Republic of the PhilippinesSupreme Court

Manila 

THIRD DIVISION  JULITO SAGALES,                                 G.R. No. 166554                              Petitioner,                                                                                         Present:                                                                         YNARES-SANTIAGO, J.,                                                                                                     Chairperson,            -   versus   -                                           AUSTRIA-MARTINEZ,                                                                        CHICO-NAZARIO,                                                                         NACHURA, and                                                                        REYES, JJ. RUSTAN’S COMMERCIAL                    Promulgated:CORPORATION,                             Respondent.                        November 27, 2008 

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D E C I S I O N  REYES, R.T., J.:  

Labor is property, and as such merits protection.  The right to make it available is next in importance to the rights of life and liberty.   It lies to a large extent at the foundation of most other forms of property, and of all solid individual and national prosperity.[1]

 The exultation of labor by Mr. Justice Noah Haynes Swayne of the United

States Supreme Court comes to the fore in this petition for review on certiorari.  The employeequestions the propriety of his dismissal after he was

caught stealing 1.335 kilos of squid heads worth P50.00.  He invokes his almost thirty-one (31) years of untarnished service and the several awards he received from the company to temper the penalty of dismissal meted on him. 

The Facts 

Petitioner Julito Sagales was employed by respondent Rustan’s Commercial Corporation  from October 1970  until July 26, 2001,  when  he was terminated.  At the time of his dismissal, he was occupying the position of Chief Cook at the Yum Yum Tree Coffee Shop located at Rustan’s Supermarket in Ayala Avenue, Makati City.  He  was paid  a basic  monthly salary of P9,880.00.  He was also receiving service charge of not less than P3,000.00 a month and other benefits under the law and the existing collective bargaining agreement between respondent and his labor union.[2]

 In the course of his employment, petitioner was a consistent recipient of

numerous citations[3] for his performance.  After receiving his latest award on March 27, 2001, petitioner conveyed to respondent his intention of retiring on October 31, 2001, after reaching thirty-one (31) years in service.[4]  Petitioner, however, was not allowed to retire with his honor intact. 

On June 18, 2001, Security Guard Waldo Magtangob, upon instructions from Senior Guard Bonifacio Aranas, apprehended petitioner in the act of taking out from Rustan’s Supermarket a plastic bag.  Upon examination, it was discovered that the plastic bag contained 1.335 kilos of squid heads worth P50.00.  Petitioner was not able to show any receipt when confronted.  Thus, he was brought to the Security Office of respondent corporation for proper endorsement to the Makati Headquarters of the Philippine National Police.  Subsequently, petitioner was brought to the Makati Police Criminal Investigation Division where he was detained.  Petitioner was later ordered released pending further investigation.[5]

 Respondent alleged that prior to his detention, petitioner called up Agaton

Samson, Rustan’s Branch Manager, and apologized for the incident.  Petitioner even begged Samson that he would just pay for the squid heads.  Samson replied that it is not within his power to forgive him.[6]

 On June 19, 2001, petitioner underwent inquest proceedings for qualified

theft before Assistant Prosecutor Amado Y. Pineda.  Although petitioner admitted that he was in possession of the plastic bag containing the squid heads, he denied stealing them because he actually paid for them.  As proof, petitioner presented a receipt.  The only fault he committed was his failure to immediately show the purchase receipt when he was accosted because he misplaced it when he changed his clothes.  He also alleged that the squid heads were already “scraps” as these were not intended for cooking.  Neither were the squid heads served to customers.  He bought the squid heads so that they could be eaten instead of being thrown away.  If he intended to steal from respondent, he could have stolen other valuable items instead of scrap.[7]

 Assistant Prosecutor Pineda believed the version of petitioner and

recommended the dismissal of the case for “lack of evidence.”[8] The recommendation was approved upon review by City Prosecutor Feliciano Aspi.[9]

 Notwithstanding the dismissal of the complaint, respondent, on June 25,

2001, required petitioner to explain in writing within forty-eight (48) hours why he should not be terminated in view of the June 18, 2001 incident.  Respondent also placed petitioner under preventive suspension.[10]

 On June 29, 2001, petitioner was informed that  a formal investigation

would be conducted by the Legal Department on July 6, 2001.[11]

 Petitioner and his counsel attended the administrative investigation where he

reiterated his defense before the inquest prosecutor. Also in attendance were Aranas and Magtangob, who testified on the circumstances surrounding the apprehension of petitioner; Samson, the  branch  manager to whom  petitioner  allegedly  apologized for the incident; and Zenaida Castro, cashier, who testified that the squid heads were not paid. 

Respondent did not find merit in the explanation of petitioner.  Thus, petitioner was dismissed from service on July 26, 2001.[12]  At that time, petitioner had been under preventive suspension for one (1) month. 

Aggrieved, petitioner filed a complaint for illegal dismissal against respondent.  He also prayed for unpaid salaries/wages, overtime pay, as well as moral and exemplary damages, attorney’s fees, and service charges.[13]

 Labor Arbiter, NLRC, and CA Dispositions

 On July 24, 2002, Labor Arbiter Felipe P. Pati dismissed[14] the complaint.

 IN VIEW OF THE FOREGOING, the complaint for illegal

dismissal should be DISMISSED for lack of merit. 

SO ORDERED.[15]

          According to the Labor Arbiter, the nature of the responsibility of petitioner “was not that of an ordinary employee.”[16]  It then went on to categorize petitioner as a supervisor in “a position of responsibility where trust and confidence is inherently infused.”[17]  As such, it behooved him “to be more knowledgeable if not the most knowledgeable in company policies on employee purchases of food scrap items in the kitchen.”[18]  Per the evidence presented by respondent, petitioner breached company policy which justified his dismissal.           Petitioner appealed to the National Labor Relations Commission (NLRC).[19]  On April 10, 2003, the NLRC reversed[20] the Labor Arbiter in the following tenor: 

WHEREFORE, the decision appealed from is hereby SET ASIDE and complainant’s dismissal declared illegal. Further, respondent is hereby ordered to reinstate complainant to his former position without loss of seniority rights and other benefits and paid backwages computed from time of dismissal up to the finality of this decision which as of this date amounts to P269,854.16.

 All other claims are denied for want of basis. SO ORDERED.[21]

           The NLRC  held that  the  position  of complainant is  not  supervisory covered by the trust and confidence rule.[22]  On the contrary, petitioner is a mere rank-and-file employee.[23]  The evidence is also wanting that petitioner committed

the crime charged.[24]  The NLRC did not believe that petitioner would trade off almost thirty-one (31) years of service for P50.00 worth of squid heads.[25]

The NLRC further ruled that petitioner was illegally dismissed as respondent failed to establish a just cause for dismissal.[26]  However, the claim for damages was denied for lack of evidence.[27]

 The motion for reconsideration[28] having been denied,[29] respondent brought

the matter to the Court of Appeals (CA) via a petition for certiorari under Rule 65 of the 1997 Rules on Civil Procedure.[30]  On July 12, 2004, the CA rendered the assailed decision, [31] with the following fallo: 

WHEREFORE, the petition is GRANTED. The challenged resolutions of April 10, 2003 and July 31, 2003 of public respondent NLRC are REVERSED and SET ASIDE. The decision of the Labor Arbiter of July 24, 2002, dismissing private respondent’s complaint is REINSTATED.

 SO ORDERED.[32]

           In reversing the NLRC, the CA opined that the position of petitioner was supervisory in nature.[33]  The CA also held that the evidence presented by respondent clearly established loss of trust and confidence on petitioner.[34]  Lastly, the CA, although taking note of the long years of service of petitioner and his numerous awards, refused to award separation pay in his favor.  According to the CA, “the award of separation pay cannot be sustained under the social justice theory” because the instant case “involves theft of the employer’s property.”[35]

 Petitioner filed a motion for reconsideration[36] which was denied.[37]  Left

with no other recourse, petitioner availed of the present remedy.[38]

 Issues

           Petitioner in his Memorandum[39] imputes to the CA the following errors, to wit: 

I. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN

IT CONCLUDED THAT THE POSITION OF THE PETITIONER BEING AN ASSISTANT COOK AS A SUPERVISORY POSITION FOR BEING CONTRADICTORY TO THE EVIDENCE ON RECORD. II. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT CONCLUDED THAT THE DOCTRINE OF TRUST   AND   CONFIDENCE     APPLIES AGAINST     THE     PETITIONER TO JUSTIFY HIS DISMISSAL FROM EMPLOYMENT FOR BEING CONTRADICTORY TO THE EVIDENCE ON RECORD.[40]  (Underscoring supplied)

           For a full resolution of  the issues in the instant case,  the  following questions should be answered: (1) Is the position of petitioner supervisory in nature which is covered by the trust and confidence rule? (2) Is the evidence on record sufficient to conclude that petitioner committed the crime charged? and (3) Assuming that the answer is in the affirmative, is the penalty of dismissal proper? 

Our Ruling 

I. The position of petitioner is supervisory in nature which is covered by the trust and confidence rule. 

The nature of the job of an employee becomes relevant in termination of employment by the employer because the rules on termination of managerial and supervisory employees are different from those on the rank-and-file.  Managerial employees are tasked to perform key and sensitive functions, and thus are bound by more exacting work ethics.[41]  As a consequence, managerial employees are covered by the trust and confidence rule.[42]  The same holds true for supervisory employees occupying positions of responsibility.[43]

 There is no doubt that the position of petitioner as chief cook is supervisory

in nature.  A chief cook directs and participates in the preparation and serving of meals; determines timing and sequence of operations required to meet serving times; and inspects galley and equipment for cleanliness and proper storage and preparation of food.[44] Naturally, a chief cook falls under the definition of a

supervisor, i.e., one who, in the interest of the employer, effectively  recommends  managerial actions which would require the use  of  independent judgment and is not merely routinary or clerical.[45]

 It has not escaped Our attention that petitioner changed his stance as far as

his actual position is concerned.  In his position paper, he alleged that at the time of his dismissal, he was “Chief Cook.”[46] However, in his memorandum, he now claimed that he was an “Asst. Cook.”[47]  The ploy is clearly aimed at giving the impression that petitioner is merely a rank-and-file employee. The change in nomenclature does not, however, help petitioner, as he would still be covered by the trust and confidence rule.  In Concorde Hotel v. Court of Appeals,[48] the Court categorically ruled:  

Petitioner is correct insofar as it considered the nature of private respondent’s position as assistant cook a position of trust and confidence.  As assistant cook, private respondent is charged with the care of food preparation in the hotel’s coffee shop.  He is also responsible for the custody of food supplies and must see to it that there is sufficient stock in the hotel kitchen.  He should not permit food or other materials to be taken out from the kitchen without the necessary order slip or authorization as these are properties of the hotel. Thus, the nature of private respondent’s position as assistant cook places upon him the duty of care and custody of Concorde’s property.[49]  (Emphasis supplied)

 Of course, the ruling assumes greater significance if petitioner is the chief

cook.  A chief cook naturally performs greater functions  and has  more responsibilities than an assistant cook.  In eo quod plus sit simper inest et minimus.  The greater always includes the less.  Ang malawak ay laging sumasakop sa maliit.           II. The evidence on record is sufficient to conclude that petitioner committed the crime charged. 

