the auction sales involved the sale of various personal properties,
including multiple trucks, construction equipment, and scrap materials. The sales occurred
on several dates in 1987, and the total proceeds from these sales amounted to
P4,389,749.99, but this was still less than the judgment award of P4,818,746.00 that needed
to be satisfied.
In the September 16, 1988 Order, the public respondent listed the items that were sold and
their respective proceeds, for example:
• A 1978 Peterbuilt truck that was in "not running condition" sold for a fraction of what
its actual value might have been.
• Scrap construction materials, scrap mining machinery, and other damaged
equipment were sold in bulk, with proceeds varying from P98,000 to P2,185,000.
The public respondent's decision to invalidate the auction sales was based on the concern
that the prices obtained from the auction were far too low to be reasonable for the items
sold. However, the court found an issue with the public respondent's decision. According to
the court, the public respondent had no evidentiary support (meaning, there was no actual
proof or evidence) to back up the claim that the prices were scandalously low. Instead, the
public respondent relied solely on the assertion of the petitioner (the person challenging the
auction results) that the properties sold for less than they were worth. Self-serving
assertions—or claims made by one party without supporting evidence—were not enough to
justify invalidating the auction sales.
The court emphasized that, as a general rule, the findings of fact and conclusions of law made
by quasi-judicial agencies (such as the public respondent) are usually not interfered with
unless there is "grave abuse of discretion." This means that the court does not normally
overturn decisions made by these agencies unless there is a serious error or misuse of power.
In this case, the court found that the public respondent's decision was made without
sufficient evidence to support the claim that the auction sales were unfair or scandalously
low.
In conclusion, the court determined that the public respondent did not act properly by
invalidating the sales based on unsupported claims. The auction sales were not properly
invalidated, and the prices alone, without solid proof or a detailed analysis of the property
values, were not enough to justify overturning the sales.

The presumption of regularity in the performance of official functions applies in this case,
which means that official actions, like those taken by the Special Sheriff in conducting the
auction sales, are generally assumed to have been done correctly unless proven otherwise.
This places the burden of proof on anyone claiming that there was an irregularity in the
auction. To challenge the validity of the sales, the party making the claim must provide clear
and convincing evidence that something was wrong.
Moreover, a well-established legal principle states that mere inadequacy of price—meaning
the sale prices being too low—is not enough to invalidate an auction sale, as long as the sale
itself was conducted properly and legally. If the auction is regular, there are no elements of

44 | P a g e
 fraud, unfairness, or misconduct, and the parties involved were on equal footing (i.e., neither
side had an unfair advantage), then the sale stands. The price alone, even if it seems too low,
cannot be a sufficient reason to set the sale aside.
In this case, the public respondent (the authority that ruled on the auction sales) made a
mistake by declaring the auction sales null and void based solely on the claim that the prices
were too low. The court ruled that this decision was made with grave abuse of discretion—
meaning the public respondent exceeded its authority or made an error in judgment—
because there was no clear evidence showing the prices were unfairly low or that the auction
process was improper in any other way.
However, the court did not simply uphold the validity of the auction sales. The sales were
still deemed null and void due to a legal issue with the property involved. It turns out that
the properties in question had been mortgaged to the Development Bank of the Philippines
(DBP) before the auction took place. Mortgages are legal agreements where a borrower
pledges property as security for a loan. In this case, the properties were pledged as collateral
for loans from the DBP.
The law that governs this situation is found in Executive Order No. 81 (E.O. 81), which was
passed on December 3, 1986. Section 14 of E.O. 81 states that the properties mortgaged to
DBP are exempt from attachment or execution. This means that even if the properties were
part of a legal judgment (in this case, a judgment for the employees of the petitioner), the
properties mortgaged to DBP could not be seized to satisfy that judgment. Essentially, these
properties were protected from being sold in the auction.
The court also cited a letter from Jose C. Sison, an official of the Asset Privatization Trust
(APT), which certified that all assets of the petitioner, Batong Buhay Gold Mines, Inc.
(BBGMI), had been transferred to the APT under Proclamation No. 50 issued by President
Corazon Aquino. This proclamation exempted the assets, including the mortgaged
properties, from being subject to execution sales or any court processes.
Thus, the auction sales were invalid not only because of the low prices but also because the
properties involved were protected by law from such sales due to their mortgaged status
with DBP. According to Rule 39 of the Revised Rules of Court, properties that are specially
exempted by law (like these mortgaged properties) cannot be seized or sold to satisfy a
judgment.
In conclusion, while the auction sales were improperly declared null and void based on the
inadequacy of the price, the true reason for their invalidity was the mortgage exemption that
protected the properties from being sold to satisfy the judgment. This exemption under E.O.
81 and Proclamation No. 50 legally shielded the properties from execution.

The private respondents argue that, even if the properties were mortgaged to the
Development Bank of the Philippines (DBP), which is now under the Asset Privatization Trust
(APT), Article 110 of the Labor Code, as amended by RA 6715, should still apply. According
to them, this article gives priority to the money claims of workers, meaning that workers’
wages and monetary claims take precedence over the petitioner’s debts, including the
mortgage. However, this argument is flawed.
The Supreme Court in the case of DBP vs. NLRC clarified that Article 110 of the Labor Code,
which gives workers a preferential claim on their wages, applies only in the context of
bankruptcy or liquidation proceedings of the employer's business. In other words, the
preferential rights of workers are only relevant when the employer is going through a formal
process of winding up its affairs, such as bankruptcy or liquidation. Moreover, the Court

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 emphasized that this provision does not invalidate the preferential lien of mortgagees (like
DBP), which is a priority claim on the property in accordance with the New Civil Code. The
New Civil Code provides a specific order of priority for different types of debts, and the
mortgage claim remains one of the preferred credits, meaning it takes precedence over other
types of debts, including those related to workers’ wages, in certain cases.
Next, the case deals with the second Order issued on December 14, 1988, which declared
the auction sale of October 29, 1987 conducted by Special Sheriff John Ramos as valid. The
public respondent (Undersecretary Dionisio dela Serna) ruled that the intervenors (MFT
Corporation and Salter Holdings Pty., Ltd.) acquired legal title to the properties they bought
at the auction. This was based on the argument that, since these parties bought the
properties from the highest bidder, Fidel Bermudez, who acquired the properties at the
auction, they should be considered the rightful owners.
However, the court disagreed with this ruling. It held that when it comes to personal
property, the principle "title cannot rise higher than its source" applies. This means that a
person who does not have valid ownership of something cannot pass on a better title than
what they themselves hold. Since Fidel Bermudez was the highest bidder in a void auction
sale, meaning the auction was legally invalid (because the properties were exempt from
being auctioned due to the mortgage), Bermudez could not transfer a valid title to MFT
Corporation and Salter Holdings Pty., Ltd.. In other words, since Bermudez never owned the
property legally (due to the auction's invalidity), he could not convey ownership to anyone
else, including the buyers who purchased the properties from him.
Thus, the public respondent's decision to declare the auction sale as valid and to uphold the
title of the buyers was an error. It was ruled that the Order issued on December 14, 1988
was made with grave abuse of discretion because it lacked jurisdiction and misapplied the
law.
In conclusion, the Supreme Court granted the petition, meaning it set aside the December
14, 1988 Order that validated the auction sale. At the same time, the September 16, 1988
Order, which upheld the Regional Director’s jurisdiction over the labor standards case, was
affirmed. This means that the regional labor authority’s jurisdiction remained intact and the
auction sale was invalid.
There was no pronouncement as to costs, meaning no party was ordered to pay for the legal
expenses incurred during the case.

MANGGAGAWA SA KOMUNIKASYON NG PILIPINAS, PETITIONER, VS. PLDT, INC.,

RESPONDENT.
G.R. No. 244752
PLDT, INC., PETITIONER, VS. HON. SECRETARY OF LABOR AND EMPLOYMENT SILVESTRE H.
BELLO III; AND MANGGAGAWA SA KOMUNIKASYON NG PILIPINAS, RESPONDENT.
G.R. No. 245294
SILVESTRE H. BELLO III, IN HIS CAPACITY AS THE SECRETARY OF THE DEPARTMENT OF
LABOR AND EMPLOYMENT, PETITIONER, VS. PLDT, INC., RESPONDENT.

Parties Involved:
• Petitioners: Manggagawa sa Komunikasyon ng Pilipinas (MKP), PLDT, Inc. (PLDT), and
Silvestre Bello III (then Secretary of the Department of Labor and Employment)
• Respondent: Court of Appeals (CA)

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 The case involves PLDT, a telecommunications company, and MKP, which represents the
rank-and-file employees of PLDT. The dispute arose during negotiations between PLDT and
MKP for their collective bargaining agreement. To resolve the issue, they requested the
intervention of the Department of Labor and Employment (DOLE). As part of the resolution
process, a Special Assessment and Visit of Establishment (SAVE) was conducted at PLDT to
assess the company’s compliance with labor laws and regulations, especially regarding its
contractors and subcontractors.
The DOLE issued Administrative Order No. 648 (AO 648), which created an assessment team
to evaluate PLDT's compliance with labor regulations, including its contractors’ adherence to
Department Order No. 18-A, Series of 2011. This order specifically addresses rules related to
training, hiring practices, working arrangements, and compliance with labor standards and
occupational health and safety laws. The DOLE Assessment Team visited PLDT and
interviewed 1,104 employees and contracted workers, along with 37 contractors'
representatives, to gather information about PLDT’s contracting practices.
The DOLE Assessment Team found that PLDT and its contractors were involved in labor-only
contracting. This means that the contractors were not truly independent entities but were
essentially acting as intermediaries for PLDT, with PLDT controlling the work conditions,
which is not compliant with labor laws. In particular, several key factors indicated that PLDT
was exercising control over workers who were supposed to be employed by contractors.
These factors include:
1. Control over hiring: PLDT informed contractors of the types of workers it needed, set
hiring criteria, and even conducted the initial evaluation of job applicants before
referring them to contractors for the final hiring process.
2. Control over work schedules and leave benefits: PLDT set the work schedules for
contractor employees, required approval for overtime, and decided on leave
benefits. The company also reviewed the workers’ reports and work performance on
a weekly basis.
3. Supervision of contractors’ employees: PLDT managers or supervisors addressed
problems faced by workers, and even though the contractors assigned
representatives to manage employees, these representatives lacked decision-making
authority and merely communicated issues to PLDT for resolution.
4. Similar work tasks: Some contractors’ employees were performing the same tasks as
PLDT employees, further indicating the lack of distinction between them.
5. Authority over employment status: PLDT had the power to recommend the
replacement or termination of contractors’ workers, showing that it had significant
control over their employment.
Additionally, DOLE found that 47 of PLDT’s contractors were violating labor laws related to
basic workers' rights, including overtime pay, holiday pay, maternity and paternity leave, and
13th-month pay. Furthermore, 19 contractors were found to have made unauthorized
deductions for items like uniforms, safety shoes, and work tools.
Based on these findings, the DOLE Assessment Team recommended that PLDT should
regularize (convert into permanent employees) those contractual workers whose jobs were
directly related to PLDT’s core business. This would mean offering them permanent
employment status, which would provide them with better job security and benefits under
labor laws. The report also recommended that PLDT and its contractors be held solidarily

47 | P a g e
 liable for paying the unpaid wages and benefits owed to these workers, as PLDT was
considered responsible for the violations due to its control over the contractors’ practices.

On January 6, 2017, PLDT, through its legal representative, filed a document called a
Manifestation and Motion in response to the findings of the DOLE Assessment Team. In this
filing, PLDT objected to the conclusion that it had engaged the services of labor-only
contractors—a practice where contractors merely supply workers to perform tasks without
having substantial capital, control, or independence, effectively making the workers under
the hiring company’s direct control.
PLDT argued that any alleged violation of DOLE Department Order No. 18-A (DO 18-A) could
be properly explained through relevant documents. PLDT believed that a more formal and
structured process—referred to as an adversarial proceeding—would be more appropriate
to evaluate the claims. An adversarial proceeding is a legal process where opposing parties
present their evidence and arguments before a neutral decision-maker, such as the National
Labor Relations Commission (NLRC). In particular, PLDT suggested that cases involving the
regularization of workers (where employees demand permanent employment status based
on the nature of their work) should be filed by the workers themselves in the NLRC, instead
of being decided based solely on anecdotal evidence collected during the assessment.
Anecdotal evidence refers to information based on personal accounts or observations rather
than verifiable data or documents.
In addition to this legal filing, several events followed in January 2017:
1. Mandatory Conferences:
o The DOLE Assessment Team held mandatory conferences on January 6, 10,
and 17, 2017.
o Contractors associated with PLDT were summoned to attend these
conferences. During these meetings, each contractor received a Notice of
Results, which detailed the alleged violations of labor laws specific to their
operations.
o The contractors were instructed to provide evidence or documentation
proving their compliance with labor standards. Labor standards include
requirements such as proper wages, benefits, and working conditions
mandated by law.
o In response, the contractors submitted proof of payment, documentation,
and affidavits (sworn written statements) in an attempt to dispute the DOLE’s
findings and to demonstrate that they were not engaging in labor-only
contracting.
2. DOLE Secretary’s Announcement:
o On April 19, 2017, Secretary Silvestre Bello III, head of the Department of
Labor and Employment, announced during a press briefing that he planned
to issue an order requiring the regularization of 10,000 workers employed
under contracting and subcontracting arrangements within PLDT’s
operations. These workers were determined to be performing jobs that are
directly related to PLDT’s business, meaning they should have been treated
as regular employees under the law.
This announcement by Secretary Bello underscored the seriousness of the DOLE’s findings
and its stance against illegal labor practices, particularly those that exploit contractual
workers who are entitled to regular employment due to the nature of their jobs.

48 | P a g e
 On July 3, 2017, the Regional Director of the Department of Labor and Employment - National
Capital Region (DOLE-NCR) issued an official Order in response to the issues raised by PLDT
concerning the regularization of its workers and the labor-only contracting practice.
In this Order, the Regional Director ruled on a few important points:
1. Regularization and Jurisdiction of DOLE:
o PLDT had requested that the issue of regularization (making certain workers
permanent employees) be referred to the National Labor Relations
Commission (NLRC) for resolution. However, the Regional Director disagreed.
He explained that violations related to labor-only contracting (where
contractors do not provide workers with substantial work autonomy or
resources, essentially functioning as middlemen) fall under the scope of the
DOLE’s visitorial and enforcement powers.
o Visitorial powers refer to the authority of the DOLE to inspect workplaces and
ensure compliance with labor laws.
o Labor-only contracting is a practice where the contractor is merely a labor
supplier, and the workers should be considered directly employed by the
company benefiting from their work. The Regional Director affirmed that the
DOLE has the legal right to examine whether labor-only contracting is taking
place and to enforce regularization in such cases. Thus, PLDT’s request to have
the issue handled by the NLRC was rejected because it is within DOLE’s
jurisdiction to handle labor-only contracting issues.
2. Failure to Refute the Findings:
o The Regional Director also concluded that PLDT had failed to present enough
evidence to counter the findings of the Labor Law Compliance Officers
(LLCOs). The LLCOs had investigated PLDT's practices and concluded that
several of PLDT’s contractors were engaged in labor-only contracting. Despite
having been given an opportunity to provide evidence to dispute these
findings, PLDT was unable to successfully refute them.
o As a result, the Regional Director officially declared certain contractors as
being involved in labor-only contracting. This meant that the workers
employed through these contractors were entitled to be regularized, or
formally made permanent employees of PLDT.
3. Liability for Unpaid Monetary Benefits:
o The Regional Director found that both PLDT and its contractors were solidarily
liable for the payment of unpaid monetary benefits to the workers of the
contractors. Solidarily liable means that PLDT and the contractors are both
responsible for the full amount owed, and the workers can seek payment
from either party. The unpaid benefits amounted to PHP 78,699,983.71.
o This amount likely covered various worker entitlements that were not paid,
such as overtime pay, holiday pay, service incentive leave, and other monetary
benefits under labor laws.
4. Cessation of Labor-Only Contracting:
o The Regional Director ordered that the contractors involved in labor-only
contracting stop engaging in such activities. This means that these contractors
could no longer supply workers to PLDT or any other company under the
terms of labor-only contracting.

49 | P a g e
 o Additionally, the licenses of the contractors that were registered under DO
18-A (which is a department order that regulates contracting practices) were
revoked. This is a severe penalty that essentially prevents these contractors
from continuing their operations.
5. Regularization of Workers:
o The Regional Director also mandated that PLDT regularize the workers of the
contractors that were found to be involved in labor-only contracting. These
workers should now be placed directly on PLDT’s payroll and should receive
the benefits and protections of regular employees.
After the July 3, 2017 order was issued, PLDT filed a Memorandum of Appeal on July 14,
2017, challenging the decision of the Regional Director. They disagreed with the findings and
the orders issued, seeking to overturn or modify the order.
On July 12, 2017, the Regional Director issued a Supplemental Order, which included a
detailed list of the workers who were now considered regular employees of PLDT. This action
was taken to officially identify those workers affected by the ruling.
In response, on August 3, 2017, MKP (the union representing PLDT's workers) filed an
Opposition to PLDT’s appeal. MKP argued that the Regional Director’s findings were correct
and should be upheld.
Later, on September 28, 2017, MKP filed a Supplement to Opposition to Appeal, where it
included affidavits from workers who had been interviewed during the earlier SAVE
proceedings. These affidavits supported the Regional Director’s conclusion that PLDT and its
contractors were engaging in labor-only contracting. Affidavits are written statements that
are sworn to be true by the person making the statement, and they can serve as important
evidence in legal matters.

The ruling issued by Secretary Bello on January 10, 2018, addressed the appeal made by
PLDT and its contractors regarding a decision on labor-related matters.
To provide some context, labor-only contracting refers to a situation where a contractor hires
workers for an employer, but the contractor doesn't provide real services of its own, instead
simply acting as a middleman to provide workers to the employer. This practice is illegal
under labor laws because it essentially means that the workers are, in reality, directly
employed by the company they are working for, even though they are technically contracted
by an external agency.
In this case, Sec. Bello rejected PLDT’s appeal, meaning he upheld the decision made by the
Regional Director that PLDT was indeed involved in labor-only contracting. The Regional
Director had concluded that PLDT exercised enough control over the contractors' workers,
which is a key factor in determining whether labor-only contracting exists. The evidence
backing this decision included workers' affidavits (statements sworn to be true under oath),
SAVE notes (likely referring to some form of documentation related to compliance with labor
standards), and interviews with the contractors’ officers and supervisors.
PLDT's documents, including notarized statements (officially witnessed statements) from the
contractors' officers and service agreements (formal contracts between PLDT and the
contractors), were not convincing enough for Sec. Bello. He considered these documents
self-serving, meaning they appeared to be created for the benefit of PLDT’s defense, rather
than as genuine proof to dispute the earlier findings.
Sec. Bello's resolution outlined several key actions:

50 | P a g e
 1. Regularization of Workers: He ordered that 7,416 workers, initially employed through
contractors that were found to be engaging in labor-only contracting, be recognized
as regular employees of PLDT. This means these workers, from the start of their
employment, should be treated as direct employees of PLDT, included in the
company’s payroll, and granted all the benefits and rights regular employees are
entitled to.
2. Cancellation of Contractor Registration: The contractors who were found to be
engaging in labor-only contracting had their DO 18-A registration canceled. DO 18-A
refers to a Department Order that outlines the rules and regulations governing
legitimate contracting and subcontracting arrangements. The cancellation means
these contractors would no longer be allowed to operate under that status.
3. Payment of Unpaid Benefits: PLDT and the contractors were ordered to jointly pay
the workers a significant amount—PHP 66,348,369.68—in unpaid monetary
benefits. This likely refers to benefits such as overtime pay, holiday pay, or other forms
of compensation that the workers were entitled to but had not received.
4. Legitimate Contractors: Some contractors were able to prove they were operating
within the legal guidelines of DO 18-A. These contractors were recognized as
legitimate, meaning their operations were not in violation of labor laws.
5. Reduction of Liability for Some Contractors: Contractors who could show evidence
that they had already paid their workers, either fully or partially, had their financial
liability reduced or eliminated. This was an incentive for compliance, showing that
contractors who took steps to remedy the situation were given some leniency.
Later, on April 24, 2018, Sec. Bello issued a second ruling after reviewing motions for
reconsideration from PLDT and one of the contractors (MKP). In this ruling, Sec. Bello
reduced PLDT’s and the contractors’ monetary liability further, to PHP 51,801,729.80.
Additionally, the number of workers who were regularized was reduced to 7,344.
PLDT, dissatisfied with Sec. Bello’s decisions, filed a Petition for Certiorari before the Court of
Appeals (CA). A Petition for Certiorari is a legal request asking a higher court to review the
decision of a lower court or official. In this case, PLDT sought to have the ruling reviewed
because they believed there was an error in the application of the law or the facts.

On July 31, 2018, the Court of Appeals (CA) issued a ruling that modified the resolutions of
Secretary Silvestre Bello III of the Department of Labor and Employment (DOLE). The decision
involved the Philippine Long Distance Telephone Company (PLDT) and its labor practices,
particularly related to regularization and labor contracting. In the first part of the ruling, the
Court affirmed the previous resolutions dated January 10, 2018, and April 24, 2018, which
ordered PLDT to regularize individuals performing essential tasks like the installation, repair,
and maintenance of communication lines. However, the Court remanded the matter back to
the Regional Director of DOLE's National Capital Region for further investigation and factual
determination regarding the regularization of these workers. In the second part, the Court
set aside portions of the resolutions that declared certain jobs as part of labor-only
contracting. This decision specifically affected various services such as janitorial, IT support,
sales, and other professional services. The Court ruled that the previous declaration of labor-
only contracting was incorrect for these job functions. As a result, the Court enjoined the
enforcement of certain orders and restrained the implementation of compliance orders
related to these services. Finally, the Court remanded the case for a proper review of the
monetary award for labor standards violations committed by PLDT, ensuring further

51 | P a g e
 appropriate actions would be taken in line with the Court's findings. The decision was
concluded with the "SO ORDERED" declaration, marking the official conclusion of this part of
the case.

In this decision, the Court of Appeals (CA) upheld the jurisdiction of the Regional Director
and Secretary Silvestre Bello III of the Department of Labor and Employment (DOLE) to
determine whether an employer-employee relationship exists. The Court stated that this
determination is a condition sine qua non (a necessary condition) for the exercise of their
visitorial and enforcement powers. The CA agreed with Sec. Bello’s ruling to stop PLDT from
contracting out services that are considered necessary and desirable to the company's
normal business operations. As a result, workers deployed by contractors performing
installation, repair, and maintenance of PLDT's lines were ruled to be regular employees of
PLDT. However, the CA reversed Sec. Bello’s decision regarding the regularization of certain
other groups of workers. These included workers involved in janitorial services, medical
services, professional services, IT services, and sales on a commission basis.
The CA explained that regular employment depends on whether the worker's duties are
essential to the employer’s core business. If a worker performs tasks that are integral to the
business, they are considered regular employees. The CA also clarified that workers in certain
roles, regardless of how long they have worked, cannot be regular employees unless they
meet specific criteria under the Labor Code, such as being casual employees who have
worked for at least one year or project employees who are rehired for successive projects.
These specific workers, however, were employed by independent contractors and are
therefore subject to different rules under the Labor Code and its regulations, like DO 01-2017
and DO 174-2017, which govern certain contracted services.
The CA also acknowledged that the regularization of the workers performing installation,
repair, and maintenance services for PLDT might raise issues, such as salary and benefit
payments beyond the allowed period or double compensation. The Court ordered these
issues to be properly investigated by the Regional Director since it could not determine these
factual matters within the scope of the certiorari (appeal) process.
Moreover, the CA found that Sec. Bello’s resolutions were tainted by grave abuse of
discretion. It criticized the Regional Director's findings, which relied on limited interviews
that lacked solid evidence to support the existence of an employer-employee relationship.
The CA pointed out that the conclusions were based on anecdotal evidence, which was too
general and inconclusive to meet the substantial evidence standard required by law. The CA
also noted that Sec. Bello seemed biased toward the contractors' workers, citing his public
comments and incorrect interpretation of PLDT’s control over the means and methods of
achieving results. Finally, the CA ruled that the monetary award ordered by Sec. Bello was
arbitrary, as it was based on an overly simplified computation method. Therefore, the CA
remanded the case to the Regional Director for a proper determination of the appropriate
monetary award and further proceedings.

The petitioners filed their petitions for review on certiorari before the Supreme Court,
aggrieved by various aspects of the Court of Appeals (CA) decision. MKP argues that the CA
failed to consider the totality of the circumstances in each contractor's agreement with PLDT,
instead categorizing them too broadly as either labor-only or legitimate contracting based
solely on the services being contracted out. MKP contends that the CA unjustly disregarded
the factual findings made by the Regional Director and Secretary Bello, which were

52 | P a g e
 supported by substantial evidence. MKP insists that the CA should have examined whether
Sec. Bello had made a jurisdictional error in his findings. MKP further claims that the CA
wrongly held that workers performing tasks not directly related to PLDT’s core business, like
janitors and security guards, cannot be regularized. It argues that prior case law shows
contractors providing such workers can still be found to be engaged in labor-only contracting,
and there’s no legal basis stating that such workers cannot be treated as regular employees
of the principal. MKP asserts that the CA’s ruling introduces a flawed indicator for labor-only
contracting, which is inconsistent with the Labor Code and relevant regulations, thus
amounting to a grave abuse of discretion.
Additionally, MKP agrees with the CA’s decision to regularize workers involved in the
installation, repair, and maintenance of PLDT's lines but insists that the issue lies in the
contracting arrangements. MKP explains that these contractors had no valid service
contracts with PLDT, lacked DOLE contractor licenses, and hired workers on terms shorter
than those stipulated in their contracts. MKP also criticizes the CA for declaring medical,
dental, engineering, and other professional services workers as independent contractors,
arguing that their relationship with PLDT and the contractors is trilateral and governed by
Article 106 of the Labor Code, which addresses the relationship between the principal, the
contractor, and the workers.
Moreover, MKP objects to the CA’s ruling that sales workers from PLDT’s contractors are
outside the coverage of DO 18-A. MKP argues that these workers, despite being paid on a
commission basis, should still be considered regular employees under a trilateral
relationship, as they were supplied by contractors engaged in labor-only contracting. MKP
also asserts that the CA’s exclusion of information technology-enabled services contractors
and sales agents from the coverage of DO 18-A is wrong, claiming that while business process
outsourcing is exempt, the contractors providing such services should not be automatically
exempt from the Labor Code provisions.
MKP further challenges the CA’s ruling that Sec. Bello's decision was tainted by grave abuse
of discretion, arguing that PLDT had administrative due process throughout the process. MKP
asserts that PLDT had the chance to present evidence during inspections and mandatory
conferences but chose not to participate. MKP also defends the substantiality of the evidence
in Sec. Bello's ruling, pointing out that interviews and sworn testimonies from workers were
supported by documentary evidence, such as the "Technical Protocols" that indicated PLDT’s
control over contractors’ workers, contrary to the CA’s findings. According to MKP, these
protocols were more than just guidelines; they represented explicit control over the methods
and means of carrying out the work.

In G.R. No. 244752, PLDT argues that the Court of Appeals (CA) made an error by upholding
the regularization of workers performing installation, repair, and maintenance services
provided by contractors. PLDT asserts that the CA overlooked the possibility that these
workers could be project employees or seasonal employees, both of which are valid
employment arrangements. These types of employment are used for specific services, and
workers in such arrangements are not automatically entitled to regular employment status,
even if their tasks are generally necessary or desirable for the business. PLDT emphasizes the
importance of distinguishing between fixed-term employment and regular employment,
arguing that just because a job is typically necessary or desirable for the business, it does not
automatically make the workers regular employees. Additionally, PLDT highlights that the
work performed by these contractors' workers, specifically in construction, is distinct from

53 | P a g e
 the core business of telecommunications and is excluded from the coverage of DO 174-2017,
which regulates legitimate contracting. PLDT also challenges the CA’s statement that
Secretary Bello can determine the existence of an employer-employee relationship in the
exercise of his visitorial and enforcement powers. PLDT claims that this conclusion is
unsupported by facts or law because the SAVE (Special Assessment or Visit of the
Establishment) program is intended to assess compliance with labor laws, not to make legal
determinations about employment relationships, which require a more formal, adversarial
process. According to PLDT, the determination of regularization and the employer-employee
relationship should be handled in proceedings before Labor Arbiters, where the evidence
can be properly examined and contested.

In G.R. No. 245294, Sec. Bello argues that the Court of Appeals (CA) should have limited its
review to determining whether he had committed grave abuse of discretion in his decision.
He explains that writ of certiorari, a legal remedy used to challenge judicial or quasi-judicial
decisions, does not extend to correcting his evaluation of the evidence, since factual findings
made by administrative agencies are generally deemed binding and final if they are
supported by substantial evidence. Substantial evidence means enough relevant information
that a reasonable mind might accept as adequate to support the conclusion. Sec. Bello insists
that he did not arrive at his findings arbitrarily, as he reviewed all the evidence submitted by
PLDT and its contractors, both during the main appeal and their motions for reconsideration.
He also stresses that his findings were backed by various pieces of testimonial (witness
statements) and documentary evidence (written records and documents). Sec. Bello defends
his decision to apply his ruling to 7,344 employees, even though less than 1,000 workers
were directly interviewed, arguing that in cases of labor law violations, any award should
benefit all affected employees. The core of his argument lies in the fact that PLDT was found
to be engaged in labor-only contracting, where workers are treated as employees of the
principal company rather than independent contractors. This determination was based on
PLDT's control over the contractors’ workers, including those performing janitorial,
messenger, clerical, IT-related, sales, and professional services. Sec. Bello asserts that the CA
erred in saying that these services were validly contracted out because the key issue is that
PLDT exercised control over these workers, which is a hallmark of labor-only contracting. He
also points out that both PLDT and the contractors violated Department Order 18-A (DO 18-
A), which governs contracting arrangements, especially by repeatedly hiring workers for
shorter periods to avoid giving them job security, thus violating their right to security of
tenure. Regarding the monetary awards, Sec. Bello argues that the CA wrongly relied on the
South Cotabato Communications Corp. v. Sto. Tomas case, which he believes does not apply
to his situation. He maintains that his award was based on thorough evidence, including
adjustments to the monetary obligations of contractors based on new evidence. Finally, Sec.
Bello defends his decision against accusations that PLDT was denied due process. He asserts
that PLDT was given ample opportunity to present its case and submit evidence during the
preliminary and mandatory conferences, and he made his own independent legal and factual
determinations, which allowed him to make necessary adjustments to the initial findings of
the Regional Director.

In this ruling, the Supreme Court upheld the decision of the Court of Appeals (CA) and
dismissed the consolidated petitions. The Court emphasized that its review in labor cases is
generally limited to questions of law, particularly whether the CA correctly identified any

54 | P a g e
 grave abuse of discretion by the Secretary of Labor or labor tribunals. The Court reiterated
that judicial review of labor cases is restricted to determining if there were jurisdictional
errors or grave abuse of discretion, not to reexamine the factual issues of the case, unless
the findings of the lower tribunals are contradictory or unsupported by substantial evidence.
The Court referenced the case Coca-Cola FEMSA Philippines and explained that judicial
review in labor cases does not involve evaluating the sufficiency of the evidence but is limited
to whether the lower tribunal or labor officer acted with grave abuse of discretion. Grave
abuse of discretion means that the tribunal acted in a manner that is capricious, whimsical,
or equivalent to lack of jurisdiction. The Court emphasized that substantial evidence, which
refers to the amount of relevant evidence that a reasonable mind could accept, must support
the tribunal's findings.
The Court then reiterated the principle that in labor cases, the scope of the CA's certiorari
review is limited to determining whether there was grave abuse of discretion in the tribunal’s
findings. In Montoya v. Transmed Manila Corp., the Court explained that in a Rule 45 petition
for review, the Supreme Court examines whether the CA correctly determined the presence
of grave abuse of discretion in the tribunal’s ruling. The Supreme Court noted that it does
not reassess the merits of the case itself but focuses on whether the CA properly identified
errors in the lower tribunal's decision-making process.
In this particular case, the Court agreed with the CA's finding that the Secretary of Labor's
resolutions were not supported by substantial evidence and that grave abuse of discretion
was present. This decision confirms the importance of ensuring that tribunal decisions are
based on adequate and sufficient evidence before any actions are taken.

The Secretary of Labor has the authority to determine the existence of an employer-
employee relationship in the exercise of its visitorial and enforcement powers under Article
128 of the Labor Code. This provision grants the Secretary, or authorized representatives, the
right to access an employer's premises and investigate potential violations of labor laws, such
as wage orders, labor standards, and regulations. It also allows them to question employees,
inspect conditions, and issue compliance orders based on their findings. These actions are
crucial for enforcing labor laws and ensuring employers follow legal requirements.
The DOLE's authority to assess whether an employer-employee relationship exists is an
essential part of fulfilling its duty to enforce labor standards. The Secretary of Labor can use
guidelines established by law, which are the same as those used by courts, to determine this
relationship. These guidelines include factors such as the selection and engagement of the
employee, payment of wages, the power of dismissal, and the employer’s control over the
employee’s conduct. The DOLE can apply these criteria during inspections, even before a
formal case is brought before the National Labor Relations Commission (NLRC), making this
determination part of the enforcement process.
In cases where the employer-employee relationship does not exist or has already been
terminated, the Secretary of Labor does not have the jurisdiction to issue compliance orders
for labor violations. However, if such a relationship is found, the Secretary has the power to
mandate compliance with labor standards and impose penalties as needed. This power
ensures that labor laws are upheld and that workers are protected in their employment
relationships.
The case People's Broadcasting Service v. Secretary of the Department of Labor and
Employment further affirmed this position, highlighting that the DOLE's determination of the
employer-employee relationship is not limited by procedural requirements or the need for a

55 | P a g e
 prior ruling from the NLRC. The DOLE holds the primary responsibility for making this
determination and enforcing compliance with labor laws based on its findings.

In the present case, the Secretary of Labor has jurisdiction, and the "exception clause" of
Article 128 of the Labor Code does not apply. PLDT argues that the DOLE lacks jurisdiction
because the evidence used to determine the existence of an employer-employee
relationship is not part of the "normal course" of a labor inspection under Article 128.
Furthermore, PLDT claims that this case involves examining the relationship dynamics
between the principal (PLDT), the contractor, and the contractors' workers, which, according
to PLDT, should remove the DOLE's jurisdiction.
However, the Court disagrees with PLDT's assertion. In the case of Meteoro v. Creative
Creatures, Inc., the Court explained the elements that must be present for the exception
clause to apply: (a) the employer contests the findings of the labor officer, (b) there is a need
to examine evidentiary matters, and (c) such matters cannot be verified in the normal course
of inspection. The key point here is that the DOLE retains jurisdiction unless the evidence
presented cannot be verified through a normal inspection. In Bay Haven, Inc. v. Abuan, the
Court ruled that the DOLE was not divested of jurisdiction because the evidence (like
contracts and payroll records) could be verified through standard inspection processes.
In this case, the DOLE did not lose jurisdiction. The evidence considered by the DOLE, such
as service agreements, employment documents, and inspection of work areas, could be
verified in the normal course of inspection. PLDT’s reliance on Meteoro is misplaced because,
in that case, the issue required an examination of evidence that could not be verified during
an inspection. The question of whether workers are independent contractors or employees
is not, by itself, what removes the DOLE's jurisdiction. The determining factor is whether
resolving such issues requires examining evidence that cannot be verified during an
inspection.
PLDT’s argument about the trilateral relationship between the principal, the contractor, and
the workers does not trigger the exception clause. The dynamics of these relationships can
be determined from contracts and other documents, which are available for inspection in
the workplace. As such, the DOLE remains within its jurisdiction to make a determination
based on the available evidence, and the exception clause does not apply in this case.