Security of tenure is a paramount right of every employee that is held sacred by the Constitution.[50]  The reason for this is that labor is deemed to be

“property”[51] within the meaning of constitutional guarantees.[52]  Indeed, as it is the policy of the State to guarantee the right of every worker to security of  tenure  as  an  act  of  social  justice,[53]such right should not be denied on mere speculation of any similar or unclear nebulous basis.[54]  Indeed, the right of every employee to security of tenure is all the more secured by the Labor Code by providing that “the employer shall not terminate the services of an employee except for a just cause or when authorized” by law.  Otherwise, an employee who is illegally dismissed “shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive  of  allowances, and  to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”[55]

 Necessarily then, the employer bears the burden of proof to show the basis

of the termination of the employee.[56]

 In the case at bar, respondent has discharged its onus of proving that

petitioner committed the crime charged.  We quote with approval the observation of the CA in this regard: 

On this matter, petitioner presents as evidence the verified statement of security guard Aranas.  Aranas positively saw the private in the act of bringing out the purloined squid heads.  Similarly, the statement of security guard Magtangob attested to the commission by private respondent of the offense charged.  Further, the verified statement of Samson, store manager  of  petitioner  corporation who is in charge of all personnel, including employees of the Yum Yum Tree Coffee Shop of which private respondent was a former assistant cook, attested to the fact of private respondent seeking apology for the commission of the act.  Likewise, the statement of Zenaida Castro (Castro), cashier of petitioner corporation’s supermarket, Makati Branch, Ayala Center, Makati City, confirmed that indeed the 1.335 kilos of squid heads amounting to fifty pesos (P50.00)per kilo, had not been paid for.[57]

 The contention of petitioner that respondent merely imputed the crime

against him because he was set to retire is difficult, if not impossible, to believe.  Worth noting is the fact that petitioner failed to impute any ill will or

motive on the part of the witnesses against him.  As aptly observed by the Labor Arbiter: 

            It seems unbelievable to believe that the apprehending officers up to the Manager, Mr. Samson, were all telling a lie as what complainant wants to portray when he alleged in his pleadings that he mentioned to the apprehending officers [that] he has a receipt for [the squid heads] and that he never apologized. This is understandable on his part because complainant wants no loophole in his version. And an easy way out is to fabricate his allegations.[58]

 We stress that the quantum of proof required for the application of the loss

of trust and confidence rule is not proof beyond reasonable doubt.  It is sufficient that there must only be some basis for the loss of trust and confidence or that there is reasonable ground to believe, if not to entertain the moral conviction, that the employee concerned is responsible for the misconduct and that his participation in the misconduct rendered him absolutely unworthy of trust and confidence.[59]

 It is also of no moment that the criminal complaint for qualified theft against

petitioner was dismissed.  It is well settled that the conviction of an employee in a criminal case is not indispensable to the exercise of the employer’s disciplinary authority.[60]

           III. The penalty of dismissal is too harsh under the circumstances. 

The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.[61]  The only condition is that the exercise of management prerogatives should not be done in bad faith[62] or with abuse of discretion.[63]  Truly, while the employer has the inherent right to discipline, including that of dismissing its employees, this prerogative is subject to the regulation by the State in the exercise of its police power.[64]

 In this regard, it is a hornbook doctrine that infractions committed by an

employee should merit only the corresponding penalty demanded by the circumstance. The penalty must be commensurate with the act, conduct or omission imputed to the employee and must be imposed in connection with the disciplinary authority of the employer.[65]

 For example, in Farrol v. Court of Appeals,[66] the employee, who was

a  district  manager of  a bank, incurred a shortage of P50,985.37.  He was dismissed although the funds were used to pay the retirement benefits of five employees of the bank.  The employee was also able to return the amount, leaving a balance of only P6,995.37 of the shortage.  The bank argued that under its rules, the penalty for the infraction of the employee is dismissal.  The Court disagreed and held that the penalty of dismissal is too harsh. The Court took note that it is the first infraction of the employee and that he has rendered twenty-four (24) long years of service to the bank.  In the words of Mme. Justice Consuelo Ynares-Santiago, “the  dismissal  imposed  on petitioner is unduly harsh and grossly disproportionate to the infraction which led to the termination of his services.  A lighter penalty would have been more just, if not humane.”[67]

    

So too did the Court  pronounce  in  Felix v. National Labor Relations Commission,[68] Gutierrez v. Singer Sewing Machine Company,[69] Associated Labor Unions-TUCP v. National Labor Relations Commission,[70] Dela Cruz v. National Labor Relations Commission,[71] Philippine Long Distance Telephone Company v. Tolentino,[72]Hongkong and Shanghai Banking Corporation v. National Labor Relations Commission,[73] Permex, Inc. v. National Labor Relations Commission,[74] VH Manufacturing, Inc. v. National Labor Relations Commission,[75] A’ Prime Security Services, Inc. v. National Labor Relations Commission,[76] and St. Michael’s Institute v. Santos.[77]

           In the case at bar, petitioner deserves compassion more than condemnation.  At the end of the day, it is undisputed that: (1) petitioner has worked for respondent for almost thirty-one (31) years; (2) his tireless and faithful service is attested by the numerous awards[78] he has received from respondent; (3) the incident on June 18, 2001 was his first offense in his long years of service; (4) the value of the squid heads worth P50.00 is negligible; (5) respondent practically did not lose anything as the squid heads were considered scrap goods and usually thrown away in the wastebasket; (6) the ignominy and shame undergone by petitioner in being imprisoned, however momentary, is punishment in itself; and

(7) petitioner was preventively suspended for one month, which is already a commensurate punishment for the infraction committed.  Truly, petitioner has more than paid his due.              In any case, it would be useless to order the reinstatement of petitioner, considering that he would have been retired by now.  Thus, in lieu of reinstatement, it is but proper to award petitioner separation pay computed at one-month salary for every year of service, a fraction of at least six (6) months considered as one whole year.[79]  In the computation of separation pay, the period where backwages are awarded must be included.[80]

           Word of caution.           We do not condone dishonesty.  After all, honesty is the best policy.  However, punishment should be commensurate with the offense committed.  The supreme penalty of dismissal is the death penalty to the working man.  Thus, care should be exercised by employers in imposing dismissal to erring employees.  The penalty of dismissal should be availed of as a last resort.           Indeed, the immortal words of Mr. Justice (later Chief Justice) Enrique Fernando ring true then as they do now: “where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not be visited with a consequence so severe.  It is not only because of the law’s concern for the workingman.  There is, in addition, his family to consider.  Unemployment brings untold hardships and sorrows on those dependent on the wage-earner.”[81]

 WHEREFORE, the appealed Decision of the Court of Appeals

is REVERSED and SET ASIDE. The Decision of the National Labor Relations Commission isREINSTATED with the MODIFICATION that petitioner is granted separation pay and backwages in lieu of reinstatement. 

SO ORDERED. 

G.R. No. 125548 September 25, 1998

SOLVIC INDUSTRIAL CORP. and ANTONIO C. TAM, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION and DIOSDADO LAUZ, respondents.

 

PANGANIBAN, J.:

Except for the most serious causes affecting the business of the employer, our labor laws frown upon the penalty of dismissal. Where a penalty less punitive would suffice, an employee should not be sanctioned with a consequence so severe.

The Case

Before us is a petition for certiorari under Rule 65 of the Rules of Court, assailing the Resolutions in National Labor Relations Commission 1 (NLRC) Case No. 00-03-02583-94, issued by the NLRC on April 30, 1996; May 29, 1996; and June 17, 1996.

At the arbitration branch of the NLRC in the National Capital Region, Diosdado Lauz filed on March 22, 1994, a complaint for illegal dismissal and monetary claim for service incentive leave pay against petitioner. On November 29, 1995, Labor Arbiter Alex Arcadio Lopez dismissed the complaint.

On appeal, Respondent Commission set aside the Decision of the labor arbiter. In its assailed April 30, 1996 Resolution, NLRC ruled: 2

PREMISES CONSIDERED, the appeal is hereby granted and the Decision of the Labor Arbiter dated 29 November 1995 is hereby SET ASIDE. In lieu thereof, a new Order is hereby entered directing Solvic Industrial Corporation for [sic] the immediate reinstatement of the complainant to his former or equivalent position without loss of seniority right but without backwages.

Respondent Commission denied the Motion for Reconsideration in its May 29, 1996 Resolution: 3

WHEREFORE, the instant Motion for Reconsideration is hereby denied for lack of merit. No further Motion of similar nature shall be entertained.

Notwithstanding the above Resolution, petitioner filed a Second Supplemental Motion for Reconsideration with Leave to File and Admit the Same. The NLRC, in its third assailed Resolution dated June 17, 1996, ruled: 4

WHEREFORE, in view of the foregoing, the instant motion is hereby merely NOTED. Let the instant case be dropped from the calendar of this Commission.

Attributing grave abuse of discretion to the NLRC, petitioner has now elevated the matter to this Court. 5

The Facts

Adopting the labor arbiter's summary, Respondent NLRC relates the factual background of this case as follows:

Complainant in his position paper alleged the following:

He started employment with respondent sometime in 1977. He occupied the position as extruder operator. In the course of his employment, he performed his utmost best, and in fact has never been suspended or reprimanded. On 17 January 1994, sans cause or due process, he was arbitrarily terminated from service. Additionally, complainant alleged that he was not paid his service leave pay.

Respondent on the other hand, averred that:

Complainant who was hired in 1977 was actually terminated for cause on 17 January 1994. That the termination of complainant arose from the incident that transpired on 17 January 1994 at about 7:00 p.m. On said occasion complainant upon seeing Foreman Carlos Aberin confronted him and thereafter struck him in the shoulder beside the neck with a bladed weapon in the process, inflicting bodily injury on him. That several days after said incident, complainant did not report for work, hence, memorandum of preventive suspension dated 19 January 1994, received by him on 22 January 1994. Correspondingly, Mr. Aberin executed an affidavit and submitted a medical certificate.

Complainant on the other hand, submitted his letter of explanation dated 24 January 1994 denying complicity in the acts imputed to him. Thereafter, a series of administrative investigation was conducted on 5, 12 and 19 February 1994, where complainant refused to give any further statement or explanation. Subsequently, he was served his letter of termination dated 21 February 1994, which however, he refused to receive. Relatedly, in a meeting conference held with the union officers by Carlos Aberin and Diosdado Lauz on 26 February 1994, complainant admitted to attempting to take the life of Mr. Aberin and apologized for the same.

In reply, complainant countered that he never struck Mr. Aberin with a bladed weapon, and that the incident [was] not job related, hence cannot serve as basis for termination.

Respondents, on the other hand in reply, argued that:

Contrary to his allegation, he was given his day in court as [an] investigation was conducted. Moreover, complainant in the course of his meeting with Mr. Aberin [and] with the union officers, admitted that he assaulted the latter and even explanation apologized in exchange for the withdrawal of the criminal case filed against him.

The Ruling of the NLRC

Respondent Commission found that the wrong imputed to the private respondent did not merit the penalty of dismissal. Thus, ordering his reinstatement but omitting the award of back wages, it ruled:

We are not full in accord with the above-findings of the [l]abor [a]rbiter, While we do not condone the action taken by the complainant against his foreman, to our mind,

the imposition of the supreme penalty of dismissal is not commensurate [with] the gravity of the offense he committed.

Records show that the injury inflicted by the complainant was not that serious as pictured by the respondent, coupled with the fact that the incident occurred outside the work premises and did not in any way disrupt the operations in the company. Besides, the mere fact that the complainant has been in the faithful service of the company for the past twenty (20) long years untainted with any derogatory record, are factors that must be considered in his favor. Besides, the complainant and his supervisor had already patched up their differences that led to the withdrawal of the criminal case instituted by the latter against the former.

The claim for the payment of service incentive leave pay must be denied for failure of the complainant to particularize the grounds for his entitlement thereto. Likewise, moral damages cannot be awarded for lack of factual or legal basis.

Assignment of Error

In its Memorandum, petitioner raises a single issue:

Whether or not the NLRC committed grave abuse of discretion in granting the appeal of the private respondent for reinstatement, but without backwages, finding that the penalty of dismissal was not commensurate [with] the gravity of the offense committed by the private respondent. 6

In fine, petitioner questions only the propriety of private respondent's reinstatement. The parties submit no other issue.

The Court's Ruling

The appeal is devoid of merit.

Sole Issue: Reinstatement

Assailing the NLRC, petitioner contends that reinstatement is not proper because the mere act of hacking someone with a bolo, albeit with the blunt side, is a serious offense which merits the penalty of dismissal. Petitioner further avers that the incident was work-related, because it arose out of private respondent's ill feelings towards his victim, the company foreman, who had chastised him for allegedly sleeping while on duty. Petitioner admits that the incident took place outside the work premises, but maintains that it happened just opposite the entrance gate of the company building.

Petitioner's arguments are not persuasive. Fighting within work premises may be deemed a valid ground for the dismissal of an employee. Such act adversely affects the employer's interests for it distracts employees, disrupts operations and creates a hostile work atmosphere. 7 The facts of this case, however, do not justify the dismissal of private respondent. As found by Respondent NLRC, the infraction was committed outside the work premises and did not lead to any disruption of work or any hostile environment in the work premises.

It is axiomatic that factual findings of agencies exercising quasi-judicial functions, such as the NLRC, are accorded not only respect but even finality, when these findings are supported by substantial

evidence. 8 A careful review of the records of this case reveals that there is no cogent reason to overturn or modify the findings of Respondent Commission.

We agree with the NLRC that the acts of private respondent are not so serious as to warrant the extreme penalty of dismissal. Private respondent was accused of hitting the victim once with the blunt side of a bolo. Private respondent could have attacked him with the blade of the weapon, and he could have struck him several times. But he did not, thus negating any intent on his part to inflict fatal injuries. In fact, the victim merely sustained a minor abrasion and has since forgiven and reconciled with the private respondent. If the party most aggrieved — namely, the foreman — has already forgiven the private respondent, then petitioner cannot be more harsh and condemning than the victim. Besides, no criminal or civil action has been instituted against private respondent. Furthermore, in his twenty years of service in the company, he has not been charged with any similar misconduct.

Arguing that the length of private respondent's service cannot atone for his serious misconduct, petitioner invokesVilleno v. NLRC, 9 in which the Court held that "considerations of first offense and length of service are overshadowed by the seriousness of the offense." Villeno, however, is not applicable. In that case, the employee disconnected the steering line cable of the ship, thereby needlessly delaying its departure. The Court recognized the gravity of the work-related misconduct, for the concomitant delay affected the business and the reputation of the shipping company and exposed it to lawsuits for breach of contract. In the present case, private respondent's offense was not as serious as that in Villeno. Its consequences did not directly affect the business of petitioner or the atmosphere in the work premises.

Verily, we do not condone the action of the private respondent. We believe, however, that the NLRC did not commit grave abuse of discretion in ruling that the penalty of dismissal was too harsh and not commensurate with the said offense. "Where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe." 10

Be it remembered that in an action for certiorari, the petitioner must prove not merely reversible error, but grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the public respondent. "By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law." 11 In this case, petitioner failed to show graveabuse of discretion on the part of Respondent Commission.

In so ruling, we reiterate that an employer's power to discipline its workers must be exercised with caution, lest it erode the constitutional guarantee of security of tenure. 12 This is especially true when the penalty being imposed is dismissal, which leads to severance of employment ties and the economic dislocation of the employee. Because of the serious implications of this penalty, "our Labor Code decrees that an employee cannot be dismissed, except for the most serious causes. The overly concern of our laws for the welfare of employees is in accord with the social justice philosophy of our Constitution." 13

In sum, we believe Respondent Commission did not gravely abuse its discretion in holding that private respondent should be reinstated, but not awarded back wages. Its Decision finds basis in Manila Electric Co. v. NLRC 14 in which the Court allowed a similar relief.

WHEREFORE, petition is DISMISSED and the impugned Resolutions of Public Respondent NLRC are hereby AFFIRMED. No costs.

SO ORDERED.

Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

G.R. No. 155421             July 7, 2004

ELMER M. MENDOZA, petitioner, vs.RURAL BANK OF LUCBAN, respondent.

D E C I S I O N

PANGANIBAN, J.:

The law protects both the welfare of employees and the prerogatives of management. Courts will not interfere with business judgments of employers, provided they do not violate the law, collective bargaining agreements, and general principles of fair play and justice. The transfer of personnel from one area of operation to another is inherently a managerial prerogative that shall be upheld if exercised in good faith -- for the purpose of advancing business interests, not of defeating or circumventing the rights of employees.

The Case

The Court applies these principles in resolving the instant Petition for Review1 under Rule 45 of the Rules of Court, assailing the June 14, 2002 Decision2 and September 25, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68030. The assailed Decision disposed as follows:

"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit."4

The challenged Resolution denied petitioner's Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution Nos. 99-52 and 99-53, which read:

"Board Res. No. 99-52

"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the bank to familiarize bank employees with the various phases of bank operations and further strengthen the existing internal control system[,] all officers and employees are subject to reshuffle of assignments. Moreover, this resolution does not preclude the transfer of assignment of bank officers and employees from the branch office to the head office and vice-versa."

"Board Res. No. 95-53

"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new assignments without changes in their compensation and other benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA C/A Clerk Actg. Appraiser

ELMER L. MENDOZA Appraiser Clerk-Meralco Collection

CHONA R. MENDOZA Clerk-Meralco Collection Bank Teller"5

In a letter dated April 30, 1999, Alejo B. Daya, the bank's board chairman, directed Briccio V. Cada, the manager of the bank's Tayabas branch, to implement the reshuffle.6 The new assignments were to "be effective on May 1, 1999 without changes in salary, allowances, and other benefits received by the aforementioned employees."7

On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his opinion on the reshuffle, as follows:

"RE: The recent reshuffle of employees as perBoard Resolution dated April 25, 1999

"Dear Sir:

"This is in connection with the aforementioned subject matter and which the undersigned received on April 25, 1999.

"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-Meralco Collection is deemed to be a demotion without any legal basis. Before this action on your part[,] the undersigned has been besieged by intrigues due to [the] malicious machination of a certain public official who is bruited to be your good friend. These malicious insinuations were baseless and despite the fact that I have been on my job as Appraiser for the past six (6) years in good standing and never involved in any anomalous conduct, my being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a prelude to my termination in due time. This will constitute an unfair labor practice.

"Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until the reason [for] my being reshuffled is made clear.

"Your kind consideration on this request will be highly appreciated."8

On May 10, 1999, Daya replied:

"Dear Mr. Mendoza,

"Anent your undated letter expressing your resentment/comments on the recent management's decision to reshuffle the duties of bank employees, please be informed that it was never the intention (of management) to downgrade your position in the bank considering

that your due compensation as Bank Appraiser is maintained and no future reduction was intended.

"Aside from giving bank employees a wider experience in various banking operations, the reshuffle will also afford management an effective tool in providing the bank a sound internal control system/check and balance and a basis in evaluating the performance of each employee. A continuing bankwide reshuffle of employees shall be made at the discretion of management which may include bank officers, if necessary as expressed in Board Resolution No. 99-53, dated April 25, 1999. Management merely shifted the duties of employees, their position title [may be] retained if requested formally.

"Being a standard procedure in maintaining an effective internal control system recommended by the Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of bank management."9

On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a letter in which he applied for a leave of absence from work:

"Dear Sir:

"I wish I could continue working but due to the ailment that I always feel every now and then, I have the honor to apply for at least ten (10) days sick leave effective June 7, 1999.