In the case at hand, it is crucial to understand that labor contracting is not inherently illegal.
The fact that PLDT outsourced specific jobs or services does not automatically mean that the
employees of the contractors are direct employees of PLDT. The contracting out of services
is a common practice and is generally allowed as part of a company’s business judgment or
management prerogative, meaning it is a decision that the employer is allowed to make
based on their discretion in managing the business. As long as there is no evidence that the
employer acted with bad intent or arbitrarily, the court typically will not intervene. This was
clarified in BPI Employees Union-Dayap City-FUBU v. Bank of the Philippines Islands, where
the Supreme Court emphasized that contracting services is a lawful practice. In another case,
Aliviado v. Procter & Gamble Philippines, Inc., it was further explained that the law allows
companies to contract out work, but it must be done with independent contractors, not
under what is known as labor-only contracting. Labor-only contracting occurs when a
contractor merely acts as a middleman, recruiting workers to perform tasks that are directly
related to the principal employer’s business, without substantial capital or control over the
workers’ performance. This form of contracting is prohibited because it essentially makes the

56 | P a g e
 contractor a mere agent that does not have the substance to be considered a legitimate
employer. In contrast, legitimate labor contracting is allowed when the contractor is
independent, has sufficient capital, and controls the workers' tasks. Article 106 of the Labor
Code allows employers to engage in legitimate labor contracting, as long as they comply with
rules such as DO 18-A and DO 174-2017, which regulate these arrangements. It is important
to distinguish between legitimate labor contracting and labor-only contracting, which is not
permissible. In this case, the Secretary of Labor issued a ruling that PLDT engaged in labor-
only contracting, but for that finding to be upheld, it must be supported by substantial
evidence. If the evidence is insufficient or flawed, as alleged in this case, then the ruling can
be deemed erroneous. The Court of Appeals found that Secretary Bello’s decision was based
on weak evidence, such as anecdotal interviews that were not representative or substantial
enough to prove that an employer-employee relationship existed. The appellate court
argued that these interviews, conducted with fewer than a thousand people and not
including all of the over 7,000 employees, could not form a solid basis for such a
determination. Since the findings were not backed by substantial evidence, it was ruled that
there was grave abuse of discretion in issuing the resolutions. Therefore, the Court of
Appeals' judgment was affirmed.

In legal proceedings, substantial evidence is defined as the amount of relevant evidence that
a reasonable mind might accept as adequate to justify a conclusion. This standard was
elaborated in the case of South Cotabato, where the Court found that the employees’
allegations were not enough to support the ruling of the Secretary of Labor. The Court
pointed out that allegations alone, without additional concrete proof or corroborating
evidence, cannot be considered sufficient. Allegations are often self-serving and can be easily
fabricated, making them unreliable without further substantiation. Therefore, the Court
emphasized that mere allegations, without more, are not equivalent to proof and cannot
constitute the substantial evidence required to support a legal conclusion. This principle was
reinforced in Ang Tibay v. The Court of Industrial Relations, which established essential
requirements for administrative due process, stating that evidence must be substantial—
meaning it should be relevant evidence that a reasonable mind would accept as adequate to
support a conclusion. Additionally, administrative bodies must consider the evidence
presented, and their decisions must be supported by such evidence. This doctrine ensures
that decisions are not made arbitrarily or without sufficient factual basis. The importance of
substantial evidence is crucial, especially in administrative proceedings like those overseen
by the Secretary of Labor. Even though labor cases allow some flexibility in procedural rules,
it does not mean that self-serving statements or bare allegations can be accepted as proof.
Administrative bodies, including the Secretary of Labor, are expected to use authorized
methods to gather relevant and material facts and evidence. Due process requires that
evidence be presented and considered properly, ensuring that decisions are made based on
an accurate understanding of the facts. While the rules for labor cases may be more lenient,
this does not grant officials the ability to disregard necessary proof. The quantum of proof
still needs to be met for a fair and just decision.

The evidence relied upon by Secretary Bello in declaring that PLDT and its contractors were
engaged in labor-only contracting was insufficient to support the allegations. The core of
Secretary Bello's conclusion was the assertion that PLDT was exercising control over the
contractors' employees, along with other alleged violations like the practice of repeatedly

57 | P a g e
 hiring workers on short-duration contracts. However, the evidence used, such as interviews
with workers and service agreements (including "Technical Protocols" in some cases), was
not enough to establish these claims. Interviews, especially when viewed alone, are
considered mere allegations, which lack the probative value (evidentiary weight) needed to
prove the allegations. In the South Cotabato case, the Court made it clear that allegations
without concrete evidence or corroborating proof cannot be treated as substantial evidence.
Allegations, being self-serving, are too easily fabricated to serve as reliable proof. This was
further emphasized in Tongko v. The Manufacturers Life Insurance Co., where the Court
warned against relying on anecdotal evidence—evidence that may be tailored to fit a desired
narrative or conclusion. Moreover, the sampling method used by the DOLE (Department of
Labor and Employment) in basing its conclusions on the statements of less than a thousand
workers for over 7,000 employees is problematic. This approach was speculative and
unreliable, as what applied to some workers might not apply to others. This speculative
method failed to meet the standard of substantial evidence, and the conclusions drawn were
arbitrary, suggesting a grave abuse of discretion. The Court believed that the DOLE should
have conducted a more thorough investigation, using direct inspection of the actual work
being done by contractors' employees, which could have turned the workers' statements into
substantial evidence. Lastly, other alleged violations, such as hiring workers for short periods
or assigning them tasks typically done by regular employees, were based on the same
problematic interviews. Thus, these claims also lacked substantial evidence and could not
sustain the findings.

The Court agrees with the Court of Appeals' (CA) view that Secretary Bello mistakenly
interpreted PLDT's efforts to control the results of work as controlling the means and
methods of how the work was performed. Essentially, the guidelines provided by PLDT, such
as Technical Protocols, the General Scope of Work, product training, and evaluations of
contractors, were not about controlling how the contractors did their work but about
ensuring the desired results were achieved. The Court explains that not every form of control
equates to an employer-employee relationship. In the Orozco v. Court of Appeals case, it was
clarified that the distinction between an employee and an independent contractor depends
on whether the hiring party controls both the result and the means of achieving it. The Court
stressed that guidelines intended to achieve specific results, without controlling how the
work is done, do not make the relationship one of employment. The guidelines PLDT used
were focused on ensuring successful work completion and quality outcomes, but they did
not dictate how the contractors should perform their tasks. For example, the Technical
Protocol might instruct workers to install or troubleshoot, but it left them free to decide the
methods or tools to use in doing so. The Court noted that allowing PLDT to guide the work
in this way is a reasonable practice for ensuring that contractors meet its standards and
achieve its desired results, without overstepping into unlawful control over how the work is
executed. Thus, PLDT's guidelines were results-oriented and did not establish an employer-
employee relationship.

The Court agrees with the Court of Appeals (CA) in rejecting PLDT's claim that workers
engaged in installation, repair, and maintenance services for PLDT lines can be classified as
project or seasonal employees. PLDT argued that these workers should be excluded from
being considered regular employees, but this claim lacks merit because PLDT failed to
provide substantial evidence to prove that the workers were employed for specific, limited

58 | P a g e
 projects or on a seasonal basis. The burden of proof lies with the employer to establish such
claims, and PLDT failed to demonstrate that the workers were hired for specific projects with
defined durations or for seasonal work.
The law on regular employment is clear under Article 295 of the Labor Code. It states that
an employment relationship is considered regular when the employee performs work that is
necessary and desirable to the usual business or trade of the employer, unless the work is
specifically for a determined project or a seasonal job. In this case, the Court agrees with the
CA that the workers were performing tasks that are essential to PLDT’s business—
telecommunications. Without these workers, PLDT could not provide the services it offers to
customers, thus they should be considered regular employees.
The CA also emphasized that the determination of regularization for these workers depends
on factual issues such as the years of service, the period of deployment, salary amounts, and
the payment of benefits. These factual details cannot be properly addressed in this type of
legal proceeding, which is limited to jurisdictional issues. Consequently, the Court agrees that
the case should be remanded to the Regional Director to conduct further proceedings to
investigate these factual matters and determine the consequences of regularizing these
workers. This includes identifying which contractors and workers are involved in the
installation, repair, and maintenance services for PLDT.

The Court concurs with the Court of Appeals (CA)'s observation that the Regional Director
and Sec. Bello improperly used a "straight computation method" in determining the
monetary awards due to the workers of contractors. The straight computation method refers
to calculating amounts such as service incentive leave (SIL) pay, 13th month pay, and
unauthorized deductions in a uniform manner, without taking into account the individual
circumstances or specific evidence of each worker.
In South Cotabato, the Court criticized the use of this method, explaining that it is illogical to
award uniform amounts for benefits like SIL pay and holiday premiums to workers over a
span of years without considering individual rest days, holidays worked, or the amount of
remaining leave credits. Since entitlement to these benefits varies from worker to worker,
using a one-size-fits-all approach is arbitrary and does not accurately reflect the entitlements
of the workers.
The same issue arises in the present case, where the Regional Director awarded identical
amounts for SIL pay, 13th month pay, and refund of unauthorized deductions to workers
from different contractors, as shown in the sample breakdown of awards for workers at AE
Researcher Exponents, Inc., Aremay Enterprises, and Comworks, Inc. The amounts awarded
are largely consistent across all workers, with only a few discrepancies. This uniformity in
awards suggests that the calculations were done without properly considering the individual
entitlements and specific circumstances of each worker, leading to inaccurate and unjust
results.
The Court thus concludes that the method of calculation must be revisited and corrected to
ensure that the workers are awarded the correct amounts based on accurate evidence, such
as actual work performed, benefits due, and individual work conditions.

The Court concurs with the Court of Appeals (CA)'s observation that the Regional Director's
method of awarding monetary benefits to workers was erroneous. The uniformity of the
amounts awarded to workers, despite them being employed by different contractors and
likely engaged in different work, is unrealistic and implausible. The Regional Director did not

59 | P a g e
 provide sufficient explanation or evidence to justify how the amounts were computed,
merely stating that they were "based on the assessment." This lack of transparency and
proper calculation results in arbitrary and inaccurate awards.
Despite this, the Court agrees with the CA's finding that PLDT and the contractors are
solidarily liable for these amounts, as provided under Article 109 of the Labor Code. However,
given the errors in the computation, the case is remanded to the Regional Director for a
proper review and calculation of the monetary awards, taking into account the actual work
performed and benefits due to the workers.
Moreover, the Court modifies the order of Sec. Bello to set aside the regularization of workers
except for those performing installation, repair, and maintenance services for PLDT, who are
to be declared regular employees of PLDT, subject to the terms of the remand.
The case is remanded for the following actions:
1. To review and determine the effects of the regularization of workers performing
installation, repair, and maintenance services.
2. To review and compute the correct monetary awards for labor standards violations.
3. To conduct further proceedings consistent with the Court's ruling.
In conclusion, the Petitions filed by Manggagawa sa Komunikasyon ng Pilipinas, PLDT, and
Sec. Bello are dismissed, and the Decision and Resolution of the CA are affirmed, with
modifications as outlined above.
Labor Relations Labor Relations Right to Self-Organization
Philippines refers to • Employees have the right to form,
the system of join, or assist labor unions or workers'
interactions and organizations to protect their
processes between interests.
workers (employees), • Labor unions enable workers to:
employers, and the o Engage in collective bargaining
government to for better wages, benefits, and
promote harmonious, working conditions.
productive, and fair o Represent workers in disputes
working with management.
environments. It • This right applies to both private and
focuses on the rights, public sector employees, although
responsibilities, and there are specific rules for each.
mechanisms for • Collective Bargaining
resolving conflicts and o What is Collective Bargaining?
maintaining balance in ▪ It is a process where
the workplace. workers, through their
Labor Relations is union, negotiate with
governed by the Labor employers to reach
Code of the agreements on wages,
Philippines working conditions,
(Presidential Decree benefits, and other
No. 442), particularly employment terms.
in Book V (Labor o Collective Bargaining
Relations), which Agreement (CBA):
provides the legal ▪ The resulting
framework for agreement from these

60 | P a g e
 managing employer- negotiations, which
employee binds both parties to
relationships, its terms for a
collective bargaining, specified period
unionism, dispute (typically 5 years, with
resolution, and economic provisions
workers’ rights. renegotiable every 3
years).
o The process is designed to
equalize the power dynamic
between workers and
employers.
• Peaceful Concerted Activities
o Workers have the right to
participate in activities like
strikes, pickets, or protests to
express grievances or
demands, provided they
comply with legal procedures.
o Strikes:
▪ A legitimate strike is a
temporary work
stoppage due to
unresolved labor
disputes (e.g., unfair
labor practices or
deadlock in CBA
negotiations).
o Lockouts:
▪ Employers may also
temporarily suspend
operations in
response to disputes,
but they must comply
with legal rules.
o These activities aim to
pressure the opposing party
to negotiate and address
grievances.

Labor Dispute Resolution

• Labor relations include mechanisms
for resolving disputes between
workers and employers. These
disputes may involve:
o Unfair Labor Practices (ULPs):
Violations of workers’ or

61 | P a g e
 employers’ rights under the
law (e.g., union busting,
discrimination, or interference
in union activities).
o CBA Deadlocks:
Disagreements during
collective bargaining.
• Dispute resolution methods include:
o Voluntary Conciliation and
Mediation: Encouraging
parties to resolve issues
amicably with the assistance
of mediators.
o Arbitration: When disputes
are submitted to a third party
(arbitrator) whose decision is
binding.
o National Labor Relations
Commission (NLRC): An
agency that adjudicates labor
disputes, such as illegal
termination or ULPs.
• Tripartism
o The concept of tripartism
refers to the collaboration
between three key
stakeholders:
▪ Workers
▪ Employers
▪ Government
o The government acts as a
mediator and policymaker to
ensure that both labor and
management work together
peacefully while achieving
economic goals.

Grievance Machinery
• Companies are required to establish
grievance machinery as part of their
CBA to address workplace complaints
at the company level.
• This mechanism ensures that disputes
are resolved internally and fairly
before escalating to formal legal
processes.
• Unfair Labor Practices (ULPs)

62 | P a g e
 o ULPs are actions by
employers or labor unions
that violate the rights of
workers or employers as
defined by the Labor Code.
Examples include:
▪ For Employers:
▪ Union busting
(e.g., firing
employees for
unionizing).
▪ Interfering in
union elections
or activities.
▪ For Labor Unions:
▪ Coercing
employees to
join a union.
▪ Refusing to
bargain in
good faith.

REPUBLIC OF THE PHILIPPINES REPRESENTED BY PRIVATIZATION AND MANAGEMENT

OFFICE, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION)
AND NACUSIP/BISUDECO CHAPTER/GEORGE EMATA, DOMINGO REBANCOS, NELSON
BERINA, ROBERTO TIRAO, AMADO VILLOTE, AND BIENVENIDO FELINA, RESPONDENTS.

The case discusses the legal responsibilities of the Asset Privatization Trust (APT), now the
Privatization and Management Office (PMO), in connection with the privatization of
government assets. Created under Proclamation No. 50, Series of 1986, the APT was tasked
with managing and disposing of assets identified for privatization. Under this law, it was
explicitly stated that no employer-employee relationship arises when APT acquires assets of
a government entity for privatization. This means APT is generally not liable for labor-related
claims, such as unpaid wages or benefits, unless it voluntarily assumes responsibility. Even
then, these claims must be filed within three years from when they arise, as provided in
Article 291 of the Labor Code. Once liability is established, the claimant must also file a
separate claim before the Commission on Audit (COA) to access government funds, unless
those funds have already been allocated.
The issue stems from the operations of Bicolandia Sugar Development Corporation
(BISUDECO), a sugar milling company that incurred significant financial losses and failed to
repay loans from government institutions like the Philippine Sugar Corporation and
Philippine National Bank (PNB). These loans were transferred to the government through the
APT, which eventually foreclosed on BISUDECO’s properties and took ownership. Despite
BISUDECO entering a Collective Bargaining Agreement (CBA) with its employees, financial
struggles led to the termination of employees in 1992 when the APT decided to privatize
BISUDECO’s assets. The properties were later sold to a private entity, resulting in the dismissal

63 | P a g e
 of employees. The employees, represented by their union, filed complaints for unfair labor
practices, union busting, and unpaid benefits against APT and other involved entities.
The key legal principles in the case include the distinction between APT’s role as an asset
manager and its limited obligations as an employer. Additionally, the case emphasizes
procedural rules, such as filing appeals within the reglementary period (the set deadline for
filing), as failure to comply can result in dismissal, as happened in this case when the
petitioners’ appeal was filed late. The Court of Appeals upheld these rules and dismissed the
employees' claims, reiterating the limitations of APT’s liabilities under the law.

In this case, the Labor Arbiter dismissed the Complaint filed by employees of Bicolandia Sugar
Development Corporation (BISUDECO) for lack of merit. The Complaint alleged union busting
and violations of their Collective Bargaining Agreement (CBA) when the Asset Privatization
Trust (APT), under its mandate in Proclamation No. 50, disposed of BISUDECO's assets. The
Arbiter ruled that there was no union busting because the APT was simply performing its
duty to manage and privatize non-performing government assets. However, it was found that
some employees—George Emata, Bienvenido Felina, Domingo Rebancos, Jr., Nelson Berina,
Armando Villote, and Roberto Tirao—had refused to accept their checks for separation pay,
13th-month pay, and other benefits, citing their opposition to their dismissal and the sale of
BISUDECO's assets.
Despite their refusal and the fact that their claims had already prescribed (expired due to the
lapse of the three-year period under Article 291 of the Labor Code), the Arbiter ordered APT
to pay these employees, as their co-workers had already received their benefits. The APT
complied by depositing the monetary award of P116,182.20 with the National Labor
Relations Commission (NLRC) but filed a Partial Appeal, arguing against the order. However,
the NLRC dismissed the appeal for failure to perfect the appeal—meaning the APT did not
meet procedural requirements, such as filing within the specified period. APT's successor,
the Privatization and Management Office (PMO), sought reconsideration, but this was denied
in a subsequent NLRC resolution.
PMO then filed a Petition for Certiorari before the Court of Appeals, arguing that the NLRC
should have decided the appeal based on the merits of the case to uphold substantial justice,
rather than dismissing it on procedural grounds. This reflects the ongoing tension between
adhering to strict legal procedures and ensuring equitable outcomes in labor disputes.