"Hoping that this request [merits] your favorable and kind consideration and understanding."10

On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for twenty days effective on the same date.11

On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before Arbitration Branch No. IV of the National Labor Relations Commission (NLRC). The Complaint -- for illegal dismissal, underpayment, separation pay and damages -- was filed against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and its Tayabas branch manager, Briccio V. Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q.12

The labor arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:

"WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of seniority rights with full backwages from date of dismissal to actual reinstatement in the amount of P55,000.00 as of June 30, 2000.

3. Ordering the payment of separation pay if reinstatement is not possible in the amount ofP30,000.00 in addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount ofP5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the payment of Attorney's fees in the amount of P18,000.00 which is 10% of the monetary award."13

On appeal, the NLRC reversed the labor arbiter.14 In its July 18, 2001 Resolution, it held:

"We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its implementation of its Board Resolution directing the reshuffle of employees at its Tayabas branch to positions other than those they were occupying. While at first the employees thereby affected would experience difficulty in adjusting to their new jobs, it cannot be gainsaid that the objective for the reshuffle is noble, as not only would the employees obtain additional knowledge, they would also be more well-rounded in the operations of the bank and thus help the latter further strengthen its already existing internal control system.

"The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an appraiser he was made to perform the work of a clerk in the collection of Meralco payments, which he may have considered as beneath him and his experience, being a pioneer employee. But it cannot be discounted either that other employees at the Tayabas branch were similarly reshuffled. The only logical conclusion therefore is that the Board Resolution was not aimed solely at the [petitioner], but for all the other employees of the x x x bank as well. Besides, the complainant has not shown by clear, competent and convincing evidence that he holds a vested right to the position of Appraiser. x x x.

"How and by what manner a business concern conducts its affairs is not for this Commission to interfere with, especially so if there is no showing, as in the case at bar, that the reshuffle was motivated by bad faith or ill-will. x x x."15

After the NLRC denied his Motion for Reconsideration,16 petitioner brought before the CA a Petition for Certiorari17 assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled thus:

"The so-called 'harassment' which Mendoza allegedly experienced in the aftermath of the reshuffling of employees at the bank is but a figment of his imagination as there is no evidence extant on record which substantiates the same. His alleged demotion, the 'cold shoulder' stance, the things about his chair and table, and the alleged reason for the harassment are but allegations bereft of proof and are perforce inadmissible as self-serving statements and can never be considered repositories of truth nor serve as foundations of court decisions anent the resolution of the litigants' rights.

"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no [diminution] of his salary benefits and rank. He could even retain his position title, had he only requested for it pursuant to the reply of the Chairman of the bank's board of directors to Mendoza's letter protesting the reshuffle. There is, therefore, no cause to doubt

the reasons which the bank propounded in support of its move to reshuffle its employees, viz:

1. to 'familiarize bank employees with the various phases of bank operations,' and

2. to 'further strengthen the existing internal control system' of the bank.

"The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of constructive dismissal.

"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does not signify that the bank has dismissed the former from its employ. Mendoza separated himself from the bank's employ when, on June 24, 1999, while on leave, he filed the illegal dismissal case against his employer for no apparent reason at all."18

Hence, this Petition.19

The Issues

Petitioner raises the following issues for our consideration:

"I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service and/or abandoned his job when he filed his Complaint for constructive and consequently illegal dismissal;

"II. Whether or not the reshuffling of private respondent'[s] employees was done in good faith and cannot be made as the basis of a finding of constructive dismissal, even as the [petitioner's] demotion in rank is admitted by both parties;

"III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department Store (323 SCRA 445)] is applicable to the case at bar;

"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's money claims, damages, and unpaid salaries for the period July 1-30, 1999, although this was not disputed by the private respondent; and

"V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC are a nullity since the appeal filed by private respondent before the NLRC on August 5, 2000 was on the 15th day or five (5) days beyond the reglem[e]ntary period of ten (10) days as provided for by law and the NLRC Rules of Procedure."20

In short, the main issue is whether petitioner was constructively dismissed from his employment.

The Court's Ruling

The Petition has no merit.

Main Issue:Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.21 Petitioner argues that he was compelled to file an action for constructive dismissal, because he had been demoted from appraiser to clerk and not given any work to do, while his table had been placed near the toilet and eventually removed.22 He adds that the reshuffling of employees was done in bad faith, because it was designed primarily to force him to resign.23

Management Prerogativeto Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often decline to interfere in legitimate business decisions of employers.24 Indeed, labor laws discourage interference in employers' judgments concerning the conduct of their business.25 The law must protect not only the welfare of employees, but also the right of employers.

In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one office or area of operation to another -- provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause.26 This privilege is inherent in the right of employers to control and manage their enterprise effectively.27 The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.28

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice.29 The test for determining the validity of the transfer of employees was explained in Blue Dairy Corporation v. NLRC30 as follows:

"[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee's transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment."31

Petitioner's Transfer Lawful

The employer bears the burden of proving that the transfer of the employee has complied with the foregoing test. In the instant case, we find no reason to disturb the conclusion of the NLRC and the CA that there was no constructive dismissal. Their finding is supported by substantial evidence -- that amount of relevant evidence that a reasonable mind might accept as justification for a conclusion.32

Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with the various phases of bank operations and further strengthen the existing internal control system"33 of all officers and employees. We have previously held that employees may be transferred -- based on their qualifications, aptitudes and competencies -- to positions in which they can function with maximum benefit to the company.34 There appears no justification for denying an employer the right to transfer employees to expand their competence and maximize their full potential for the advancement of the establishment. Petitioner was not singled out; other employees were also reassigned without their express consent.

Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges and other benefits. This fact is clear in respondent's Board Resolutions, the April 30, 1999 letter of Bank President Daya to Branch Manager Cada, and the May 10, 1999 letter of Daya to petitioner.

On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no credence by both lower tribunals was his bare and self-serving statement that he had been positioned near the comfort room, made to work without a table, and given no work assignment.35 Purely conjectural is his claim that the reshuffle of personnel was a harassment in retaliation for an alleged falsification case filed by his relatives against a public official.36 While the rules of evidence prevailing in courts of law are not controlling in proceedings before the NLRC,37 parties must nonetheless submit evidence to support their contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC38 does not apply to the present factual milieu. The Court ruled therein that the lack of notice and hearing made the dismissal of the employee ineffectual, but not necessarily illegal.39 Thus, the procedural infirmity was remedied by ordering payment of his full back wages from the time of his dismissal.40 The absence of constructive dismissal in the instant case precludes the application of Serrano. Because herein petitioner was not dismissed, then he is not entitled to his claimed monetary benefits.

Alleged Nullity of NLRCand CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were void, since respondent's appeal before the NLRC had allegedly been filed beyond the reglementary period.41 A careful scrutiny of his Petition for Review42 with the appellate court shows that this issue was not raised there. Inasmuch as the instant Petition challenges the Decision of the CA, we cannot rule on arguments that were not brought before it. This ruling is consistent with the due-process requirement that no question shall be entertained on appeal, unless it has been raised in the court below.43

WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25, 2002 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

G.R. No. 76645 July 23, 1991

PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner, vs.ALICIA LAPLANA, Hon. RICARDO ENCARNACION, and NATIONAL LABOR RELATIONS COMMISSION,respondents.

D.P. Mercado & Associates for petitioner.

 

NARVASA, J.:p

Alicia Laplana was the cashier of the Baguio City Branch Office of the Philippine Telegraph and Telephone Corporation (hereafter, simply PT & T). Sometime in March 1984, PT & T's treasurer, Mrs. Alicia A. Arogo, directed Laplana to transfer to the company's branch office at Laoag City. Laplana refused the reassignment and proposed instead that qualified clerks in the Baguio Branch be trained for the purpose. She set out her reasons therefor in her letter to Mrs. Arogo dated March 27, 1984, viz.:

1. I have established Baguio City as my permanent residence. Working in Laoag will involve additional expenses like for my board and lodgingly, fare, and other miscellaneous expenses. My salary alone will not be enough — there will be no savings and my family will spend more on account of my transfer.

2. I will be away from my family. A far assignment would be a big sacrifice on my part keeping me away from my husband and family which might affect my efficiency.

3. Since I have been with PT & T for more than six years already, I have learned to work with my co-employees here more effectively. Working in another place with entirely different environment will require long adjustment period, thereby affecting performance of my job.

On April 12, 1984, Mrs. Arogo reiterated her directive for Laplana's transfer to the Laoag Branch, this time in the form of a written Memorandum, informing Laplana that "effective April 16, 1984, you will be reassigned to Laoag branch assuming the same position of branch cashier," and ordering her "to turn over your accountabilities such as PCF, undeposited collections, used and unused official receipts, other accountable forms and files to Rose Caysido who will be in charge of cashiering in Baguio."

Apparently Laplana was not allowed to resume her work as Cashier of the Baguio Branch when April 16, 1984 came. She thereupon wrote again to Mrs. Arogo advising that the directed transfer was unacceptable, reiterating the reasons already given by her in her first letter dated March 27, 1984. On April 30, 1984, Laplana received a telegram from Mrs. Arogo reading as follows:

PLEASE REPORT TO MANILA ON MAY 2, 1984 FOR NEW JOB ASSIGNMENT

IF YOU DON'T REPORT ON MAY 2, 1984, WE WILL CONSIDER THIS AS ABANDONMENT OF YOUR JOB AND THIS MIGHT CONSTRAIN US TO IMPOSE DISCIPLINARY ACTION AGAINST YOU

YOU CAN GET YOUR CASH ADVANCE FOR TRANSPORTATION PETITION FROM MRS. BAUTISTA TODAY.

On May 8, 1984, Laplana in turn sent a telex message to Mrs. Arogo which reads as follows:

I LOVE WORKING FOR OUR COMPANY HOWEVER I AM SORRY I CANNOT ACCEPT YOUR JOB OFFER IN MANIIA THANK YOU AND RETRENCH ME INSTEAD. MY BEST REGARDS.

Thereafter, Laplana sent a letter to Mrs. Arogo on May 15, 1984, expatiating on her telex message and reiterating her request to be retrenched, as follows:

Dear Mrs. Arogo:

Thank you for the job in Manila. However, I cannot accept the said offer because I have established Baguio City as my permanent residence. Considering the high cost of living in Manila it will surely involve additional expenses on my part. My salary alone will not be enough to sustain my expenses. Furthermore, a far assignment will be a big sacrifice on my part keeping me away from my husband which might affect my health due to an entirely new environment and climate, thereby affecting my efficiency.