On February 27, 2004, the Court of Appeals issued a Decision denying the Privatization and
Management Office’s (PMO) Petition. The court held that the PMO failed to justify why it
should be exempted from strict compliance with procedural rules, particularly the timely
filing of an appeal. The grant of separation pay to employees—Emata, et al.—was based on
the finding that PMO had already given the same benefits to other complainants in the labor
case. The PMO's Motion for Reconsideration was later denied in a Resolution dated
September 19, 2006, prompting the PMO to file this present Petition before a higher court.
In its arguments, the PMO claimed that procedural rules should have been liberally applied
because the dismissal of its appeal would cause grave and irreparable damage to the
government. It argued that the employees' money claims had already prescribed (expired)
since the Complaint for illegal dismissal was filed beyond the three-year period under Article
291 of the Labor Code. Even if the claims had not prescribed, the PMO maintained that it
should not be held liable for separation pay and other benefits because the business closure
was due to serious financial losses. Furthermore, the PMO emphasized that the transfer of

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 Bicolandia Sugar Development Corporation's (BISUDECO) assets to it, through a foreclosure
sale, did not create an employer-employee relationship with BISUDECO’s workers. It also
contended that as a government instrumentality, any money claims against it should first be
filed with the Commission on Audit (COA), in accordance with Commonwealth Act No. 327,
as amended by Presidential Decree No. 1445.
In response, Emata, et al. countered that the PMO’s Petition raised no new issues that had
not already been resolved by the Labor Arbiter, the National Labor Relations Commission
(NLRC), and the Court of Appeals. They argued that the issues involved the exercise of
discretion by the courts and administrative agencies, and the PMO’s Petition failed to cite
any specific legal basis to support its claims.
This case highlights the importance of complying with procedural rules, the prescriptive
periods for filing legal claims, and the limitations of government liability in labor disputes
involving privatized assets. It also underscores the distinction between substantive justice
(deciding based on fairness) and procedural technicalities, with courts generally prioritizing
strict adherence to the rules unless exceptional circumstances exist.

The Privatization and Management Office (PMO) argues that its appeal, despite being
dismissed on technical grounds by the National Labor Relations Commission (NLRC) and the
Court of Appeals, should have been resolved based on the merits, as it pointed out laws and
judicial precedents that were allegedly overlooked. However, the Supreme Court emphasizes
that an appeal is not an inherent right but a statutory privilege that must be exercised within
the specific procedural rules set by law. In labor cases, Article 223 of the Labor Code
mandates that an appeal of a Labor Arbiter’s decision must be filed within 10 calendar days
from receipt of the decision. The PMO received the decision on January 26, 2000, but filed
its Memorandum of Appeal a day late on February 8, 2000, without providing any
explanation for the delay. This procedural lapse resulted in the dismissal of its appeal by the
NLRC and subsequently by the Court of Appeals.
The Court acknowledges that procedural rules in labor cases are generally applied with
liberality to ensure the promotion of substantial justice, especially when the rights of workers
are at stake. However, when a case involves a government entity like the PMO, the
dispensation of public funds is involved, requiring strict adherence to procedural and
substantive standards to ensure accountability. In this case, even if the Court were to grant
liberality and review the appeal on the merits, the PMO’s arguments would still fail.
The issues for resolution include: whether there was an employer-employee relationship
between PMO (formerly Asset Privatization Trust) and the employees of Bicolandia Sugar
Development Corporation (BISUDECO); whether the closure of BISUDECO due to alleged
serious business losses exempted the PMO from paying separation benefits; and whether
the employees’ claims had already prescribed under Article 291 of the Labor Code, which
imposes a three-year limitation on filing labor claims. These issues are subject to strict
scrutiny, especially since any finding of liability against the PMO would involve public funds.
The Court stresses that procedural rules are fundamental to the orderly administration of
justice. While exceptions may be made to prioritize fairness, such exceptions cannot apply
when no compelling justification, such as fraud, mistake, or excusable negligence, is provided
for noncompliance. The PMO’s failure to explain its delayed filing, coupled with the potential
public fund implications, leaves no room for procedural leniency. As a result, even with a
liberal application of procedural rules, the PMO’s Petition would still be denied.

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 Initially, the Privatization and Management Office (PMO) was not liable for the Union's claims
for labor standard benefits, as its acquisition of Bicolandia Sugar Development Corporation's
(BISUDECO) assets was not intended to continue the corporation’s business operations.
Instead, the purpose was to conserve and prepare the assets for privatization, in line with its
mandate under Proclamation No. 50. When the Philippine National Bank (PNB) transferred
its rights and interests over BISUDECO’s outstanding loan obligations to PMO in 1987, the
transfer was limited to PNB's rights as a creditor. This transfer did not establish an employer-
employee relationship between PMO and BISUDECO's employees, meaning PMO did not
assume the role of a substitute employer and, therefore, was not liable for any money claims
arising from such a relationship.
Section 24 of Proclamation No. 50 explicitly clarifies that the transfer of government assets
is solely for the purpose of disposition, liquidation, and/or privatization. It emphasizes that
such transfers do not automatically return the assets to the general fund or require enabling
legislation for their disposition. Instead, the assets remain public properties specifically
designated for privatization, with the Minister of Finance or an authorized representative
responsible for managing their assignment or conveyance.
This principle was reinforced in Republic v. National Labor Relations Commission, et al.,
where the Court explained that the role of the Asset Privatization Trust (APT), now the PMO,
is limited to being a conservator of assets during privatization. APT’s liability is confined to
the value of the assets it has taken over from the privatized entity. The Court highlighted that
APT's involvement in labor-related claims arises only because of its role in managing assets,
not because it is an employer.
Following this reasoning, PMO's role with BISUDECO’s assets was limited to provisional
possession for the purpose of privatization or liquidation, as mandated by Proclamation No.
50. Its interest in BISUDECO did not extend to the corporation's continued business
operations. This position was also upheld in Barayoga v. Asset Privatization Trust, where the
Court ruled that APT's involvement in monetary claims was limited to its conservatorship role
and did not create additional obligations beyond managing assets for privatization.
Consequently, PMO was not liable for BISUDECO employees' labor claims arising from an
employer-employee relationship.

In the Barayoga case, the BISUDECO-PHILSUCOR Corfarm Workers Union alleged that when
Philippine Sugar Corporation (PHILSUCOR) took over the operations of Bicolandia Sugar
Development Corporation (BISUDECO) in 1988, it retained BISUDECO's existing employees
until May 1991. However, at the start of the 1991 season, PHILSUCOR did not recall some
union members back to work, prompting the union to file a Complaint on July 23, 1991,
against BISUDECO, the Asset Privatization Trust (APT), and PHILSUCOR. The complaint
included allegations of unfair labor practice, illegal dismissal, illegal deductions,
underpayment of wages, and other labor standard violations. Among the three respondents,
only APT was held liable by the Labor Arbiter and the National Labor Relations Commission
(NLRC) for the union members' monetary claims.
However, the Court of Appeals overturned the decisions of the Labor Arbiter and the NLRC,
ruling that APT did not assume the role of employer for BISUDECO’s employees. When the
union members appealed this decision to the Supreme Court, the Court denied their
Petition, holding that APT was not liable for money claims arising from an employer-
employee relationship. The Court emphasized that APT’s role was solely to conserve and

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 privatize BISUDECO's assets under Proclamation No. 50, and it did not become a substitute
employer.
The Court clarified that APT, as the purchaser of BISUDECO’s foreclosed properties, did not
automatically assume BISUDECO’s duties and liabilities, including monetary obligations to
employees. This principle was based on the doctrine that labor contracts, including collective
bargaining agreements (CBAs), are binding only between the parties involved (in personam)
and are not automatically enforceable against a transferee of an enterprise unless the
transferee explicitly agrees to assume such obligations.
The Court further stated that no privity of contract existed between BISUDECO’s employees
and APT. This means that there was no legal connection or agreement between APT and the
employees that would make APT their employer or obligate it to fulfill BISUDECO’s labor-
related obligations. To impose such liabilities on APT would contradict Proclamation No. 50
and the terms of the Deed of Transfer between the national government and the Philippine
National Bank (PNB). For APT to be held liable for employees’ claims, it must explicitly and
categorically agree to such liabilities, which it did not do in this case. Thus, the Supreme Court
ruled that APT had no legal responsibility for the union members' money claims.

While the Asset Privatization Trust (APT), now represented by the petitioner, was not
inherently liable for the monetary claims arising from an employer-employee relationship
with the terminated employees of Bicolandia Sugar Development Corporation (BISUDECO),
it voluntarily assumed the obligation to pay separation benefits to these employees in the
context of the corporation's privatization. This was formalized through a Resolution issued
by the APT Board of Trustees on September 23, 1992, which explicitly authorized the
payment of separation pay and other benefits to BISUDECO's employees upon privatization.
In the related Barayoga case, the employees who were not recalled to work by PHILSUCOR
(Philippine Sugar Corporation) in May 1991 sought monetary claims against APT. However,
the Court ruled that APT, as a mere conservator of BISUDECO's assets, was not an employer
and thus could not be held liable for claims arising out of an employer-employee relationship
unless explicitly agreed upon. In contrast, the union members in this case were those who
were recalled to work in May 1991 but were later terminated on September 1, 1992, when
BISUDECO underwent privatization.
Under Section 27 of Proclamation No. 50, the employer-employee relationship between the
government (acting through APT) and BISUDECO's employees is automatically severed upon
the sale or disposition of the corporation's assets. While the privatized corporation is granted
discretion to rehire or dismiss employees, the employees’ entitlement to accrued
compensation and benefits, as stipulated in employment contracts, collective bargaining
agreements, or applicable laws, remains protected. Thus, despite not being a substitute
employer, APT recognized its responsibility under this provision and voluntarily committed
to honor these claims.
The Labor Arbiter noted that separation benefits, 13th-month pay, and accrued leave
benefits were already paid to many of the employees, although some employees refused to
collect their checks, and others' payments were released through compliance with an Alias
Writ of Execution. This acknowledgment by APT aligned with its authority under
Proclamation No. 50, Article III, Section 12(6), which grants it the power to release claims
and settle liabilities as part of its role in privatizing government-held corporations.
By issuing the September 23, 1992 Resolution, APT contractually bound itself to fulfill these
obligations, even though it was not originally required to do so as a mere custodian of assets.

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 This act underscores APT's recognition of its role in ensuring equitable treatment for
terminated employees during the privatization process. Therefore, while APT was not
automatically liable as an employer, it voluntarily assumed responsibility for the employees’
separation benefits, solidifying its contractual obligation to provide financial redress to
BISUDECO's terminated employees.

Petitioner argues that even if it is found liable for separation benefits, the payment obligation
should not apply because Bicolandia Sugar Development Corporation (BISUDECO) was closed
due to serious business losses, a situation that generally exempts employers from paying
separation benefits under Article 298 of the Labor Code. However, this argument fails for the
following reasons:
1. Serious Business Losses as an Exemption for Employers
Under Article 298 of the Labor Code, employers are exempted from paying separation
benefits if they close or cease operations due to serious business losses. This provision is
designed to alleviate the burden on businesses that are unable to sustain their financial
obligations. For this exemption to apply, the employer must demonstrate that it has incurred
losses of such magnitude and for such a prolonged period that recovery is no longer feasible.
In the case of BISUDECO, there is no question that it was experiencing serious business
losses, as evidenced by its heavy loans to Philippine National Bank (PNB) and its eventual
inability to continue operations. This financial distress led to the transfer of its assets and
liabilities to petitioner (then the Asset Privatization Trust, or APT) for the purpose of
conservation and privatization.
2. Petitioner as Conservator, Not Employer
The exemption under Article 298 applies strictly to employers. While petitioner assumed
control over BISUDECO’s assets as part of its mandate under Proclamation No. 50, it did not
automatically become a substitute employer of BISUDECO's employees. Thus, the exemption
from paying separation benefits due to serious business losses does not directly apply to
petitioner.
3. Voluntary Assumption of Liability
Even if the exemption applied, petitioner voluntarily assumed the obligation to pay
separation benefits through the Resolution dated September 23, 1992 issued by its Board of
Trustees. This Resolution explicitly authorized the payment of separation benefits to
BISUDECO employees upon privatization. By doing so, petitioner deviated from the general
rule of exemption and bound itself to provide separation benefits, irrespective of the
financial condition of BISUDECO.
This principle is consistent with Benson Industries Employees Union-ALU-TUCP v. Benson
Industries, Inc., where the Court held that if an employer or party voluntarily agrees to pay
separation benefits, even in cases of serious business losses, the contractual obligation
prevails. The voluntary nature of the obligation overrides the exemption provided under
Article 298.
4. Privatization as the Trigger for Liability
Petitioner’s mandate under Proclamation No. 50 was to conserve and privatize non-
performing assets, including BISUDECO. Section 27 of Proclamation No. 50 provides for the
termination of employer-employee relationships upon the sale or disposition of such assets
but does not negate the employees’ entitlement to accrued compensation or benefits at
termination. By issuing the Resolution, petitioner effectively acknowledged its role in

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 facilitating the equitable treatment of BISUDECO's employees during privatization, including
the payment of separation benefits.

The private respondents in this case filed a Complaint for unfair labor practices, union
busting, and labor standard benefits on April 24, 1996. This was three years, seven months,
and 24 days after they were terminated on September 30, 1992. The complaint argued that
their termination was illegal because it occurred prior to the sale of Bicolandia Sugar
Development Corporation's (BISUDECO) assets to a private company, Bicol Agro-Industrial
Producers Cooperative, Incorporated-Peñafrancia Sugar Mill. Additionally, the complaint
alleged that the sale was intended to remove the Union (NACUSIP/BISUDECO Chapter) as a
representative of the sugar mill's workers, which would constitute union busting. A key legal
issue here is whether their claim for separation benefits has prescribed, meaning whether
too much time has passed for them to still seek compensation. Article 291 of the Labor Code
specifies that money claims related to an employer-employee relationship must be filed
within three years from the time the claim arises, otherwise, they will be barred or dismissed.
This is the prescriptive period—the time within which a legal action must be initiated. The
claim for separation benefits is a money claim because it involves payment from an employer
to an employee for work done or due to employment termination. In a previous case, Arriola
v. National Labor Relations Commission, the Supreme Court clarified that there are two
different kinds of money claims: one arising from an employer-employee relationship (like
the separation benefits) and another for reparations for illegal acts committed by the
employer (such as unfair labor practices or violations of workers' rights). For claims related
to employer-employee relations, the prescriptive period is three years, while for claims
regarding illegal acts by the employer, the period is four years. In this case, the private
respondents filed their complaint well within the three-year limit set by Article 291 of the
Labor Code. Thus, their claims for separation benefits are not barred by prescription and can
proceed. The word prescribed here refers to the concept that after a certain period of time,
a legal claim can no longer be brought to court. The Labor Code sets strict rules about time
limits for filing claims, and if these limits are not respected, the claim will be dismissed
forever, hence the importance of determining whether the complaint was filed within the
allowable timeframe.

Under the prescriptive periods outlined in the Labor Code and clarified in the Arriola case,
the private respondents' claim for separation benefits, 13th month pay, and other labor
benefits has not yet prescribed. Their complaint, filed on April 24, 1996, was done within the
three-year prescriptive period set by Article 291 of the Labor Code. This article specifies that
money claims arising from employer-employee relations must be filed within three years
from the time the cause of action occurred, otherwise, they are forever barred. The three-
year period for these claims begins when the violation of the workers' rights, such as the
refusal to pay benefits, occurs. In this case, the Labor Arbiter's decision on January 14, 2000,
which mandated the payment of these benefits, marked the point at which the private
respondents' right to these benefits was established. Since the case was appealed to the
National Labor Relations Commission (NLRC), the prescriptive period began only after the
Commission's decision became final and executory, which occurred after the Motion for
Reconsideration was denied on June 21, 2002. Therefore, the three-year prescriptive period
for the claim of separation benefits began at that point, and since the complaint was filed on
April 24, 1996, it was timely.

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 Moreover, the Labor Arbiter did not err in ordering the release of separation benefits despite
the private respondents' initial refusal to receive them. The Constitution guarantees workers'
rights to economic security and parity (equal treatment). The State is committed to
protecting workers' rights, promoting their welfare, and ensuring they receive their just share
in the fruits of production, including their monetary benefits. Although the private
respondents initially refused to accept their separation benefits because of their belief that
their dismissal violated their Collective Bargaining Agreement and that the sale of Bicolandia
Sugar Development Corporation was an act of union busting, this refusal was not based on
negligence or malice but on their honest belief that their rights had been violated. Despite
the lack of sufficient evidence to prove their claims of illegal dismissal, it would be unjust to
deny them their rightful benefits. In line with the Labor Code and Constitutional provisions,
the workers are entitled to receive all the benefits owed to them, just like other workers in
similar situations, regardless of their dispute over the circumstances of their termination.

The private respondents' co-complainants were able to collect their separation benefits
during the pendency of the Complaint, without needing to go through the Commission on
Audit (COA), which is responsible for auditing debts and claims involving government funds.
According to Section 26 of the State Auditing Code, the COA has jurisdiction over the audit
and settlement of all debts and claims due from or owed to the government or its agencies,
subdivisions, and instrumentalities. This includes government-owned or controlled
corporations and entities subsidized or funded by the government. The purpose of requiring
claims against the government to go through the COA is rooted in the principle that public
funds can only be released after proper appropriation and disbursement procedures are
followed. This is outlined in Section 4 of the State Auditing Code, which establishes several
fundamental principles. These principles ensure that no public money is disbursed without
being covered by an appropriation law or another specific statutory authority. Additionally,
public funds must be used for public purposes, and there must be proper documentation for
all claims against government funds. The principles also require that all financial transactions
follow established accounting standards and sound fiscal management practices, ensuring
accountability for the disbursement of government funds.

In the context of money claims against the government, such claims, including money
judgments made by the courts, must be filed with the Commission on Audit (COA) before
they can be paid. Supreme Court Administrative Circular No. 10-2000 emphasizes that judges
must exercise caution when issuing writs of execution to satisfy money judgments against
government agencies or local government units. The rationale is based on the principle that
government funds can only be used if they have been properly appropriated through the
corresponding budget process, as required by law. Public policy dictates that government
services and functions must not be disrupted by the seizure of funds through legal actions
such as garnishment or execution. This principle was further supported by the Supreme
Court in the case of Commissioner of Public Highways v. San Diego, which pointed out that
the courts' authority ends after a judgment is rendered, and the government’s consent to be
sued is limited to proceedings before execution.
Additionally, P.D. No. 1445 (the Government Auditing Code of the Philippines) mandates that
any money claim against the government must first be filed with the COA, which must act on
it within sixty days. If the COA rejects the claim, the matter can be elevated to the Supreme
Court on certiorari. This procedure ensures that claims are properly reviewed and accounted

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 for within the scope of government regulations. In prior cases such as National Electrification
Administration v. Morales, the court held that even though claims might be adjudicated in
trial courts, a separate action before the COA is needed for the satisfaction of the judgment
award.
However, in the case at hand, the situation differs. The petitioner's Board of Trustees had
already authorized the release of funds for the separation benefits of employees, including
the private respondents, in a Resolution dated September 23, 1992. The checks for these
benefits were already issued and held by the Labor Arbiter. Since the funds had already been
appropriated and disbursed, it was not necessary for the private respondents to file a
separate claim with the COA to receive their separation benefits. Given that their co-
complainants were able to claim their checks without such a process, it would be unjust and
a violation of the private respondents' rights if they were forced to do so. Therefore, the
petition was denied, allowing the private respondents to collect their rightful separation
benefits.

PEDRO CHAVEZ, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE,
Plant Manager, respondents.

In this case, Pedro Chavez (the petitioner) filed a petition for review with the Court of Appeals
(CA), seeking to overturn a Resolution (an official decision or ruling by a court or judicial
body) dated December 15, 2000, which reversed a previous decision made by the CA on April
28, 2000 in CA-G.R. SP No. 52485. The Resolution reinstated a decision from the National
Labor Relations Commission (NLRC) (a government agency responsible for adjudicating labor
disputes) dated July 10, 1998, which dismissed the complaint for illegal dismissal (the
unlawful termination of an employee’s employment, which violates labor laws) that Pedro
Chavez had filed. The NLRC’s decision also reversed its earlier ruling made on January 27,
1998, which had affirmed the Labor Arbiter’s (a legal officer who resolves labor disputes at
the first level) decision that Pedro Chavez had indeed been illegally dismissed by the
respondents, Supreme Packaging, Inc., and its plant manager, Mr. Alvin Lee. The case started
because the respondent company (the party against whom the complaint is filed), Supreme
Packaging, Inc., which is engaged in manufacturing cartons and other packaging materials
(items used for wrapping or containing products) for export and distribution, employed
Pedro Chavez as a truck driver (a person responsible for driving a vehicle to transport goods)
beginning on October 25, 1984. His role was to deliver the company's products from its
factory in Mariveles, Bataan to various customers, primarily in Metro Manila. To perform his
job, Pedro Chavez was provided with a truck by the company. His delivery trips were mostly
made at night, starting at 6:00 p.m. from Mariveles, and he would return two to three days
later in the afternoon. The deliveries followed specific routing slips (documents that provide
detailed instructions for deliveries, such as destinations, timing, and priorities) issued by the
company, which detailed the order, time, and urgency of each delivery. Initially, Pedro Chavez
was paid ₱350.00 per trip, which was later increased to ₱480.00 and eventually to ₱900.00
per trip by the time of his alleged dismissal. In 1992, Pedro Chavez communicated to Alvin
Lee, the plant manager, his interest in receiving the same benefits that regular employees
got, such as overtime pay (additional compensation given to employees for work done
beyond their regular working hours), nightshift differential pay (extra pay given to employees

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 working during night hours), and the 13th month pay (a mandatory benefit in many
countries, usually given at the end of the year, which is equivalent to a portion of an
employee's salary). Though Alvin Lee promised to extend these benefits, he failed to fulfill
this commitment. On February 20, 1995, Pedro Chavez filed a complaint for regularization
(the process by which an employee gains permanent status after probationary work) with
the Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. However,
before the case could be heard, the respondent company terminated his services. As a result,
on May 25, 1995, Pedro Chavez filed an amended complaint (a revised or updated formal
complaint, often filed when new facts or claims are introduced) against the respondents,
accusing them of illegal dismissal, unfair labor practice (acts by employers or employees that
violate labor laws or employee rights), and non-payment (failure to pay) of benefits such as
overtime pay, nightshift differential pay, and 13th month pay, among other claims. This case
was registered as NLRC Case No. RAB-III-02-6181-95.

The respondents (the party against whom a lawsuit is filed) denied that there was an
employer-employee relationship (a legal connection between an employer and an employee
where the employer has control over the employee’s work) between the respondent
company (the company being accused in the case) and the petitioner (the person bringing
the case). They argued that the petitioner, Pedro Chavez, was actually an independent
contractor (a person or business that performs services for another under terms specified in
a contract but is not considered an employee). They based their argument on a contract of
service (a formal agreement outlining the terms of work between two parties) that he and
the respondent company entered into. According to this contract, the Principal (referring to
Supreme Packaging, Inc.) agreed to hire Pedro Chavez as the Contractor (the person or
business providing services) for certain services. The contract outlined specific terms and
conditions, including:
1. The inland transport delivery/hauling activities (the act of transporting goods by land)
to be performed by the contractor (Pedro Chavez) would only cover the travel route
from Mariveles to Metro Manila. Any changes to this route would require further
agreement between the parties involved.
2. The payment (the amount of money the contractor would be paid) for the hauling or
delivery transport services was to be made on a per trip basis (paid for each trip),
depending on the size or classification of the truck being used. For example, if the
service required a six-wheeler truck (a truck with six wheels), the payment would be
₱300.00 per trip, effective December 15, 1984. For a ten-wheeler truck (a truck with
ten wheels), the payment would be ₱350.00 per trip, also effective December 15,
1984.
3. The Contractor was required to provide at least two helpers (assistants) for the
service.
4. The Contractor would be responsible for any damage (harm caused to something) or
loss (when something is misplaced or lost) of goods, cargo, or products while in
transit (being transported), or due to the recklessness (lack of caution or care) of its
workers.
5. The Contractor was given absolute control (complete authority) over its workers, with
the power to discipline them. Furthermore, the Contractor was responsible for
ensuring compliance with various laws such as the Minimum Wage Law (a law setting
the lowest amount of compensation an employer can pay an employee), the

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 Employees Compensation Act (a law providing benefits to employees who are injured
at work), and the Social Security System Act (a law governing social security benefits
for workers). The contract made it clear that the Contractor’s workers (truck drivers,
helpers, or other workers) were not considered employees of the respondent
company and would not be entitled to compensation or indemnity from the company
in case of claims or damages.
6. The contract took effect immediately upon signing by both parties and was subject
to renewal on an annual basis.
This contract of service was initially signed on December 12, 1984 and was renewed twice,
on July 10, 1989, and September 28, 1992. The terms of the contracts were substantially the
same except for the rates (the amount of money paid) to be paid to Pedro Chavez. The
relationship between the respondent company and Pedro Chavez was allegedly governed by
this contract of service.

The respondents (the party against whom a lawsuit is filed) argued that the petitioner (the
person bringing the case) had sole control (authority or responsibility) over the means and
methods by which his work was accomplished. They claimed that Pedro Chavez paid the
wages of his helpers (assistants who assist with the work) and exercised control over them.
Because of this, the respondents maintained that Pedro Chavez was not entitled to
regularization (the process of gaining permanent employee status), as he was not an
employee of the respondent company. The respondents also asserted that they did not
dismiss the petitioner; instead, his contractual relation (the formal relationship based on a
contract) with the company was terminated due to his violation of the terms and conditions
of their contract. Specifically, they alleged that Pedro Chavez failed to maintain the truck he
was using with the required degree of diligence (carefulness or thoroughness), leading to
unnecessary and significant expenses for the company to overhaul the truck.
After the parties filed their respective pleadings (formal written statements in a lawsuit), the
Labor Arbiter (a legal officer responsible for resolving labor disputes) issued a Decision
(official judgment in a case) on February 3, 1997, finding the respondents guilty of illegal
dismissal (unlawful termination of an employee’s employment). The Labor Arbiter ruled that
Pedro Chavez was a regular employee (a worker who is employed on a permanent basis
rather than temporarily or as a contractor) of the respondent company, as he was performing
work that was necessary (essential to the company’s operations) and desirable (beneficial to
the company) to the company’s business. The Labor Arbiter also noted that the petitioner
had been performing his duties as a truck driver for the company for more than ten years,
without interruption.
The contract of service (the agreement between the company and the petitioner detailing
the terms of work) invoked by the respondents was declared null and void (invalid) because
it circumvented the constitutional provision that affords full protection to labor (workers)
and guarantees security of tenure (the right of employees to not be dismissed without just
cause or due process). The Labor Arbiter found that the petitioner’s dismissal was due to his
demand to be regularized, which was a protected right (a right guaranteed by law). As a
result, the dismissal was considered unjustified because there was no valid or lawful reason
for it, and the respondents did not follow the proper due process (legal procedures required
before taking action such as dismissal).
As a result, the Labor Arbiter’s decision ordered the respondents to pay separation pay
(compensation paid to an employee when their employment is terminated) equivalent to

73 | P a g e
 one month’s pay for each year of service. This was in lieu of reinstatement (restoring the
employee to their previous position), as returning the petitioner to work was deemed
impractical given the strained relationship between the parties. Additionally, the
respondents were ordered to pay backwages (wages the employee should have received but
did not, due to unlawful dismissal) from February 23, 1995, until January 31, 1997, and the
13th month pay (a required annual bonus in many countries) and service incentive leave pay
(leave pay for long-serving employees). The total amount due to the petitioner was
calculated as follows:
• Backwages: ₱248,400.00
• Separation Pay: ₱140,400.00
• 13th Month Pay: ₱10,800.00
• Service Incentive Leave Pay: ₱2,040.00
• Total: ₱401,640.00
Additionally, the respondents were ordered to pay attorney’s fees (fees for legal
representation) amounting to 10% of the total amount due to the petitioner. The decision
concluded with the statement: SO ORDERED (finalized decision by the Labor Arbiter).

The respondents (the party against whom a lawsuit is filed) filed an appeal to the National
Labor Relations Commission (NLRC) (a government body that handles disputes between
employers and employees) after the Labor Arbiter (a legal officer responsible for resolving
labor disputes) ruled against them. However, the NLRC dismissed the appeal in its Decision
(official judgment in a case) dated January 27, 1998, and fully affirmed (confirmed without
changes) the Labor Arbiter’s decision. In its decision, the NLRC described the contract of
service (an agreement between a company and an independent contractor) between the
respondent company and the petitioner as a "scheme" (a plan or arrangement, often
implying dishonesty) that the respondents used to avoid making the petitioner a regular
employee. The NLRC believed that the respondents took advantage of the petitioner’s lack
of knowledge of the English language (the language in which the contract was likely written)
and legal niceties (specific legal details and formalities) to evade the consequences of
regularizing the petitioner’s employment.
The respondents then asked the NLRC to reconsider its decision. After reconsidering, the
NLRC issued a new Decision (official ruling) on July 10, 1998, which reversed (changed) its
earlier decision. This time, the NLRC ruled that no employer-employee relationship (the
formal, legal connection between an employer and their employee) existed between the
respondent company and the petitioner. In its new decision, the NLRC argued that the
respondents did not exercise enough control over how the petitioner performed his duties.
It pointed out that the contract of service was valid, noting that the contract did not specify
a time by which deliveries had to be made and allowed the petitioner to hire his own helpers,
who were paid from his own account. These details suggested that the petitioner was an
independent contractor (someone who works on their own terms, rather than as an
employee).
The NLRC believed that the contract was not intended to evade the Labor Code (the body of
law governing labor in the Philippines), specifically Article 280 (a provision in the Labor Code
related to the regularization of employees). The NLRC cited the case Brent School, Inc. v.
Zamora (a legal precedent) to support its finding that the contract was valid (legally
acceptable), as both parties had knowingly and voluntarily agreed to it. Based on this

74 | P a g e
 reasoning, the NLRC dismissed the petitioner’s complaint for illegal dismissal (unlawful
termination of an employee’s employment).
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the
NLRC in its Resolution (formal written decision) dated September 7, 1998. The petitioner
then filed a petition for certiorari (a formal request for a higher court to review a decision)
with the Supreme Court. Following the St. Martin Funeral Home v. NLRC case (a ruling in
which the Court established the procedure for such cases), the petition was referred to the
Court of Appeals (CA) (a higher court that hears appeals).
The Court of Appeals rendered a Decision on April 28, 2000, reversing the NLRC’s July 10,
1998 Decision and reinstating the Labor Arbiter’s decision. In its ruling, the CA found that the
petitioner was indeed a regular employee (someone employed on a permanent basis), as his
work as a truck driver was indispensable (essential) to the respondent company’s business.
Moreover, the CA noted that the petitioner had worked for the company as a truck driver for
ten continuous years. The CA also argued that the petitioner could not be considered an
independent contractor because he lacked significant capital (resources or equipment
needed for a business), such as tools or machinery. In fact, the truck that he used belonged
to the respondent company. The CA further observed that the routing slips (documents
detailing delivery routes and instructions) issued by the company showed that the company
exercised control over the petitioner, as the slips indicated delivery priorities, the urgency of
deliveries, and the specific times by which goods should be delivered.
The CA also disbelieved (did not believe) the respondents’ claim that the petitioner
abandoned (left) his job, noting that the petitioner had simply filed a complaint for
regularization (the process of being made a permanent employee). This act showed that the
petitioner had not abandoned his job, thus contradicting the respondents’ claim. The CA held
that the respondents failed to prove that the petitioner’s dismissal was based on a valid
(lawful) and just (fair) cause. Consequently, the respondents were found guilty of illegal
dismissal, and the decision of the Labor Arbiter was reinstated (put back into effect).

The respondents (the party against whom a lawsuit is filed) filed an appeal to the National
Labor Relations Commission (NLRC) (a government body that handles disputes between
employers and employees) after the Labor Arbiter (a legal officer responsible for resolving
labor disputes) ruled against them. However, the NLRC dismissed the appeal in its Decision
(official judgment in a case) dated January 27, 1998, and fully affirmed (confirmed without
changes) the Labor Arbiter’s decision. In its decision, the NLRC described the contract of
service (an agreement between a company and an independent contractor) between the
respondent company and the petitioner as a "scheme" (a plan or arrangement, often
implying dishonesty) that the respondents used to avoid making the petitioner a regular
employee. The NLRC believed that the respondents took advantage of the petitioner’s lack
of knowledge of the English language (the language in which the contract was likely written)
and legal niceties (specific legal details and formalities) to evade the consequences of
regularizing the petitioner’s employment.
The respondents then asked the NLRC to reconsider its decision. After reconsidering, the
NLRC issued a new Decision (official ruling) on July 10, 1998, which reversed (changed) its
earlier decision. This time, the NLRC ruled that no employer-employee relationship (the
formal, legal connection between an employer and their employee) existed between the
respondent company and the petitioner. In its new decision, the NLRC argued that the
respondents did not exercise enough control over how the petitioner performed his duties.

75 | P a g e
 It pointed out that the contract of service was valid, noting that the contract did not specify
a time by which deliveries had to be made and allowed the petitioner to hire his own helpers,
who were paid from his own account. These details suggested that the petitioner was an
independent contractor (someone who works on their own terms, rather than as an
employee).
The NLRC believed that the contract was not intended to evade the Labor Code (the body of
law governing labor in the Philippines), specifically Article 280 (a provision in the Labor Code
related to the regularization of employees). The NLRC cited the case Brent School, Inc. v.
Zamora (a legal precedent) to support its finding that the contract was valid (legally
acceptable), as both parties had knowingly and voluntarily agreed to it. Based on this
reasoning, the NLRC dismissed the petitioner’s complaint for illegal dismissal (unlawful
termination of an employee’s employment).
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the
NLRC in its Resolution (formal written decision) dated September 7, 1998. The petitioner
then filed a petition for certiorari (a formal request for a higher court to review a decision)
with the Supreme Court. Following the St. Martin Funeral Home v. NLRC case (a ruling in
which the Court established the procedure for such cases), the petition was referred to the
Court of Appeals (CA) (a higher court that hears appeals).
The Court of Appeals rendered a Decision on April 28, 2000, reversing the NLRC’s July 10,
1998 Decision and reinstating the Labor Arbiter’s decision. In its ruling, the CA found that the
petitioner was indeed a regular employee (someone employed on a permanent basis), as his
work as a truck driver was indispensable (essential) to the respondent company’s business.
Moreover, the CA noted that the petitioner had worked for the company as a truck driver for
ten continuous years. The CA also argued that the petitioner could not be considered an
independent contractor because he lacked significant capital (resources or equipment
needed for a business), such as tools or machinery. In fact, the truck that he used belonged
to the respondent company. The CA further observed that the routing slips (documents
detailing delivery routes and instructions) issued by the company showed that the company
exercised control over the petitioner, as the slips indicated delivery priorities, the urgency of
deliveries, and the specific times by which goods should be delivered.
The CA also disbelieved (did not believe) the respondents’ claim that the petitioner
abandoned (left) his job, noting that the petitioner had simply filed a complaint for
regularization (the process of being made a permanent employee). This act showed that the
petitioner had not abandoned his job, thus contradicting the respondents’ claim. The CA held
that the respondents failed to prove that the petitioner’s dismissal was based on a valid
(lawful) and just (fair) cause. Consequently, the respondents were found guilty of illegal
dismissal, and the decision of the Labor Arbiter was reinstated (put back into effect).