In view of the above reasons, I hereby request management to retrench me.

xxx xxx xxx

Termination of Laplana's employment on account of retrenchment thereupon followed. On May 19, 1984, PT & T issued an "Employees's Service Report" which contained the following remarks regarding Laplana: "Services terminated due to retrenchment with corresponding termination pay effective May 16, 1984. " And on June 30, 1984, Mrs. Arogo sent a Memorandum to the company's Baguio Branch Manager embodying the computation of the separation and 13th month pay due to Laplana, together with a check for the amount thereof, P2,512.50 and a quitclaim deed, and instructing said manager to "have the quitclaim signed by Alicia Laplana before releasing the check and return all copies of said form . . . immediately." On July 4, 1984, Laplana signed the quitclaim and received the check representing her 13th month and separation pay.

On October 9, 1984, Laplana filed with the Labor Arbiters' Office at Baguio City, thru the CLAO, a complaint against PT & T its "Baguio Northwestern Luzon Branch, Baguio City," and Paraluman Bautista, Area Manager. In her complaint, she set forth substantially the facts just narrated, and alleged, as right of action, that "when she insisted on her right of refusing to be transferred, the Defendants made good its warning by terminating her services on May 16, 1984 on alleged ground of "retrenchment," although the truth is, she was forced to be terminated and that there was no ground at all for the retrenchment;" that the company's "act of transferring is not only without any valid ground but also arbitrary and without any purpose but to harass and force . . . (her) to eventually resign."

In answer, the defendants alleged that —

1) Laplana "was being transferred to Laoag City because of increase in sales due to the additional installations of vodex line;"

2) in connection with her transfer, Laplana had been informed "that she would be given ten (10) days. relocation allowance and transportation expense from Baguio to Laoag City;"

3) the company "was exercising management prerogatives in transferring complainant . . . and there is no showing that this exercise was arbitrarily and whimsically done;"

4) Laplana's services were terminated on her explicit declaration that "she was willing to be retrenched rather than be assigned to Laoag City or Manila;"

5) in any event, the company had been actually suffering losses; in fact, in June, 1984, several employees "were retrenched because of losses incurred due to rising costs in wages, rentals, production supplies and other operational costs."

Upon the issues thus raised, judgment was rendered on March 28, 1985 by the Labor Arbiter in Laplana's favor. 1The Arbiter's verdict was made to rest essentially on the following pronouncements (made avowedly in reliance on the doctrine laid down by this Court in Helmut Dosch v. NLRC and Northwest Airlines, Inc., G.R. No. 51182, July 5, 1983 2), to wit:

Transferring an employee from one place to another is not by itself unlawful. It is within the inherent right of an employer to transfer or assign an employee in the pursuit of its legitimate business interests. However, this right is not absolute.

Transfer becomes unlawful where it is motivated by discrimination or in bad faith, or is effected as a form of punishment or demonition without sufficient cause.

The transfer of the complainant from Baguio City to Laoag City or to Manila is patently a demotion and a form of punishment without just cause and would cause untold suffering on the part of the complainant. . . .

With these premises in mind, the Arbiter ruled "that the complainant was illegally dismissed . . . (and her) acceptance of separation pay . . . cannot cure the illegality of her dismissed because it was forced upon her — she was compelled to accept the lesser evil," and that there was "no evidence to show that the complainant was retrenched to prevent losses," but that on the contrary, "it is continuously expanding and improving its facilities, and hiring new employees." Accordingly, he ordered —

1) PT & T "to reinstate immediately the complainant, Alicia R. Laplana, to her former position or equivalent position without loss of seniority rights and benefits earned with full backwages and benefits less P2,512.50, the amount she received as separation, from the time her compensation was suspended until reinstated;"

2) the dismissal of the claim for moral and exemplary damages for lack of merit; and

3) the dismissal of the case against Mrs. Paraluman Bautista also for lack of merit.

The National Labor Relations Commission affirmed the Arbiter's judgment and dismissed the respondents' appeal, by Resolution dated August 5, 1986. 3

There can be no quarrel with the Arbiter's formulation of the general principle governing an employer's prerogative to transfer his employees from place to place or from one position to another. The Arbiter acknowledges "the inherent right of an employer to transfer or assign an employee in the pursuit of its legitimate business interests" subject only to the condition that it be not "motivated by discrimination or (made) in bad faith, or . . . effected as a form of punishment or demotion without sufficient cause." This is a principle uniformly adhered to by this Court. 4

The case law on the matter is succinctly set out by a noted commentator on Labor Relations Law as follows: 5

. . . Except as limited by special laws, the employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and the discipline, dismissal and recall of workers. This flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in the conduct of his business and does not deprive the employer of the right to select or dismiss his employees for any cause, except in cases of unlawful discrimination (NLU v. Insular-Yebana Tobacco Corp., 2 SCRA 924, 931; Republic Savings Bank v. CIR, 21 SCRA 226, 235).

. . . The employer has the prerogative of making transfers and reassignment of employees to meet the requirements of the business. Thus, where the rotation of employees from the day shift to the night shift was a standard operating procedure of management, an employee who had been on the day shift for some time may be transferred to the night shift (Castillo v. CIR, 39 SCRA 81). Similarly, transfers effected pursuant to a company policy to transfer employees from one theater to other theaters operated by the employer, in order to prevent connivance among them, was sustained (Cinema, Stage and Radio Entertainment Free Workers v. CIR, 18 SCRA 1071). Similar transfers and re-assignments of employees have been upheld such as the re-assignment of one from a position of supervisor to that of engineer at the power house (Interwood Employees Assn. v. Interwood, 99 Phil. 82), or the transfer of the union president from his position of messenger clerk in a hotel to purely office work and two other unionists from the position of hotel guard to line and elevator men, without diminution of pay or other employee's rights (Bay View Hotel Employees Union v. Bay View Hotel, L-10393, March 30, 1960), or the temporary assignment of a sales clerk to another section of the store (Marcaida v. PECO, 63 O.G. 8559).

Subsequent decisions of this Court have made no deviation from the doctrine. In Philippine Japan Active Carbon Corp. v. NLRC, promulgated on March 8, 1989 6 this Court made the following pronouncement, to wit:

It is the employer's prerogative, based on its assessment and perception of its employees' qualifications, aptitudes, and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employee's right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or diminution of his salaries, benefits, and other

privileges, the employee may not complain that it amounts to a constructive dismissal.

In Yuco Chemical Industries, Inc. v. MOLE et al. (judgment promulgated on May 28, 1990) 7 the same "general principles on transfer" were re-stated. The Court said:

. . . In a number of cases, the Court has recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment provided that there is no demotion in rank or diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's right to control and manage its enterprise effectively. Even as the law is solicitous of the employees' welfare, it cannot ignore the right of the employer to exercise what are clearly and obviously management prerogatives. The freedom of management to conduct its business operations to achieve its purpose cannot be denied.

But like all other rights, there are limits. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right must be exercised. Thus it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities and thereby defeat his right to self-organization. But the transfer can be upheld when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

The acceptability of the proposition that transfers made by an employer for an illicit or underhanded purpose — e.g., to evade the duty to bargain collectively, or to defeat the welfare, right of collective bargaining, or discriminate against one or some of them on account of their union activities — is self-evident and cannot be gainsaid. The difficulty lies in the situation where no such illicit, improper or underhanded purpose can be ascribed to the employer, the objection to the transfer being ground solely upon the, personal inconvenience or hardship that will be caused to the employee by reason of the transfer. What then?

In Dosch v. NLRC, supra, this Court found itself unable to agree with the NLRC that the petitioner employee was guilty of disobedience and insubordination in refuse to accept his transfer from the Philippines to an overseas post. Said the Court:

. . . The only piece of evidence on which (respondent employer) Northwest bases the charge of contumacious refusal is petitioner's letter dated August 28, 1975 to R.C. Jenkins wherein petitioner acknowledged receipt of the former's memorandum dated August 18, 1975, appreciated his promotion to Director of International Sales but at the same time regretted "that at this time for personal reasons and reasons of my family, I am unable to accept the transfer from the Philippines' and thereafter expressed his preference to remain in my Position of Manager-Philippines until such time that my services in that capacity are no longer required by Northwest Airlines." From this evidence, We cannot discern even the slightest hint of defiance, much less imply insubordination on the part of petitioner.

Withal, it is evident that the courteous tone of the employee's letter did not alter the actuality of his refusal to accept the transfer decreed by his employer in the exercise of its sound business judgment and discretion; and that the transfer of an employee to an overseas post cannot be likened to a transfer from a city to another within the country, as in the case at bar.

In this case, the employee (Laplana) had to all intents and purposes resigned from her position. She had unequivocally asked that she be considered dismissed, herself suggesting the reason therefor –– retrenchment. When so dismissed, she accepted separation pay. On the other hand, the employer has not been shown to be acting otherwise than in good faith, and in the legitimate pursuit of what it considered its best interests, in deciding to transfer her to another office. There is no showing whatever that the employer was transferring Laplana to another work place, not because she would be more useful there, but merely "as a subterfuge to rid . . . (itself) of an undesirable worker," or "to penalize an employee for . . . union activities. . . ." The employer was moreover not unmindful of Laplana's initial plea for reconsideration of the directive for her transfer to Laoag; in fact, in response to that plea not to be moved to the Laoag Office, the employer opted instead to transfer her to Manila, the main office, offering at the same time the normal benefits attendant upon transfers from an office to another.

The situation here presented is of an employer transferring an employee to another office in the exercise of what it took to be sound business judgment and in accordance with pre-determined and established office policy and practice, and of the latter having what was believed to be legitimate reasons for declining that transfer, rooted in considerations of personal convenience and difficulties for the family. Under these circumstances, the solution proposed by the employee herself, of her voluntary termination of her employment and the delivery to her of corresponding separation pay, would appear to be the most equitable. Certainly, the Court cannot accept the proposition that when an employee opposes his employer's decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee's wishes that should be made to prevail. In adopting that proposition by way of resolving the controversy, the respondent NLRC gravely abused its discretion.

WHEREFORE, the writ of certiorari prayed for is GRANTED and the Resolution of August 5, 1986 of respondent NLRC is thereby nullified and set aside, and the termination of services of private respondent is declared legal and proper. No costs.

SO ORDERED.

FIRST DIVISION

[G.R. No. 144412.  November 18, 2003]

ALLIED BANKING CORPORATION, petitioner, vs. COURT OF APPEALS and POTENCIANO L. GALANIDA, respondents.

D E C I S I O N

CARPIO, J.:

The Case

Before the Court is a petition for review[1] assailing the Decision[2] of 27 April 2000 and the Resolution of 8 August 2000 of the Court of Appeals in CA-G.R. SP No. 51451.  The Court of Appeals upheld the Decision [3] of 18 September 1998 and the Resolution of 24 December 1998 of the National Labor Relations Commission (“NLRC”) in NLRC Case No. V-000180-98.  The NLRC modified the Decision dated 23 December 1997 of Labor Arbiter Dominador A. Almirante (“Labor Arbiter”) in NLRC Case No. RAB VII-05-0545-94 holding that Allied Banking Corporation (“Allied Bank”) illegally dismissed Potenciano L. Galanida (“Galanida”). The NLRC awarded Galanida separation pay, backwages, moral and exemplary damages, and other amounts totaling P1,264,933.33.

Antecedent Facts

For a background of this case, we quote in part from the Decision of the Court of Appeals:

Private respondent Potenciano Galanida was hired by petitioner Allied Banking Corporation on 11 January 1978 and rose from accountant-book(k)eeper to assistant manager in 1991.  His appointment was covered by a “Notice of Personnel Action” which provides as one of the conditions of employment the provision on petitioner’s right to transfer employees:

“REGULAR APPOINTMENT: xxx It is understood that the bank reserves the right to transfer or assign you to other departments or branches of the bank as the need arises and in the interest of maintaining smooth and uninterrupted service to the public.”

Private respondent was promoted several times and was transferred to several branches as follows:

“a)  January, 1978 to March, 1982 –Tagbilaran City Branch

“b)  April, 1982 to May, 1984 –Lapulapu City Branch

“c)  June, 1984 –Mandaue City Branch

“d)  July, 1984 to April, 1986 –Tagbilaran City Branch

“e)  May, 1986 to May, 1987 –Dumaguete City Branch

“f)  June, 1987 to August, 1987 –Carbon Branch, Cebu City

“g)  September, 1987 to Sept. 1989 –Lapulapu City Branch, Cebu

“h)  October, 1989 to Sept. 1992 –Carbon Branch, Cebu City

“i)  October 1992 to Sept. 1994 –Jakosalem Regional Branch,Cebu City” (Rollo, p. 47)

Effecting a rotation/movement of officers assigned in the Cebu homebase, petitioner listed respondent as second in the order of priority of assistant managers to be assigned outside of Cebu City having been stationed inCebu for seven years already.  Private respondent manifested his refusal to be transferred to Bacolod City in a letter dated 19 April 1994 citing as reason parental obligations, expenses, and the anguish that would result if he is away from his family.  He then filed a complaint before the Labor Arbiter for constructive dismissal.

Subsequently, petitioner bank informed private respondent (Rollo, p. 86) that he was to report to the Tagbilaran City Branch effective 23 May 1994.  Private respondent refused.  In a letter dated 13 June 1994, petitioner warned and required of private respondent as follows:

“There is no discrimination in your transfer.  In fact, among the officers mentioned, only you have refused the new assignment citing difficulty of working away from

your family as if the other officers concerned do not suffer the same predicament.  To exempt you from the officer transfer would result in favoritism in your favor and discrimination as against the other officers concerned.

“In furtherance of maintaining a smooth and uninterrupted service to the public, and in accordance with the Bank’s order of priority of rotating its accountants’ places of assignments, you are well aware that Roberto Isla, AM/Accountant, assigned in Cebu for more than ten (10) years, was, on February 14, 1994, reassigned to Iligan City Branch and then to Cagayan de Oro City Branch on June 8, 1994.  Hence, your objection on the ground of your length of service is without merit.

xxx

“As discussed, your refusal to follow instruction concerning  your transfer and reassignment to Bacolod City and to Tagbilaran City is penalized under Article XII of the Bank’s Employee Discipline Policy and Procedure [which] provides:

‘XII Transfer and ReassignmentRefusal to follow instruction concerning transfers and reassignments.

First and subsequent offenses –The penalty may range from suspension to dismissal as determined by management.  The employee shall be required to comply with the order of transfer and reassignment, if the penalty is not termination of employment.’

“In view of the foregoing, please explain in writing within three (3) days from receipt hereof why no disciplinary  action should be meted against you for  your having refused to follow instructions concerning the foregoing transfer and reassignment.” xxx[4]

On 16 June 1994, Galanida replied that “(w)hether the bank’s penalty for my refusal be Suspension or Dismissal xxx it will all the more establish and fortify my complaint now pending at NLRC, RAB 7.” [5]  In the same letter, he charged Allied Bank with discrimination and favoritism in ordering his transfer, thus:

xxx What I cannot decipher now under the headship of Mr. Olveda is management’s discriminatory act of transferring only the long staying accountants of Cebu in the guise of its exercise of management prerogative when in truth and in fact, the ulterior motive is to accommodate some new officers who happen to enjoy favorable connection with management.  How can the bank ever justify the transfer of Melinda T. Co, a new officer who had experienced being assigned outside of Cebu for more

than a year only to Tabunok Branch?  If the purpose is for check and balance, is management implying that Melinda Co can better carry out such function over Mr. Larry Sabelino, who is a seasoned and experienced accountant or any of the Metro Cebu accountants for that matter?  Isn’t this act of management an obvious display of favoritism? xxx[6]

On 5 October 1994, Galanida received an inter-office communication[7] (“Memo”) dated 8 September 1994 from Allied Bank’s Vice-President for Personnel, Mr. Leonso C. Pe.  The Memo informed Galanida that Allied Bank had terminated his services effective 1 September 1994.  The reasons given for the dismissal were:  (1) Galanida’s continued refusal to be transferred from the Jakosalem, Cebu City branch; and (2) his refusal to report for work despite the denial of his application for additional vacation leave.  The salient portion of the Memo reads:

Therefore, your refusal to follow instruction concerning your transfer and reassignment to Bacolod City and to Tagbilaran City is without any justifiable reason and constituted violations of Article XII of the Bank’s EDPP xxx

In view of the foregoing, please be informed that the Bank has terminated your services effective September 1, 1994 and considered whatever benefit, if any, that you are entitled as forfeited in accordance with 04, V Administrative Penalties, page 6 of the Bank’s EDPP which provides as follows:

“04. Dismissal.Dismissal is a permanent separation for cause xxx

Notice of termination shall be issued by the Investigation Committee subject to the confirmation of the President or his authorized representative as officer/employee who is terminated for cause shall not be eligible to receive any benefit arising from her/his employment with the Bank or to termination pay.”

It is understood that the termination of your service shall be without prejudice to whatever legal remedies which the Bank may have already undertaken and/or will undertake against you.

Please be guided accordingly.  (Emphasis supplied)[8] 

The Ruling of the Labor Arbiter

After several hearings, the Labor Arbiter held that Allied Bank had abused its management prerogative in ordering the transfer of Galanida to

its Bacolod and Tagbilaran branches.  In ruling that Galanida’s refusal to transfer did not amount to insubordination, the Labor Arbiter misquoted this Court’s decision in Dosch v. NLRC,[9] thus:

As a general rule, the right to transfer or reassign an employee is recognized as an employer’s exclusive right and the prerogative of management (Abbott Laboratories vs. NLRC, 154 SCRA 713 [1987]).

The exercise of this right, is not however, absolute.  It has certain limitations.  Thus, in Helmut Dosch vs. NLRC, et al. 123 SCRA 296 (1983), the Supreme Court, ruled:

“While it may be true that the right to transfer or reassign an employee is an employer’s exclusive right and the prerogative of management, such right is not absolute. The right of an employer to freely select or discharge his employee is limited by the paramount police power xxx for the relations between capital and labor are not merely contractual but impressed with public interest. xxx And neither capital nor labor shall act oppressively against each other.

Refusal to obey a transfer order cannot be considered insubordination where employee cited reason for said refusal, such (sic) as that of being away from the family.”[10] (Underscoring supplied by the Labor Arbiter)

The Labor Arbiter reasoned that Galanida’s transfer was inconvenient and prejudicial because Galanida would have to incur additional expenses for board, lodging and travel.  On the other hand, the Labor Arbiter held that Allied Bank failed to show any business urgency that would justify the transfer.

The Labor Arbiter also gave credence to Galanida’s claim that Allied Bank gave Ms. Co special treatment.  The Labor Arbiter stated that Allied Bank deliberately left out Ms. Co’s name from the list of accountants transferred to Cebu as contained in Allied Bank’s letter dated 13 June 1994.  However, Mr. Regidor Olveda, Allied Bank’s Vice President for Operations Accounting, testified that the bank transferred Ms. Co to the Tabunok, Cebu branch within the first half of 1994.

Still, the Labor Arbiter declined to award Galanida back wages because he was not entirely free from blame.  Since another bank had already employed Galanida, the Labor Arbiter granted Galanida separation pay in lieu of reinstatement.  The dispositive portion of the Labor Arbiter’s Decision of 23 December 1997 provides:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Allied Banking Corporation to pay complainant the aggregate total amount

of Three Hundred Twenty Four Thousand Pesos (P324,000.00) representing the following awards:

a)      Separation pay for P272,000.00;b)      Quarter bonus for 1994 – P16,000.00;c)      13th month pay for 1994 –  P16,000.00;

d)      Refund of contribution to Provident Fund - P20,000.00.

SO ORDERED.[11]

The Ruling of the NLRC

On appeal, the NLRC likewise ruled that Allied Bank terminated Galanida without just cause.  The NLRC agreed that the transfer order was unreasonable and unjustified, considering the family considerations mentioned by Galanida.  The NLRC characterized the transfer as a demotion since the Bacolod and Tagbilaran branches were smaller than the Jakosalem branch, a regional office, and because the bank wanted Galanida, an assistant manager, to replace an assistant accountant in the Tagbilaran branch.  The NLRC found unlawful discrimination since Allied Bank did not transfer several junior accountants in Cebu.  The NLRC also held that Allied Bank gave Ms. Co special treatment by assigning her to Cebu even though she had worked for the bank for less than two years.

The NLRC ruled that Galanida’s termination was illegal for lack of due process.  The NLRC stated that Allied Bank did not conduct any hearing.  The NLRC declared that Allied Bank failed to send a termination notice, as required by law for a valid termination.  The Memo merely stated that Allied Bank would issue a notice of termination, but the bank did not issue any notice.