The elements (essential factors) to determine the existence of an employment relationship

(the legal relationship between an employer and employee, which includes the rights and
obligations of both parties) are: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the
employee’s conduct. Among these, the most significant element is the employer’s control
(the authority of the employer over the employee's work) over the employee’s conduct,
which not only pertains to the result (the outcome) of the work but also to the means and
methods (how the work is done) of accomplishing it. In this case, all four elements are
present. First, it is clear that the respondents (the employers) engaged the services (hired)

76 | P a g e
 of the petitioner without the involvement of any third party, indicating an employment
relationship. Second, wages (payment for work) are defined as earnings, no matter the
method of calculation, whether on a time, task, or piece rate basis, which is payable by an
employer to an employee for work done. That the petitioner was paid on a per-trip basis
does not diminish the existence of an employer-employee relationship. Payment method is
simply a way to calculate compensation and does not dictate the nature of the relationship.
It is evident that the petitioner was compensated by the respondents for the services
provided. Moreover, the Rules Implementing the Labor Code (regulations that support the
Labor Code) require employers to pay employees through payrolls (official records showing
the amount paid to employees, along with deductions and the final amount). The absence
of a payroll from the respondents raises questions about their claim that the petitioner was
not their employee, suggesting that the presentation of the payroll could harm their case.
Third, the respondents’ power to dismiss (terminate employment) the petitioner was
inherent in their engagement of him as a truck driver. The respondents exercised this power
by terminating his services, though they framed it as the severance (ending) of the
contractual relationship due to an alleged breach of the contract. Finally, of the four
elements, the control test (the test to determine whether someone is an employee based
on the employer’s ability to control the work process) is the most crucial. An independent
contractor (a person who provides services to another under a contract but is not controlled
in how the work is performed) runs their own business and completes tasks independently,
whereas an employee is subject to the employer’s control regarding how the work is to be
done. This shows that while an independent contractor has freedom, an employee is bound
by the employer’s direction regarding the methods and processes of performing the work.

Although the respondents (employers) denied that they exercised control (authority over
how the petitioner performed his work) over the manner and methods by which the
petitioner accomplished his work, a careful review of the records reveals that the petitioner
carried out his duties as a truck driver under the respondents’ supervision and control. Their
right of control (the employer's ability to dictate how the employee performs work) was
shown by the following facts:
1. The truck (vehicle) driven by the petitioner belonged to the respondent company,
which suggests the company had authority over its use.
2. There was an express instruction (clear order) from the respondents that the truck
was to be used exclusively for delivering the respondent company’s goods.
3. The respondents directed the petitioner, after each delivery, to park the truck at one
of two specific locations: either at the office in Metro Manila (the capital region) or
in BEPZ, Mariveles, Bataan (a location in the Bataan Economic Zone).
4. The respondents determined how, where, and when the petitioner would perform
his task by giving him gate passes (official documents granting access to premises)
and routing slips (documents outlining the delivery details).
The routing slips revealed several important details: a. The remarks section of the slips
showed the chronological order and priority of deliveries, indicating that the petitioner had
to deliver the items in a specific sequence. b. The slips also indicated whether the delivery
was urgent, marked by the word "RUSH." c. The exact time of delivery was specified, such as
writing "tomorrow morning" on a specific slip.
These facts demonstrate that the respondents controlled not only the result (outcome) of
the petitioner’s work but also the means and methods (how the work was carried out) by

77 | P a g e
 specifying the routes, timeframes, and locations for deliveries. The Court found it hard to
believe the respondents' claim that the petitioner was an independent contractor (someone
who is self-employed and not under the control of an employer) since the petitioner did not
own the truck used for his deliveries. He lacked the capitalization (investment in assets) such
as tools, machinery, or premises that would be characteristic of an independent contractor.
Furthermore, the petitioner had been providing his delivery services exclusively to the
respondent company for over ten years.
Despite the contract of service (formal agreement stating the nature of the work
relationship) stating otherwise, the factual circumstances prove that an employer-employee
relationship existed between the respondent company and the petitioner. It is important to
note that the existence of an employer-employee relationship cannot be disregarded just
because a contract labels someone as an independent contractor when the facts clearly
show otherwise. The employment status of a person is defined by law (rules and regulations),
not merely by what the parties involved claim it to be.
Having established the existence of an employer-employee relationship, the Court then
looked at whether the respondents lawfully dismissed (terminated) the petitioner. As a
general rule, the employer must prove that the dismissal was for a valid and just cause (a
legitimate reason). In this case, the respondents failed to show any valid reason for the
petitioner’s dismissal. They suggested that the petitioner abandoned his job. For
abandonment (leaving the job without notice to the employer), two factors must be present:
(1) failure to report to work without a valid or justifiable reason, and (2) a clear intention to
end the employer-employee relationship. Clearly, the petitioner did not intend to sever his
relationship with the respondent company, as he had just filed a complaint for regularization
(formalizing his employment status), which was later amended to a complaint for illegal
dismissal. A claim of abandonment contradicts the filing of a complaint for illegal dismissal,
especially when the petitioner is asking for reinstatement (being brought back to work).

The respondents (employers) also argued that the petitioner was guilty of gross negligence
(serious carelessness) in maintaining the truck, but this did not justify his dismissal (firing).
Gross negligence refers to a lack of even slight care or diligence, showing complete disregard
for potential consequences without making any effort to avoid them. For negligence to justify
dismissal, it must not only be gross but also habitual (repeated or regular). The petitioner’s
alleged single incident (one-time occurrence) of negligence did not amount to gross and
habitual neglect, and therefore, it was not enough to warrant his dismissal.
The Court agreed with the findings of the Labor Arbiter (official adjudicator of labor
disputes), who noted that the respondents’ claim that the petitioner was dismissed for
breaching the contract was not credible. The Labor Arbiter believed the petitioner’s
explanation that he was dismissed because he demanded to be regularized (made a
permanent employee). The petitioner had depended on his job for his livelihood and family
support, so it seemed unlikely that he would abandon his work for no reason, especially
when the respondents told him his services would be terminated on February 23, 1995.
Because the respondents failed to show a valid and just cause (a legitimate reason) for
terminating the petitioner’s services, his dismissal was considered illegal. Under Article 279
of the Labor Code (a section of Philippine law governing labor relations), an employee who
is unjustly dismissed is entitled to reinstatement (being brought back to work), keeping all
seniority rights (rights based on the length of service) and other benefits, as well as the
payment of full backwages (salary from the time the dismissal occurred until the employee

78 | P a g e
 is reinstated). However, in this case, the circumstances indicated that reinstatement was not
appropriate. Instead, the Labor Arbiter (who originally ruled in the case) decided that the
petitioner should receive separation pay (a payment made when someone is dismissed),
which would be equivalent to one month’s salary for every year of service, from the time of
his illegal dismissal until the final decision was made. In addition, the petitioner was to
receive his full backwages, allowances, and other benefits.
The petition (formal request for judicial action) was GRANTED. The Resolution (formal
decision) of the Court of Appeals (the higher appellate court) dated December 15, 2000,
which had overturned its previous decision from April 28, 2000, was reversed and set aside.
The original Labor Arbiter’s decision from February 3, 1997, which found the respondents
guilty of illegally terminating the petitioner’s employment, was reinstated.

Social Legislation Social Legislation 1. Promotion of Social Justice

refers to laws enacted o Social legislation is rooted in
to promote social the idea of social justice,
justice, equity, and the which ensures the equitable
welfare of individuals distribution of wealth,
and groups in society, opportunities, and privileges
especially those who in society.
are marginalized or o It recognizes the need to
disadvantaged. These protect vulnerable groups,
laws aim to address such as workers, women,
societal inequalities, children, and the elderly, from
protect basic human exploitation and
rights, and improve marginalization.
the quality of life by 2. Regulation of Social and Economic
ensuring access to Relations
essential resources, o Social legislation governs
services, and relationships between
opportunities. individuals, groups, and
institutions, particularly in
In the Philippines, areas where there is potential
social legislation is a for abuse or inequality (e.g.,
critical tool for labor relations, housing, or
promoting the access to healthcare).
principles of social 3. State Intervention for the Common
justice enshrined in Good
the Constitution. It o Social legislation reflects the
includes laws government's duty to
designed to protect intervene in private and public
workers, vulnerable affairs when necessary to
sectors, and the protect public welfare and
general public, uphold the dignity of
ensuring fairness and individuals.
equity in the Examples of Social Legislation in the
distribution of social Philippines
1. Labor and Employment Laws

79 | P a g e
 benefits and o Labor Code of the Philippines
opportunities. (Presidential Decree No. 442):
▪ Ensures workers' rights
to fair wages, humane
working conditions,
and social protection.
o Wage Rationalization Act
(Republic Act No. 6727):
▪ Establishes minimum
wage levels to protect
workers from
exploitation.
o Magna Carta of Women
(Republic Act No. 9710):
▪ Guarantees equal
opportunities and
protections for women
in the workplace and
society.
2. Social Security and Welfare Laws
o Social Security Act (Republic
Act No. 8282, amended by
R.A. 11199):
▪ Provides retirement,
disability, and death
benefits for private-
sector workers.
o PhilHealth Act (Republic Act
No. 11223):
▪ Ensures access to
universal healthcare
for all Filipinos.
o Pag-IBIG Fund Law (Republic
Act No. 9679):
▪ Provides affordable
housing and financial
assistance to workers.
3. Housing and Urban Development
o Urban Development and
Housing Act (Republic Act No.
7279):
▪ Promotes access to
affordable housing,
especially for the
urban poor.
o Balanced Housing
Development Program:

80 | P a g e
 Requires developers to
allocate a portion of their
projects to socialized housing.
4. Health and Safety Laws
o Occupational Safety and
Health Standards Act
(Republic Act No. 11058):
▪ Ensures safe and
healthy working
conditions for
employees.
o Expanded Maternity Leave
Law (Republic Act No. 11210):
▪ Extends maternity
leave to 105 days, with
additional benefits for
mothers.
5. Laws for Vulnerable Groups
o Child and Youth Welfare Code
(Presidential Decree No. 603):
▪ Protects children’s
rights to education,
health, and protection
from abuse.
o Anti-Violence Against Women
and Their Children Act
(Republic Act No. 9262):
▪ Provides protection for
women and children
against abuse and
violence.
o Senior Citizens Act (Republic
Act No. 9994):
▪ Grants benefits and
privileges to senior
citizens, such as
discounts and health
care services.
6. Environmental and Community
Protection
o Clean Air Act (Republic Act No.
8749):
▪ Ensures a healthy
environment for all
citizens by regulating
air pollution.

81 | P a g e
 o Solid Waste Management Act
(Republic Act No. 9003):
▪ Promotes proper
waste management
and sustainable
environmental
practices.
Objectives of Social Legislation
1. Protecting Marginalized Groups
o Shielding disadvantaged
sectors from exploitation and
ensuring their basic needs are
met.
2. Reducing Inequality
o Addressing economic and
social disparities to promote
fairness and equity.
3. Improving Quality of Life
o Providing access to essential
services like education,
healthcare, housing, and
social security.
4. Fostering Economic Stability
o Ensuring workers' rights while
supporting sustainable
economic growth.
5. Maintaining Social Order
o Regulating interactions
between individuals,
businesses, and the
government to prevent abuse
and conflict.
Role of the Government in Social Legislation
The government acts as the primary enforcer
and administrator of social legislation. This
involves:
1. Policy Formulation and
Implementation:
o Creating laws and programs
that reflect the principles of
social justice and equity.
2. Monitoring and Enforcement:
o Ensuring compliance with laws
through agencies like the
Department of Labor and
Employment (DOLE),

82 | P a g e
 PhilHealth, and Social Security
System (SSS).
3. Conflict Resolution:
o Addressing disputes between
employers, employees, and
other parties to uphold justice.

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

vs.
CIVIL SERVICE COMMISSION and DR. MANUEL BARADERO, respondents.
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
CIVIL SERVICE COMMISSION and MATILDE S. BELO, respondents.

In this case, KAPUNAN, J. (a judge) explained that in their previous decision dated October
28, 1994, the Court ruled that government service (work for the government) rendered on
a per diem basis (paid for each day of work, but not regularly) could not be counted when
calculating the length of service (how long someone has worked for the government) for
retirement purposes. This meant that the Civil Service Commission (CSC), the government
body responsible for managing civil service workers, had made a mistake by requiring the
Government Service Insurance System (GSIS), which handles retirement benefits, to treat
these per diem days as creditable service (counted towards retirement). After this decision,
a private respondent, Matilde S. Belo, who was a former Vice Governor of Capiz, filed a
motion for reconsideration (a formal request for the Court to change its decision) on
November 17, 1994. She argued that the time she served as Vice Governor from December
31, 1975, to January 1, 1979, should count as creditable service for retirement. Similarly, the
GSIS filed its own motion for reconsideration on November 22, 1984, on behalf of both Belo
and another respondent, Dr. Manuel Baradero, for the same reasons. The main issue raised
in the motions was whether regular government service on a per diem basis, with no other
form of payment or benefits, should be considered compensation (payment for work) under
the Government Service Insurance Act of 1987.
After carefully reviewing the arguments, the Court decided to reconsider (change) its earlier
decision. Although the respondents had been paid per diem (a daily allowance), the Court
noted that these payments were essentially a form of compensation (payment for services
rendered). Therefore, it was the nature of the remuneration (how the workers were paid)
that mattered, not what it was called. The Court explained that Matilde S. Belo served as Vice
Governor from January 5, 1972, to February 1, 1988, and during the period from January 25,
1972, to December 31, 1979, she was paid a fixed salary (a regular, set amount). From
December 31, 1979, to February 1, 1988, she continued as Vice Governor, but her pay was
broken into two periods: one in which she was paid per diem from December 31, 1976, to
December 31, 1979, and another when she was paid a fixed salary from January 1, 1980, to
February 1, 1988. The Civil Service Commission (CSC) initially ruled that the per diem period,
from December 31, 1976 to January 1, 1979, should count as creditable service for
retirement purposes because during this time, Belo worked full time and was available 24
hours a day. However, the GSIS disagreed with the CSC and filed a petition for certiorari (a
legal request to a higher court to review a case), arguing that per diems should not count as
compensation under the Government Service Insurance Act. The Court agreed with the GSIS

83 | P a g e
 and reversed the CSC orders in question, finding that per diem payments were not
considered compensation for retirement benefits under the law.

The Court reconsidered the previous decision regarding the per diem payments received by
Matilde S. Belo, who had served as Vice Governor of Capiz. It was concluded that the "per
diem" payments were actually a form of compensation for her duties in a holdover capacity,
rather than being the type of per diem mentioned in Section 1(c) of the Government Service
Insurance Act (R.A. No. 1573). The Court pointed out that while "per diem" usually refers to
a daily allowance to cover expenses like lodging or meals when a government official is away
from their regular station, in Belo’s case, it was clear that these payments were for her actual
work, serving as Vice Governor. The Court highlighted that the term “salary, pay, or
compensation” excludes certain types of allowances, such as per diems or overtime pay, but
emphasized that in this case, the payments were more like base pay, which should be
considered as part of her compensation for retirement purposes. The Court also noted that
Belo worked full-time during this period, even though she was officially paid per diem, and
received no other form of payment during this time.
Similarly, the Court discussed the case of Dr. Manuel Baradero, who served as a member of
the Sangguniang Bayan (municipal legislative council) of La Castellana, Negros Occidental,
from January 1, 1976, to October 10, 1978. Like Belo, Baradero was paid on a per diem basis
but rendered full-time service to the government. The Civil Service Commission (CSC) had
already recognized his period of service as creditable for retirement, based on a similar ruling
in Belo’s case.
The Court explained the traditional meaning of per diem in the context of the Government
Service Insurance Law. It generally refers to an allowance paid for each day a government
employee is away from their primary work location, typically to cover extra expenses like
food and lodging. However, the Court clarified that Belo’s payments were not meant for
incidental expenses but were compensation for her official work. As she was on call full-time
during the disputed period, even outside the regular working hours, this compensation
should be treated as part of her retirement benefits. Therefore, despite being labeled as per
diem, the payment was essentially remuneration for her service and should count toward
her years of service for retirement purposes.

In this case, the Court emphasized that what should be most important is the nature of the
remuneration received by government employees, not merely the label attached to it. While
the law clearly excludes per diems from the definition of compensation in the Government
Service Insurance Law (GSIS Law), the Court noted that the term per diem can be interpreted
in different ways — either as a compensation or an allowance. This meant it was necessary
to look more closely at the circumstances to determine whether the per diem in question
was actually compensation for work or just an allowance for extra expenses incurred during
the performance of duties. The Court explained that the GSIS Law specifically intended to
exclude per diems that are used to cover incidental expenses like lodging or meals when a
government official is away from their usual work station. However, in the case of Belo, her
per diem payments were part of her remuneration for her work as Vice Governor, not merely
a reimbursement for expenses, especially since she was later paid a fixed salary for the same
position. Therefore, the Court concluded that the per diems she received should be credited
as part of her service for retirement purposes.

84 | P a g e
 In a similar vein, Baradero, another government official, was also paid on a per diem basis
during his tenure but rendered full-time service. The Civil Service Commission (CSC) had
already recognized his service during the disputed period as creditable for retirement
purposes. Both Belo and Baradero were effectively denied credit for certain periods of
service because they were paid per diems, which the GSIS did not initially count toward their
retirement benefits.
The Court acknowledged the distinction between salary (or compensation) and per diem,
noting that in previous cases, per diems paid as part of full-time service were recognized as
compensation. In Belo’s case, her per diem payments for attending board meetings were
actually paid for her full-time service as Vice Governor, not merely for incidental expenses.
Therefore, the Court concluded that Belo’s services during the disputed period should be
counted for retirement purposes, as her payments were more than just allowances.
Furthermore, the Court highlighted that retirement benefits are meant to reward public
servants for their years of dedicated service to the government, especially those in
leadership positions. These employees often could have worked in the private sector for
more lucrative salaries, but instead chose to serve the public. The Court noted that although
the GSIS system relies on contributions from its members, these contributions are minimal
in comparison to the retirement benefits employees receive, and thus should not be the
deciding factor in whether an employee qualifies for benefits.
The Court further pointed out that neither Belo nor Baradero was adequately informed that
their per diem payments during certain periods would not be credited toward their
retirement service. Both Belo and Baradero had assumed in good faith that they were
covered by GSIS benefits during their entire terms of service, and had the GSIS made the
required deductions, both would have complied. The Court also noted that the GSIS system
operates in a manner where employees have little say in the deduction process, as it is
effectively a contract of adhesion — employees cannot opt out, and the deductions are made
automatically from their salaries. The Court found that Belo and Baradero should not be
penalized for assuming they were covered by the system, especially since the GSIS did not
deduct during certain periods. Ultimately, the Court ruled that their service during the
disputed periods should be counted as service with compensation for retirement purposes.