The NLRC concluded that Allied Bank dismissed Galanida in bad faith, tantamount to an unfair labor practice as the dismissal undermined Galanida’s right to security of tenure and equal protection of the laws.  On these grounds, the NLRC promulgated its Decision of 18 September 1998, the relevant portion of which states:

In this particular case, We view as impractical, unrealistic and no longer advantageous to both parties to order reinstatement of the complainant.  xxx  For lack of sufficient basis, We deny the claim for 1994 quarter bonus. Likewise, no attorney’s fees is

awarded as counsels for complainant-appellee are from the City Prosecutor’s Office of Cebu.

WHEREFORE, premises considered, the decision of the Labor Arbiter dated December 23, 1997 is hereby MODIFIED by increasing the award of separation pay and granting in addition thereto backwages, moral and exemplary damages.  The respondent-appellant, ALLIED BANKING CORPORATION, is thus ordered to pay to herein complainant-appellee, POTENCIANO L. GALANIDA, the following amounts:

a)      P336,000.00, representing separation payb)      P833,600.00, representing backwagesc)      P    5,333.23  representing proportional 1994 13th month payd)      P  20,000.00  representing refund of Provident Fund Contributione)      P  50,000.00  representing moral damagesf)       P  20,000.00  representing exemplary damages

===========P1,264,933.33 TOTAL AWARD

All other claims are dismissed for lack of basis.  The other respondents are dropped for lack of sufficient basis that they acted in excess of their corporate powers.

SO ORDERED.[12]

Allied Bank filed a motion for reconsideration which the NLRC denied in its Resolution of 24 December 1998.[13]

Dissatisfied, Allied Bank filed a petition for review questioning the Decision and Resolution of the NLRC before the Court of Appeals. 

The Ruling of the Court of Appeals

Citing Dosch v. NLRC,[14] the Court of Appeals held that Galanida’s refusal to comply with the transfer orders did not warrant his dismissal.  The appellate court ruled that the transfer from a regional office to the smaller Bacolod or Tagbilaran branches was effectively a demotion.  The appellate court agreed that Allied Bank did not afford Galanida procedural due process because there was no hearing and no notice of termination.  The Memo merely stated that the bank would issue a notice of termination but there was no such notice.

The Court of Appeals affirmed the ruling of the NLRC in its Decision of 27 April 2000, thus:

WHEREFORE, for lack of merit, the petition is DISMISSED and the assailed Decision of public respondent NLRC is AFFIRMED.

SO ORDERED. [15]

Allied Bank filed a motion for reconsideration which the appellate court denied in its Resolution of 8 August 2000.[16]

On 26 April 2001, Allied Bank appealed the appellate court’s decision and resolution to the Supreme Court.  Allied Bank prayed that the Supreme Court:  (1) issue a temporary restraining order or writ of preliminary injunction ex parte to restrain the implementation or execution of the questioned Decision and Resolution; (2) declare Galanida’s termination as valid and legal; (3) set aside the Court of Appeals’ Decision and Resolution; (4) make permanent the restraining order or preliminary injunction; (5) order Galanida to pay the costs; and (6) order other equitable reliefs.

The Issues

Allied Bank raises the following issues:

1.  WHETHER UNDER THE FACTS PRESENTED THERE IS LEGAL BASIS IN PETITIONER’S EXERCISE OF ITS MANAGEMENT PREROGATIVE.

2.  WHETHER PRIVATE RESPONDENT’S VIOLATIONS OF COMPANY RULES CONSTITUTE A GROUND TO WARRANT THE PENALTY OF DISMISSAL.

3.  WHETHER UNDER THE FACTS PRESENTED, THERE IS LEGAL BASIS TO HOLD THAT ALLIED BANK AFFORDED PRIVATE RESPONDENT THE REQUIRED DUE PROCESS.

4.  WHETHER UNDER THE FACTS, THERE IS LEGAL BASIS TO HOLD THAT PRIVATE RESPONDENT CANNOT RECOVER ANY MONETARY AWARD.[17]

In sum, Allied Bank argues that the transfer of Galanida was a valid exercise of its management prerogative.  Allied Bank contends that Galanida’s continued refusal to obey the transfer orders constituted willful disobedience or insubordination, which is a just cause for termination under the Labor Code.

On the other hand, Galanida defended his right to refuse the transfer order.  The memorandum for Galanida filed with this Court, prepared by Atty. Loreto M. Durano, again misquoted the Court’s ruling in Dosch v. NLRC, thus:

xxx  His [Galanida’s] refusal to transfer falls well within the ruling of the Supreme Court in Helmut Dosch vs. NLRC, et. al., 123 SCRA 296 (1983) quoted as follows:

xxx

Refusal to obey a transfer order cannot be considered insubordination where employee cited reason for said refusal, such as that of being away from the family.”[18]

The Ruling of the Court

The petition is partly meritorious.

Preliminary Matter: Misquoting Decisions of the Supreme Court

The memorandum prepared by Atty. Durano and, worse, the assailed Decision of the Labor Arbiter, both misquoted the Supreme Court’s ruling in Dosch v. NLRC.  The Court held inDosch:

We cannot agree to Northwest’s submission that petitioner was guilty of disobedience and insubordination which respondent Commission sustained.  The only piece of evidence on which Northwest bases the charge of contumacious refusal is petitioner’s letter dated August 28, 1975 to R.C. Jenkins wherein petitioner acknowledged receipt of the former’s memorandum dated August 18, 1975, appreciated his promotion to Director of International Sales but at the same time regretted “that at this time for personal reasons and reasons of my family, I am unable to accept the transfer from the Philippines” and thereafter expressed his preference to remain in his position, saying: “I would, therefore, prefer to remain in my position of Manager-Philippines until such time that my services in that capacity are no longer required by Northwest Airlines.”  From this evidence, We cannot discern even the slightest hint of defiance, much less imply insubordination on the part of petitioner.[19]

The phrase “[r]efusal to obey a transfer order cannot be considered insubordination where employee cited reason for said refusal, such as that of being away from the family” does not appear anywhere in the Dosch decision.  Galanida’s counsel lifted the erroneous phrase from one of the italicized lines in the syllabus of Dosch found in the Supreme Court Reports Annotated (“SCRA”).

The syllabus of cases in official or unofficial reports of Supreme Court decisions or resolutions is not the work of the Court, nor does it state this

Court’s decision. The syllabus is simply the work of the reporter who gives his understanding of the decision.  The reporter writes the syllabus for the convenience of lawyers in reading the reports. A syllabus is not a part of the court’s decision.[20] A counsel should not cite a syllabus in place of the carefully considered text in the decision of the Court.

In the present case, Labor Arbiter Almirante and Atty. Durano began by quoting from Dosch, but substituted a portion of the decision with a headnote from the SCRA syllabus, which they even underscored.  In short, they deliberately made the quote from the SCRA syllabus appear as the words of the Supreme Court.  We admonish them for what is at the least patent carelessness, if not an outright attempt to mislead the parties and the courts taking cognizance of this case.  Rule 10.02, Canon 10 of the Code of Professional Responsibility mandates that a lawyer shall not knowingly misquote or misrepresent the text of a decision or authority.  It is the duty of all officers of the court to cite the rulings and decisions of the Supreme Court accurately.[21]

Whether Galanida was dismissed for just cause

We accord great weight and even finality to the factual findings of the Court of Appeals, particularly when they affirm the findings of the NLRC or the lower courts.  However, there are recognized exceptions to this rule.  These exceptions are: (1) when the findings are grounded on speculation, surmise and conjecture; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the factual findings of the trial and appellate courts are conflicting; (5) when the Court of Appeals, in making its findings, has gone beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the appellate court is premised on a misapprehension of facts or when it has failed to consider certain relevant facts which, if properly considered, will justify a different conclusion; (7) when the findings of fact are conclusions without citation of specific evidence on which they are based;  and (8) when the findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record.[22] After a scrutiny of the records, we find that some of these exceptions obtain in the present case.

The rule is that the transfer of an employee ordinarily lies within the ambit of the employer’s prerogatives.[23] The employer exercises the prerogative to transfer an employee for valid reasons and according to the requirement of its

business, provided the transfer does not result in demotion in rank or diminution of the employee’s salary, benefits and other privileges. [24] In illegal dismissal cases, the employer has the burden of showing that the transfer is not unnecessary, inconvenient and prejudicial to the displaced employee.[25]

The constant transfer of bank officers and personnel with accounting responsibilities from one branch to another is a standard practice of Allied Bank, which has more than a hundred branches throughout the country.[26] Allied Bank does this primarily for internal control.  It also enables bank employees to gain the necessary experience for eventual promotion.  The Bangko Sentral ng Pilipinas, in its Manual of Regulations for Banks and Other Financial Intermediaries,[27] requires the rotation of these personnel.  The Manual directs that the “duties of personnel handling cash, securities and bookkeeping records should be rotated” and that such rotation “should be irregular, unannounced and long enough to permit disclosure of any irregularities or manipulations.”[28]

Galanida was well aware of Allied Bank’s policy of periodically transferring personnel to different branches.  As the Court of Appeals found, assignment to the different branches of Allied Bank was a condition of Galanida’s employment.  Galanida consented to this condition when he signed the Notice of Personnel Action.[29]

The evidence on record contradicts the charge that Allied Bank discriminated against Galanida and was in bad faith when it ordered his transfer.   Allied Bank’s letter of 13 June 1994[30]showed that at least 14 accounting officers and personnel from various branches, including Galanida, were transferred to other branches.  Allied Bank did not single out Galanida.  The same letter explained that Galanida was second in line for assignment outside Cebu because he had been in Cebu for seven years already.  The person first in line, Assistant Manager Roberto Isla, who had been in Cebu for more than ten years, had already transferred to a branch in Cagayan de Oro City.  We note that none of the other transferees joined Galanida in his complaint or corroborated his allegations of widespread discrimination and favoritism.