In this case, the Court emphasized that the source of GSIS benefits is not purely contractual
but rooted in social legislation. This point is underscored in the "whereas" clauses of
Presidential Decree No. 1146, which outlines the intent of the law to improve the social
security and insurance benefits of government employees. The law aims to serve the
paramount welfare of government employees by providing a comprehensive system of social
security and insurance. This system is designed to benefit employees in case of sickness,
disability, death, retirement, and other contingencies. It recognizes the selfless service of
government employees and provides retirement benefits as a form of reward for their
dedication to public service.
The Court pointed out that the social security system should be re-examined and improved
to ensure that it adequately meets the needs of government employees and their
dependents. It should be responsive to economic conditions and expand benefits, including
pensions, disability, sickness income, and survivorship benefits. Additionally, the coverage of
the program should be extended to all government employees, regardless of their
employment status.

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 The Court then addressed the situation of private respondents, Belo and Baradero, who had
been denied retirement benefits due to the per diem payments they received. The Court
found that it would be grossly inequitable to permanently deny these employees the
retirement benefits they deserved for their actual service to the government. The Court
ruled that equity should prevail over rigid legal rules, meaning that instead of penalizing Belo
and Baradero, a reasonable deduction corresponding to the contributions that should have
been made during their per diem period should be subtracted from their retirement benefits.
Ultimately, the Court granted the motion to reconsider its previous decision and affirmed the
earlier orders and resolutions of the Civil Service Commission (CSC), which required the GSIS
to consider the services rendered by Belo and Baradero on a per diem basis as creditable for
retirement purposes. The Court decided that the spirit of the law and the intent behind the
retirement and insurance systems should take precedence, ensuring substantial justice for
the employees who had served the government with dedication.

In the dissenting opinion of Justice Quiason, the Civil Service Commission (CSC) and Matilde
S. Belo sought to reconsider the Court's decision from October 28, 1994. The CSC argued
that services rendered on a per diem basis (a daily allowance given to government
employees) could be considered creditable for retirement purposes, emphasizing that it is
the nature of the service rendered and not the manner of compensation that should
determine if the service counts for retirement. The CSC also maintained that it had the
authority to determine what qualifies as creditable government service, while the role of the
Government Service Insurance System (GSIS) is limited to calculating the amount of
retirement benefits owed to the employee. On the other hand, respondent Belo, who had
served as Vice-Governor and Governor of Capiz, argued that although she was paid per diem
for her full-time service, it should still count as creditable service for retirement. She pointed
out that a similar case, Inocencio V. Ferrer, involved a government official being credited with
per diem payments for retirement purposes, and she believed this precedent should apply
to her situation as well.
The issues raised in the motion for reconsideration were whether the GSIS had the authority
to determine what constitutes creditable service for retirement and whether full-time
service rendered by a government employee who received per diem payments should be
counted for retirement benefits. The dissenting opinion also added a third issue regarding
whether an employee could receive retirement benefits even if they failed to make the
necessary contributions to the GSIS during the period they were paid per diem.
The opinion affirmed the ruling that the GSIS is the proper agency to determine what counts
as creditable service for retirement under Presidential Decree No. 1146 (Government Service
Insurance Act of 1987). This special law takes precedence over the Administrative Code of
1987 (Executive Order No. 292). Justice Quiason agreed that the term used for compensation
is not the key factor in determining creditable service; rather, it is the fact that the
compensation is paid for full-time work that matters. However, Belo could not rely on the
Ferrer case because the GSIS recognized his full-time service as a hearing officer (not his role
as Commissioner) as creditable for retirement.
The opinion also discussed the Local Government Code of 1991 (Republic Act No. 7160) and
its impact on local government units’ participation in the Government Insurance System.
Prior to this law, local government employees were not automatically covered by the
Government Insurance Act (R.A. No. 186), but an amendment, R.A. No. 1573, allowed for
optional coverage under the system. This required the employee to notify the GSIS in writing,

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 meet the necessary requirements, and agree to pay the required premiums. Once admitted,
the employee would be eligible for life or retirement insurance benefits.
Finally, the dissenting opinion emphasized that the payment of premiums to the GSIS is
essential to qualify for retirement benefits, just as the length of service is crucial in
determining the eligibility for those benefits. Without contributions being made, an
employee may not be entitled to the benefits, regardless of their service record.

In the case of respondent Belo, it was pointed out that she never became a member of the
Government Service Insurance System (GSIS) during her time as Vice-Governor and
Governor of Capiz, nor did she make any contributions to the system. The law, R.A. No. 1573,
which amended previous legislation, gave her the option to continue her membership when
she began working for the local government. However, Belo did not take up this option or
fulfill the necessary requirements as specified in Section 4(b) of the law.
The GSIS is obligated to provide retirement benefits only to its members. This obligation
arises from a contract of life or retirement insurance that exists between the GSIS and the
government employee, which is formally evidenced by a policy issued by the GSIS once the
employee’s admission is approved. In some cases, this insurance contract is compulsory,
meaning that both the employer and the employee are required by law to make
contributions to the GSIS, which are usually deducted from the employee’s salary.
The premiums paid by members are essential to the functioning of the retirement system,
as these contributions are actuarially computed to ensure the sustainability of the system.
Actuarially computed means that the amount of money that needs to be contributed is
calculated based on statistical methods, considering factors like life expectancy and other
demographic factors. Without these contributions, the entire system could face instability.
The opinion argues that it would be unfair for Belo to demand retirement benefits from the
GSIS since she did not contribute during the period from December 31, 1976, to January 1,
1979. If the law were to accept Belo’s argument, it would create an inequitable situation
where the GSIS would bear the financial risk of providing retirement benefits to someone
without receiving any contributions. The GSIS is not a charitable institution, meaning it was
not created to provide benefits without receiving appropriate contributions in return. It is
intended to be a self-sustaining system based on contributions from both the government
and the employee.
The opinion suggests that the most generous interpretation of the GSIS ruling regarding
service paid on a per diem basis would be to only grant retirement benefits for such service
if the employee had made the required contributions during that period. Therefore, Belo's
failure to make contributions disqualifies her from receiving benefits for the period in
question.
As a result, Justice Melo and Justice Romero agreed with the dissenting opinion and voted
to deny the motion for reconsideration.

In the case of respondent Belo, she requested a reconsideration of a previous decision,

challenging the ruling that excluded her time in office as Vice-Governor and Governor of
Capiz from qualifying for retirement benefits. The Civil Service Commission (CSC), which
oversees government personnel matters, argued that services rendered on a per diem basis
(daily payments for attending meetings or performing duties) should be counted for
retirement purposes, emphasizing that the nature of the work matters more than the form
of compensation. They also stated that it is the CSC, not the Government Service Insurance

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 System (GSIS), which has the authority to determine what constitutes creditable service for
retirement. Respondent Belo, who was paid on a per diem basis during her term, argued that
her situation was similar to that of Commissioner Inocencio V. Ferrer, where the GSIS had
allowed credit for service based on per diem compensation. In her supplemental motion for
reconsideration, she contended that, just like Ferrer, her per diem payments should count
towards her retirement benefits. The court was tasked with addressing whether the GSIS or
the CSC had the authority to determine creditable service and whether a full-time
government employee like Belo, paid on a per diem basis, could qualify for retirement
benefits.
The court affirmed its earlier ruling, stating that GSIS has the authority to decide what counts
as creditable service under the Government Service Insurance Act of 1987 (Presidential
Decree No. 1146). The law specifically grants this power to the GSIS, making it the special
law that overrides general administrative rules like the Administrative Code of 1987. The
court also agreed that the way the salary is labeled (whether "per diem" or fixed) is not the
determining factor in retirement eligibility; what matters is that the pay is for full-time work,
regardless of the term used. Therefore, the court disagreed with Belo, stating that the case
of Commissioner Ferrer didn’t apply to her, because Ferrer’s full-time service was counted,
while his per diem payments were not.
The court then addressed an additional legal issue: prior to the Local Government Code of
1991 (Republic Act No. 7160), local government units were not compulsorily covered by the
Government Insurance Act. However, the amendment in R.A. No. 1573 allowed for optional
coverage under the government insurance system, which required employees to notify the
system and meet certain conditions. Employees could choose to be covered, but they had to
pay the appropriate premiums or contributions, which were essential for receiving
retirement benefits. The court emphasized that paying premiums is just as important as the
time worked for determining retirement eligibility.
Ultimately, the court held that it would be unfair to grant retirement benefits to Belo when
she did not make any contributions to the GSIS during the time she received per diem
payments. Premiums, or the regular contributions made to the retirement system, are
necessary to support the retirement scheme, and the GSIS could not be expected to provide
benefits without receiving the required contributions. This was not only a matter of fairness
but also of maintaining the integrity of the retirement system.

In the case of respondent Belo, it was pointed out that she did not become a member of the
Government Service Insurance System (GSIS) during her time as Vice-Governor and
Governor of Capiz, nor did she contribute to the system. However, she had the opportunity
to continue her membership when she began working for the local government unit, under
Section 4(b) of Republic Act No. 1573. This section provided her with an option to comply
with certain requirements to join the GSIS, but she failed to exercise this option.
The GSIS is obligated to grant retirement benefits only to its members. This obligation arises
from a contract between the GSIS and the government employee, which is typically a life or
retirement insurance contract. Once an employee joins the GSIS, they receive a policy
confirming their coverage. In some cases, this contract of insurance is compulsory, meaning
both the employee and the employer are required to make contributions to the GSIS. These
contributions are often deducted directly from the employee’s salary.
The premiums, which are the amounts paid regularly by members into the system, are crucial
for maintaining the retirement scheme. These premiums are actuarially computed, meaning

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 they are calculated based on statistical data to ensure the system's stability. Any attempt to
eliminate or avoid these premiums would have a negative impact on the entire GSIS system.
The court argued that it would be unfair for Belo to demand retirement benefits from the
GSIS when she never made the required contributions during the period between December
31, 1976, and January 1, 1979. To grant her benefits without these contributions would place
the GSIS in a difficult position, as it would be exposed to a financial risk without receiving the
necessary contributions or premiums. The GSIS was not intended to serve as a charitable
institution for government retirees. The GSIS is meant to function based on the premiums it
receives, and it is only fair that it be entitled to these payments once it starts offering
insurance coverage, whether it's for life insurance or annuity (a fixed payment made
periodically).
In this context, the court believed that the most generous approach would be to apply the
GSIS' policy regarding per diem payments only in cases where the retiree had paid the
necessary retirement premiums during the period in question. Therefore, the motion for
reconsideration was denied, and the original ruling stood. Justices Melo and Romero agreed
with this opinion.

RICHARD N. WAHING, RONALD L. CALAGO AND PABLO P. MAIT, PETITIONERS, VS. SPOUSES
AMADOR DAGUIO AND ESING DAGUIO, RESPONDENTS.

The Court of Appeals has the discretion (authority) to rule on all relevant matters in a case,
including the substantive issues (the fundamental issues related to the case’s outcome), in
order to reach a “just and complete resolution.” However, while the Court of Appeals
properly considered the facts of the case, it wrongly denied the existence of an employer-
employee relationship, which the Supreme Court decided should be reversed.
In the case of Richard N. Wahing (Wahing), Ronald L. Calago (Calago), and Pablo P. Mait
(Mait), who were rubber tree tappers, they were working under the operational and
economic control of the Daguio Spouses. This control refers to the authority the Daguio
Spouses had over the working conditions and the economic aspects of Wahing et al.'s work,
which created an employer-employee relationship between them. This made their dismissal
from work illegal because they were not treated as independent workers but rather as
employees under the Daguio Spouses’ control.
The Supreme Court is reviewing a Petition for Review on Certiorari, which is a legal request
to the Court to re-examine the case, regarding a decision and resolution made by the Court
of Appeals. The Court of Appeals had set aside the National Labor Relations Commission
(NLRC)'s decision, which had sent the case back for further reception of evidence regarding
the illegal dismissal complaint. Instead of addressing procedural issues, the Court of Appeals
made a decision on the merits (the actual substance of the case), finding that there was no
employer-employee relationship and dismissing the case.
Wahing et al. worked for the Daguio Spouses as rubber tree tappers until they were ordered
to stop working on October 15, 2006 (Mait) and February 6, 2007 (Wahing and Calago). They
then filed a complaint for illegal dismissal, asking for reinstatement (to be returned to their
jobs), or separation pay (compensation for not being able to return), underpayment of
wages, labor standards benefits (benefits guaranteed by labor laws), damages, and
attorney's fees. However, the Labor Arbiter (a legal official who resolves labor disputes)
dismissed their complaint, believing that their relationship with the Daguio Spouses was that
of landlord and tenant, not employer and employee.

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 Wahing et al. appealed this ruling to the National Labor Relations Commission (NLRC), which
agreed with them and vacated (set aside) the Labor Arbiter's dismissal, ordering the case to
be decided on its merits. This led to a ruling in their favor by the Labor Arbiter in 2010,
declaring that they were illegally dismissed and ordering the Daguio Spouses to pay them
P777,090.52 in monetary awards.
The Daguio Spouses then appealed to the National Labor Relations Commission (NLRC),
claiming they hadn’t received the Labor Arbiter’s orders or the position papers from Wahing
et al. The Daguio Spouses also requested a reduction of their appeal bond (the financial
guarantee they must provide in case they lose the appeal), which was partially granted, but
they were still required to provide an additional P50,000 in cash or surety.
As a result of this appeal, the NLRC ordered the case to be remanded (sent back) for further
action, requiring the Labor Arbiter to allow the Daguio Spouses to present their evidence.
This case revolves around whether or not there was an employer-employee relationship,
which is key in determining whether the dismissal was illegal. The Court of Appeals made a
mistake in deciding that there was no such relationship, which the Supreme Court has now
corrected.

Wahing et al. then filed a motion for reconsideration (a formal request to review and change
a decision) of the August 24, 2011 Resolution from the National Labor Relations Commission
(NLRC), but their request was denied. Consequently, they filed a Petition for Certiorari (a
request for judicial review of a lower court or agency’s decision) before the Court of Appeals,
arguing two main points: (1) the National Labor Relations Commission (NLRC) had no
jurisdiction (authority) to issue the challenged Resolution because the Daguio Spouses failed
to properly perfect their appeal (did not follow the proper legal steps to file an appeal), and
(2) contrary to what the Resolution stated, the Labor Arbiter (a legal official handling labor
disputes) respected the Daguio Spouses' right to due process (fair treatment in the legal
process) by giving them enough time and notice to submit their evidence, which they
allegedly failed to do.
Instead of addressing the procedural defects (errors related to the process or steps in the
case) raised in the Petition for Certiorari, the Court of Appeals chose to decide the case based
on its merits (substance or fundamental issues of the case), as the case had already been
remanded (sent back for further action) multiple times and all the parties' evidence had been
included in the case record. The Court of Appeals concluded that the Daguio Spouses’
evidence sufficiently refuted (disproved) the existence of an employer-employee
relationship, while Wahing et al. were only relying on procedural technicalities (minor legal
technicalities) and self-serving allegations (claims made by one party that benefit their own
case but lack evidence).
Since Wahing et al. failed to meet their burden of proving that an employer-employee
relationship existed, the Court of Appeals determined that they could not have been illegally
dismissed (wrongfully fired). As a result, the dispositive portion (the decision's main
conclusion or judgment) of the Court of Appeals’ January 23, 2015 Decision reads as follows:
“WHEREFORE, premises considered, the assailed Resolution dated August 24, 2011 of the
National Labor Relations Commission, Eighth Division, Cagayan De Oro City is hereby
REVERSED and SET ASIDE. Petitioner's Complaint for illegal dismissal, reinstatement or
separation pay, underpayment of wages, premium pay for holiday, holiday pay, rest day pay,
service incentive leave pay, vacation/sick leave pay, 13th month pay, moral and exemplary
damages and attorney's fees is hereby DISMISSED for lack of basis.”

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 This means that the Court of Appeals overturned the NLRC’s decision, dismissed Wahing et
al.'s complaint, and found that they did not have grounds to claim illegal dismissal or other
related claims, as their evidence was insufficient.

Wahing et al. then filed a motion for reconsideration (a formal request to review and change
a decision) of the Court of Appeals' Decision, but their request was again denied. As a result,
Wahing et al. filed a Petition for Review on Certiorari (a request for the higher court to review
the case), arguing that the Court of Appeals made a grave error (a serious mistake) by ruling
on the merits (substance) of the case when the issues that were addressed had not been
raised in their Petition for Certiorari.
Petitioners Wahing et al. argue that there was no reason to consider the Daguio Spouses'
evidence because the Daguio Spouses repeatedly failed to submit their position paper (a
written document outlining their legal arguments) before the Labor Arbiter (the legal official
handling the case), despite being sent several notices to do so. They also claim that, in any
case, the National Labor Relations Commission (NLRC) had no jurisdiction (authority) to
remand (send back) the case to the Labor Arbiter because the Daguio Spouses did not submit
the required surety bond (a financial guarantee required to proceed with an appeal) to
properly perfect (complete) their appeal. Therefore, Wahing et al. argue that the Labor
Arbiter's decision (which ruled in their favor) should have been considered final.
On the main issue, Wahing et al. dispute the Court of Appeals' conclusion that they failed to
prove the existence of an employer-employee relationship (a legal relationship in which an
employer hires an employee for work and provides compensation). They argue that their co-
workers' affidavits (sworn written statements) support their claims that they had an
employment relationship with the Daguio Spouses. Wahing et al. also challenge the Court of
Appeals' reliance on the Lirio v. Genovia case, arguing that unlike in the Lirio case, they did
not raise the issue of the employer-employee relationship in their Petition for Certiorari
before the Court of Appeals. Therefore, they believe it was inappropriate for the Court of
Appeals to address this issue, as it was not part of the appeal.
In response, the Daguio Spouses argue that the Court of Appeals was correct in resolving the
case on the merits because Wahing et al. had raised issues such as: (1) the timeliness
(whether the appeal was filed on time) of the Daguio Spouses' appeal before the NLRC, (2)
the appropriateness of resolving the case without allowing the Daguio Spouses to present
their evidence, and (3) whether Wahing et al. were entitled to certain pay benefits (such as
holiday pay, premium pay, rest day pay, etc.). They also assert that the Court of Appeals was
justified in reviewing the case to ensure the right to a speedy disposition (quick resolution)
of the case.
Regarding the bond issue, the Daguio Spouses argue that they complied with the order (legal
directive) partially granting their Motion to Reduce Bond (a request to lower the required
bond). In defense of the Court of Appeals' reliance on Lirio, the Daguio Spouses claim that
the Court of Appeals had the right to review the facts and the evidence to determine if there
was grave abuse of discretion (serious misuse of power) in the NLRC's decision.
In their reply, Wahing et al. argue that the Daguio Spouses' motion to reduce the appeal bond
did not meet the legal standards for substantial compliance (following the rules closely
enough to be acceptable). They argue that the Daguio Spouses failed to pay the required
10% of the monetary award being appealed and did not show a valid reason for leniency in
following the procedural rules. Wahing et al. also argue that the Daguio Spouses falsely
claimed they were denied due process (fair treatment in the legal process) and failed to

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 submit their evidence, despite repeated notices. Finally, Wahing et al. argue that the Lirio
case does not apply to their situation and that it was wrong for the Court of Appeals to rule
on issues that were not raised in their Petition for Certiorari.
The issue to be resolved by the Supreme Court is whether the Court of Appeals made a
serious error in ruling on issues that were not raised on appeal by Wahing et al. This includes
the question of whether Wahing et al. were, in fact, employees of the Daguio Spouses.
In the end, the Supreme Court grants Wahing et al.'s Petition (accepts their request for
review). While the Court of Appeals correctly addressed the merits of the case, it made an
error in concluding that there was no employer-employee relationship between Wahing et
al. and the Daguio Spouses.

The Court of Appeals has the authority to review and decide a case based on its merits
(substance), following the principle of judicial economy (making decisions efficiently) and
avoiding the problem of "dispensing piecemeal justice" (addressing legal issues in fragments
rather than in a full and comprehensive manner). In the case of Heirs of Loyola v. Court of
Appeals, the Court of Appeals made a ruling on the merits even when the petition for
certiorari (a formal request for a higher court to review the decision of a lower court) only
questioned the appropriateness of dismissing the case based on procedural issues. The
petitioners in Heirs of Loyola argued that the Court of Appeals made a grave abuse of
discretion (a serious misuse of authority) by addressing substantive issues that were not
raised in their petition. Citing Catholic Bishop of Balanga v. Court of Appeals, the Court
explained that, as a general rule, only matters raised as errors (mistakes or wrong decisions)
in the appeal can be resolved. Rule 51, Section 8 of the Rules of Court provides that no error
not affecting the jurisdiction (the authority of a court over a case) or the validity of the
judgment can be considered unless it is closely related to or dependent on an assigned error
and is properly argued. This rule, however, also allows the Court of Appeals to resolve errors
that were not specifically assigned but are necessary for a complete and just resolution of
the case. The Court of Appeals is given discretion (the authority to make decisions based on
judgment) if it determines that addressing these issues is essential to achieving a fair
decision.
Jurisprudence (legal principles established by judicial decisions) has established several
exceptions to the rule. In Catholic Bishop of Balanga v. Court of Appeals, the Court noted that
while an appealing party is legally required to specify in their brief the assignment of errors
(the list of mistakes they believe the court made), only those assigned errors will be
considered by the appellate court. However, the Court also recognized exceptions to this
rule. The jurisprudence cites Roscoe Pound, a well-known legal scholar, who stated that
appeals are not only necessary to correct mistakes but also serve as a preventive measure
against unfairness and as a stimulus (encouragement) for careful and thorough judicial
decisions. Pound emphasized that review (the process of reviewing a case) is not only about
correcting mistakes but also ensuring full justice for the parties involved and the public. In
line with this principle, an appeal should bring the totality (entirety) of the case before the
reviewing court, allowing for a comprehensive review of the judgment and order. This
ensures that due process (the fair treatment in legal matters) is maintained, as full-scale
review is granted as a matter of right under the Rules of Court.

Guided by the principles outlined in previous rulings, we have established that the appellate
court has broad discretionary power (the authority to make decisions based on judgment)

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 to waive the lack of proper assignment of errors (failure to formally point out mistakes in the
appeal) and consider errors not assigned (mistakes not specifically raised by the appealing
party). The Court of Appeals is empowered to review decisions, even if those decisions are
not specifically cited as errors in the appeal. Since the Court of Appeals has the authority to
consider grounds (reasons or justifications) other than those discussed by the trial court, it
can uphold the decision based on those grounds. Similarly, it can also reverse the trial court's
decision based on grounds that were not raised in the appeal. This principle has been applied
in several exceptional cases, which include instances where:
1. Grounds not assigned as errors but affecting the jurisdiction (the court's authority
over a matter) of the subject matter of the case are considered;
2. Matters not assigned as errors but are plain or clerical errors (simple mistakes or
misstatements that do not affect the decision's substance);
3. Matters not assigned as errors but are essential for a just decision and to resolve the
case fully, or to serve the interest of justice (fairness) and prevent piecemeal justice
(deciding in parts rather than fully addressing the case);
4. Matters not assigned as errors but were raised in the trial court and are important to
the case, yet were ignored or not addressed by the parties;
5. Matters not assigned as errors but are closely related to an error that was raised in
the appeal;
6. Matters not assigned as errors but are crucial for resolving a question that was
properly raised in the appeal.
Thus, the Court of Appeals has the discretion to consider these issues and make decisions
when necessary to ensure the just and complete resolution of the case, to serve the interest
of justice, and to avoid fragmenting justice. This approach is consistent with the Court of
Appeals' ability to review the entire case brought before it.
While petitioners argue that procedural defects, such as the failure to post the full appeal
bond (a financial guarantee required for an appeal to proceed), should have prevented the
remand (sending the case back to the lower court) for further evidence from the
respondents, the Court has guidance from Tres Reyes v. Maxim's Tea House. The decision in
this case highlights that in labor cases (disputes between employers and employees),
procedural rules should not be applied rigidly (strictly). These rules are tools to help achieve
justice, and when their strict application would hinder the fair and complete resolution of a
case, they should be relaxed. Technicalities should not prevent a just outcome. The focus is
on ensuring substantial justice, which may sometimes require flexibility in the application of
technical rules. Given the prolonged nature of this case, which would likely take even longer
if the case were remanded for further procedural matters, the Court of Appeals correctly
considered the evidence from both parties to resolve the case on its merits.

Regarding the petitioners' arguments about the posting of an appeal bond, the case Tres
Reyes establishes that this requirement is a procedural matter (a part of the process of a case
that deals with technical rules) that can be relaxed (made less strict) in order to achieve
substantial justice (the fair and correct outcome). Further, Turks Shawarma Company v.
Fajaron clarifies when flexibility can be applied to the appeal bond requirement: it
emphasizes that both the Labor Code (the set of laws governing labor matters) and the NLRC
Rules of Procedure (rules governing procedures for labor-related cases) intend for the appeal
bond (a sum of money or guarantee to ensure an appeal can proceed) to be strictly followed.
The bond is considered mandatory and jurisdictional (necessary for the court to have

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 authority to hear the case), meaning that if the bond is not posted, the decision of the Labor
Arbiter (the official who first hears labor disputes) becomes final and enforceable. The
purpose of the bond is to ensure that if the workers win their case, the monetary award (the
financial compensation) will be paid to them, and to prevent employers from using the
appeal process to delay or avoid paying what they owe.
However, the Court (the judicial body) has allowed some leniency (flexibility) in special and
justified circumstances, especially when strict adherence to posting the bond would
undermine equity (fairness) and justice (a correct decision). Section 6 of Rule VI of the 2005
NLRC Revised Rules of Procedure allows for the reduction of the appeal bond, but only if
certain conditions are met: the motion to reduce the bond must be based on meritorious
grounds (valid and strong reasons), and a reasonable amount (an appropriate portion of the
award) must be posted. Meeting these conditions stops the running of the period to perfect
an appeal (ensures that the appeal will still be allowed within the required timeframe).
Petitioners acknowledge that the National Labor Relations Commission (the body that
handles labor disputes) granted respondents' Motion to Reduce Appeal Bond and that the
respondents complied by posting an additional Php 50,000. Therefore, there is no issue with
respondents' adherence to this statutory (required by law) rule.
The Court of Appeals (the appellate body reviewing the case) correctly decided the case
based on the arguments and evidence provided by both parties, aligning with the principle
of ensuring a just and complete resolution (a fair and thorough decision).

After addressing the appropriateness of the Court of Appeals' decision on the merits, this
Court is now tasked with reviewing whether there was an employer-employee relationship
between the parties involved. While this typically requires a factual review (the examination
of facts and evidence), which is usually outside the scope of a Rule 45 petition (a type of
petition for review focused on legal issues), the conflicting prior findings (inconsistent
conclusions made by the lower courts) about the existence of such a relationship justify this
review. Contrary to the Court of Appeals' findings, the respondents employed the petitioners
as farm workers and are, therefore, subject to the laws governing employer-employee
relationships. The Consulta v. Court of Appeals case, citing Viaña v. Al-Lagadan, introduces
the four-fold test for determining the presence of an employer-employee relationship, which
includes (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4)
the power to control. Among these, the power to control (the ability of the employer to
direct how and where the work is done) is considered the most important factor.
Respondents argued that the petitioners were not their employees because the petitioners
only shared in the profits from the sale of rubber, rather than receiving wages. They also
denied having control over the methods by which the petitioners worked. However, De Los
Reyes v. Espineli differentiates between a farm employer-farm worker relationship and an
agricultural tenancy (a type of lease involving the cultivation of land). It points out that in an
employer-employee relationship, the employer pays a salary or wage (a fixed amount of
money for work performed), whereas in an agricultural tenancy, the worker (tenant) receives
a share of the produce, which depends on the harvest. De Los Reyes explains that agricultural
labor can be considered as an employer-employee relationship if it involves the four
elements of (1) the selection and engagement (hiring) of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the employer's power to control the employee's
conduct. The decisive factor (key element) in distinguishing between a farm employer and a
landholder with a tenant is the control the employer has over the worker’s actions. The

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 landholder does not have the same level of control over the tenant as an employer has over
an employee, which is why the tenant is not considered an employee in the same way. This
analysis further illustrates that the nature of the relationship between farm workers and
employers hinges on the employer’s control over the worker's work and the payment of
wages, distinguishing it from a shareholding tenancy, where the worker’s compensation
depends on the output.

The record does not provide sufficient evidence to support the idea that the respondents are
farm laborers. They do not adhere to set hours of work, and there are no specific regulations
(rules or guidelines) established by the petitioner regarding how they are supposed to
perform their duties. The argument made is that they are guards; however, there is no
evidence that they are required to report for duty or that they work in shifts. Additionally,
there is no indication that the petitioner has prescribed how they should carry out their
duties as guards. Without the necessary degree of control (the power to direct and supervise
the work), it is difficult to establish an employer-employee relationship in this case. Both
parties presented testimonial evidence (statements made by witnesses) to support their
claims about the existence of an employer-employee relationship. The petitioners provided
testimonies from their co-workers, who described: (1) the daily wages (money paid every
day) for their required hours of work; (2) the constant supervision (continuous oversight) of
their work by the respondents; and (3) the potential for dismissal (being fired) if they missed
three consecutive workdays. On the other hand, the respondents submitted testimonies
from their former caretaker (a person who took care of their property), a local rubber
merchant, and several local government officials (officials who hold positions in the local
government), all of whom claimed that the petitioners "only shared in the proceeds"
(received a portion of the profits) from rubber sales and were not engaged as agricultural
employees.
Despite these differing testimonies, there is enough supporting evidence to back up the
petitioners' claim that they worked as employees on the respondents' rubber plantation. The
testimonies of the petitioners’ colleagues show that they: (1) were required to work during
set hours; (2) were paid a fixed daily wage; (3) were closely supervised by the respondents;
and (4) could be dismissed if they failed to meet the work standards set by the respondents.
Regarding the control element, the work of rubber tapping (collecting rubber from trees)
does not fit the usual way of evaluating an employer's control over an employee's means and
methods (the way the work is performed). As explained in the Court of Appeals' decision,
the petitioners' job involved simply collecting rubber lumps from small containers attached
to trees and transferring them into another container. Because this work does not fit the
traditional model of control, the Francisco v. National Labor Relations Commission case
suggests using a different approach. The economic realities (the actual circumstances or
financial aspects) of the employment relationship can help determine whether someone is
an employee or another type of worker, such as an independent contractor or corporate
officer. This broader perspective may offer a more accurate understanding of the nature of
the relationship between the parties involved.

The more appropriate approach, in this case, is to apply a two-tiered test (a method involving
two steps) to assess the nature of the relationship between the parties. The first step is to
evaluate the putative employer's power (the alleged employer’s authority) to control the
employee regarding the means and methods (how the work is done) of performing the tasks.

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 The second step is to consider the underlying economic realities (the actual financial
circumstances) of the activity or relationship. This dual approach provides a more
comprehensive framework for understanding the true nature of the relationship by looking
at the full context of the situation. It is especially relevant in this case, as there is no written
agreement (formal contract or document) or terms of reference (specific guidelines) that can
clearly define the relationship between the parties. Additionally, the complexity of the
relationship, which includes various roles and responsibilities given to the worker over time,
further complicates matters.
The economic reality test discussed in the Francisco v. National Labor Relations Commission
case requires an analysis of the totality of economic circumstances (all aspects of the
worker’s economic situation) to determine if an employer-employee relationship exists. To
do this, several factors must be considered, such as: (1) the extent to which the services the
worker performs are an integral part (essential or necessary part) of the employer's business;
(2) how much the worker has invested in equipment and facilities (tools or resources needed
for the job); (3) the level of control (authority and supervision) the employer has over the
worker; (4) the worker’s potential for profit and loss (whether the worker benefits or suffers
financially from the business); (5) the amount of initiative, skill, judgment, or foresight (how
much effort, expertise, or planning is required for the worker's success); (6) the permanency
(long-term nature) and duration (length) of the relationship between the worker and
employer; and (7) the degree of dependency (how much the worker relies on the employer)
for continued employment in that line of work. These factors help establish the true nature
of the employment relationship, even if there is no formal agreement between the parties.

The standard for determining economic dependence (how much a worker relies on the
employer for their livelihood) is whether the worker is dependent on the alleged employer
for continued employment in that specific line of business. In the U.S., the Federal Labor
Standards Act uses this concept of economic dependence to analyze potential employment
relationships, and by analogy, the same standard should apply under the Labor Code of the
Philippines. This means that to determine whether an employer-employee relationship
exists, the key factor is whether the worker is financially dependent on the employer for their
work.
In this case, the testimonies presented by the petitioners (the workers) support the
necessary economic reality factors to prove that they were economically dependent on the
respondents. The petitioners performed services that were essential to the respondents'
business of running a rubber plantation. Although there was no evidence that the petitioners
invested in their own tools or work facilities, the simple nature of the labor they performed
means this point is not crucial.
Moreover, the lack of evidence showing that other plantations were willing to hire the
petitioners does not negate the fact that: (1) respondents had control over the petitioners
by supervising them during their work hours; (2) the petitioners had no ability to control their
profit or loss, as they were paid a fixed daily wage; and (3) the petitioners could be dismissed
for not following the required work schedule. These factors, when viewed through the lens
of the two-tier test from Francisco v. National Labor Relations Commission, demonstrate that
respondents had control over the means, methods, and hours of the petitioners' work, and
that the petitioners were economically dependent on respondents for their livelihood.
Therefore, there is an employer-employee relationship.

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 Both parties presented similar types of evidence to support their claims. Respondents
provided testimonies from a "former caretaker" and local government officials, which were
equally credible to the petitioners' evidence. When the evidence of both parties is balanced,
the scales must tip in favor of labor (the workers), as established in Philippine National Bank
v. Bulatao. This principle aligns with the legal rule that when the evidence is in equipoise
(balanced), doubts should be resolved in favor of the worker. This reflects the State's policy
to afford greater protection to labor, which is required under the Labor Code and is
consistent with the social justice goals behind labor laws. These laws are meant to protect
workers' rights and promote their welfare, ensuring that labor has a primary place in the
social and economic structure of the nation.

The Labor Code and related laws are seen as tools for achieving social justice in the
workplace. Their purpose is to humanize laws and ensure that the social and economic forces
in society are balanced by the State so that justice, which may not always be perfectly
achieved, can be approached. Social justice seeks to protect those who are disadvantaged,
particularly workers, whose only means of livelihood may be their job. The 1987 Constitution,
through Article XIII, Section 3, guarantees workers the right to security of tenure—the right
to not be arbitrarily deprived of their job. Security of tenure is considered a property right
that a worker can only lose through due process, meaning fair and just procedures must be
followed before termination can occur. Under Article 280 of the Labor Code, security of
tenure means that an employee cannot be dismissed unless there is just cause or it is
authorized by the Labor Code. If a worker is terminated without due process or without
proper cause, the dismissal is considered arbitrary and unlawful.
The Labor Code also contains a provision, Article 4, which ensures that all doubts in the
interpretation and implementation of the Labor Code will be resolved in favor of labor. This
ensures that the law works to protect the rights of workers, who are often in a disadvantaged
position compared to employers. In the case at hand, the Court of Appeals placed a heavy
evidentiary burden on the petitioners, which was unjust considering the evidence already
presented. The principle of equipoise (the idea that when evidence is balanced between two
sides, it should be resolved in favor of labor) should have been applied, and therefore, the
petitioners were entitled to the benefit of the doubt.
Because the employer-employee relationship was established, the respondents (employers)
illegally terminated the petitioners' employment by ordering them to stop working without
proper or authorized cause. The petitioners are entitled to reinstatement (being restored to
their job) along with back wages (pay for the period they were unlawfully dismissed) and
other labor standards benefits. If reinstatement is not possible due to strained relations
between the parties, the respondents must instead provide the petitioners with separation
pay (compensation for loss of employment). Additionally, because the petitioners incurred
costs in their legal battle, they are entitled to attorney's fees amounting to 10% of the total
monetary award. However, the Court did not find any evidence of malice, fraud, or bad faith
on the part of the respondents, so there is no basis for moral or exemplary damages.
In conclusion, the petition is granted, and the Court of Appeals' decision is reversed. The
decision of the Labor Arbiter (the original court that handled the case) that recognized the
employer-employee relationship and found the dismissal to be illegal is reinstated, with the
possibility of reinstatement or separation pay depending on the situation. The petitioners
are also entitled to attorney's fees. The judgment has been issued, and the ruling is now final,
with no further legal issues to address.

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