As regards Ms. Co, Galanida’s letter of 16 June 1994 itself showed that her assignment to Cebu was not in any way related to Galanida’s transfer.  Ms. Co was supposed to replace a certain Larry Sabelino in the Tabunok branch.  The employer has the prerogative, based on its assessment of the employees’ qualifications and competence, to rotate them in the various areas of its business operations to ascertain where they will function with maximum benefit to the company.[31]

Neither was Galanida’s transfer in the nature of a demotion.  Galanida did not present evidence showing that the transfer would diminish his salary, benefits or other privileges.  Instead, Allied Bank’s letter of 13 June 1994 assured Galanida that he would not suffer any reduction in rank or grade, and that the transfer would involve the same rank, duties and obligations.  Mr. Olvedaexplained this further in the affidavit he submitted to the Labor Arbiter, thus:

19.     There is no demotion in position/rank or diminution of complainant’s salary, benefits and other privileges as the transfer/assignment of branch officers is premised on the role/functions that they will assume in the management and operations of the branch, as shown below:

(a)     The Branch Accountant, as controller of the branch is responsible for the proper discharge of the functions of the accounting section of the branch, review of documentation/proper accounting and control of transaction.  As such, the accounting functions in the branch can be assumed by any of the following officers with the rank of:  Senior Manager/Acctg.; Manager/ Acctg.; Senior Asst. Manager/Acctg.; Asst. Manager/Acctg.; Accountant or Asst. Accountant.

x x x

20.     The transfer/assignment of branch officer from one branch, to another branch/office is lateral in nature and carries with it the same position/rank, salary, benefits and other privileges.  The assignment/transfer is for the officer to assume the functions relative to his job and NOT the position/rank of the officer to be replaced.

There is also no basis for the finding that Allied Bank was guilty of unfair labor practice in dismissing Galanida. Unfair labor practices relate only to violations of “the constitutional right of workers and employees to self-organization”[32] and are limited to the acts enumerated in Article 248 of the Labor Code, none of which applies to the present case.  There is no evidence that Galanida took part in forming a union, or even that a union existed in Allied Bank. 

This leaves the issue of whether Galanida could validly refuse the transfer orders on the ground of parental obligations, additional expenses, and the anguish he would suffer if assigned away from his family.

The Court has ruled on this issue before.  In the case of Homeowners Savings and Loan Association, Inc. v. NLRC,[33] we held:

The acceptability of the proposition that transfer made by an employer for an illicit or underhanded purpose – i.e., to defeat an employee’s right to self-organization, to rid himself of an undesirable worker, or to penalize an employee for union activities – cannot be upheld is self-evident and cannot be gainsaid.  The difficulty lies in the situation where no such illicit, improper or underhanded purpose can be ascribed to the employer, the objection to the transfer being grounded solely upon the personal inconvenience or hardship that will be caused to the employee by reason of the transfer.  What then?

This was the very same situation we faced in Phil. Telegraph and Telephone Corp. v. Laplana.  In that case, the employee, Alicia Laplana, was a cashier at the Baguio City Branch of PT&T who was directed to transfer to the company’s branch office at Laoag City.  In refusing the transfer, the employee averred that she had established Baguio City as her permanent residence and that such transfer will involve additional expenses on her part, plus the fact that an assignment to a far place will be a big sacrifice for her as she will be kept away from her family which might adversely affect her efficiency.  In ruling for the employer, the Court upheld the transfer from one city to another within the country as valid as long as there is no bad faith on the part of the employer.  We held then:

“Certainly the Court cannot accept the proposition that when an employee opposes his employer’s decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee’s wishes that should be made to prevail.”

Galanida, through counsel, invokes the Court’s ruling in Dosch v. NLRC.[34] Dosch, however, is not applicable to the present case. Helmut Dosch refused a transfer consequential to a promotion.  We upheld the refusal because no law compels an employee to accept a promotion, and because the position Dosch was supposed to be promoted to did not even exist at that time.[35] This left as the only basis for the charge of insubordination a letter from Dosch in which the Court found “not even the slightest hint of defiance, much less xxx insubordination.”[36]

Moreover, the transfer of an employee to an overseas post, as in the Dosch case, cannot be likened to a transfer from one city to another within the country,[37] which is the situation in the present case.  The distance from Cebu City to Bacolod City or from Cebu City to Tagbilaran City does not exceed the distance from Baguio City to Laoag City or from Baguio City to Manila, which the Court considered a reasonable distance in PT&T v. Laplana.[38]

The refusal to obey a valid transfer order constitutes willful disobedience of a lawful order of an employer.[39] Employees may object to, negotiate and seek redress against employers for rules or orders that they regard as unjust or illegal.  However, until and unless these rules or orders are declared illegal or improper by competent authority, the employees ignore or disobey them at their peril.[40] For Galanida’s continued refusal to obey Allied Bank’s transfer orders, we hold that the bank dismissed Galanida for just cause in accordance with Article 282 (a) of the Labor Code. [41] Galanida is thus not entitled to reinstatement or to separation pay.

Whether Galanida’s dismissal violated therequirement of notice and hearing

To be effective, a dismissal must comply with Section 2 (d), Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code (“Omnibus Rules”), which provides:

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

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

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

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

The first written notice was embodied in Allied Bank’s letter of 13 June 1994.  The first notice required Galanida to explain why no disciplinary action should be taken against him for his refusal to comply with the transfer orders.

On the requirement of a hearing, this Court has held that the essence of due process is simply an opportunity to be heard. [42] An actual hearing is not necessary. The exchange of several letters, in which Galanida’s wife, a lawyer with the City Prosecutor’s Office, assisted him, gave Galanida an opportunity to respond to the charges against him.

The remaining issue is whether the Memo dated 8 September 1994 sent to Galanida constitutes the written notice of termination required by the

Omnibus Rules. In finding that it did not, the Court of Appeals and the NLRC cited Allied Bank’s rule on dismissals, quoted in the Memo, that, “Notice of termination shall be issued by the Investigation Committee subject to the confirmation of the President or his authorized representative.” [43] The appellate court and NLRC held that Allied Bank did not send any notice of termination to Galanida.  The Memo, with the heading “Transfer and Reassignment,” was not the termination notice required by law.

We do not agree.

Even a cursory reading of the Memo will show that it unequivocally informed Galanida of Allied Bank’s decision to dismiss him.  The statement, “please be informed that the Bank has terminated your services effective September 1, 1994 and considered whatever benefit, if any, that you are entitled [to] as forfeited xxx” [44] is plainly worded and needs no interpretation.  The Memo also discussed the findings of the Investigation Committee that served as grounds for Galanida’s dismissal.  The Memo referred to Galanida’s “open defiance and refusal” to transfer first to the Bacolod City branch and then to the Tagbilaran City branch.  The Memo also mentioned his continued refusal to report for work despite the denial of his application for additional vacation leave. [45] The Memo also refuted Galanida’s charges of discrimination and demotion, and concluded that he had violated Article XII of the bank’s Employee Discipline Policy and Procedure.

The Memo, although captioned “Transfer and Reassignment,” did not preclude it from being a notice of termination.  The Court has held that the nature of an instrument is characterized not by the title given to it but by its body and contents.[46] Moreover, it appears that Galanida himself regarded the Memo as a notice of termination.  We quote from the Memorandum for Private Respondent-Appellee, as follows:

The proceedings may be capsulized as follows:

1.       On March 13, 1994[47] Private Respondent-Appellee filed before the Region VII Arbitration Branch a Complaint for Constructive Dismissal. A copy of the Complaint is attached to the Petition as Annex “H”;

xxx

5.       On September 8, 1994, Petitioner-Appellant issued him a Letter of Termination.  A copy of said letter is attached to the Petition as Annex “N”;  

6.       Private Respondent-Appellee filed an Amended/ Supplemental Complaint wherein he alleged illegal dismissal.  A copy of the Amended/Supplemental Complaint is attached to the Petition as Annex “O”; xxx [48](Emphasis supplied)

The Memorandum for Private Respondent-Appellee refers to the Memo as a “Letter of Termination.”  Further, Galanida amended his complaint for constructive dismissal[49] to one for illegal dismissal[50] after he received the Memo.  Clearly, Galanida had understood the Memo to mean that Allied Bank had terminated his services.

The Memo complied with Allied Bank’s internal rules which required the bank’s President or his authorized representative to confirm the notice of termination.  The bank’s Vice-President for Personnel, as the head of the department that handles the movement of personnel within Allied Bank, can certainly represent the bank president in cases involving the dismissal of employees.

Nevertheless, we agree that the Memo suffered from certain errors.   Although the Memo stated that Allied Bank terminated Galanida’s services as of 1 September 1994, the Memo bore the date 8 September 1994.  More importantly, Galanida only received a copy of the Memo on 5 October 1994, or more than a month after the supposed date of his dismissal.  To be effective, a written notice of termination must be served on the employee.[51] Allied Bank could not terminate Galanida on 1 September 1994 because he had not received as of that date the notice of Allied Bank’s decision to dismiss him.  Galanida’s dismissal could only take effect on 5 October 1994, upon his receipt of the Memo. For this reason, Galanida is entitled to backwages for the period from 1 September 1994 to 4 October 1994.

Under the circumstances, we also find an award of P10,000 in nominal damages proper.  Courts award nominal damages to recognize or vindicate the right of a person that another has violated. [52] The law entitles Galanida to receive timely notice of Allied Bank’s decision to dismiss him.  Allied Bank should have exercised more care in issuing the notice of termination.

WHEREFORE, the Decision of 27 April 2000 of the Court of Appeals in CA-G.R. SP No. 51451 upholding the Decision of 18 September 1998 of the NLRC in NLRC Case No. V-000180-98 is AFFIRMED, with the following MODIFICATIONS:

1)       The awards of separation pay, moral damages and exemplary damages are hereby deleted for lack of basis; 

2)       Reducing the award of backwages to cover only the period from 1 September 1994 to 4 October 1994; and

3)       Awarding nominal damages to private respondent for P10,000.

This case is REMANDED to the Labor Arbiter for the computation, within thirty (30) days from receipt of this Decision, of the backwages, inclusive of allowances and other benefits, due to Potenciano L. Galanida for the time his dismissal was ineffectual from 1 September 1994 until 4 October 1994.

Labor Arbiter Dominador A. Almirante and Atty. Loreto M. Durano are ADMONISHED to be more careful in citing the decisions of the Supreme Court in the future.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

Republic of the PhilippinesSupreme Court

Manila  

FIRST DIVISION  Genuino Ice Company, Inc. G.R. No. 147790                             Petitioner,

Present:    PANGANIBAN, CJ., Chairperson,    YNARES-SANTIAGO,

                - versus -     AUSTRIA-MARTINEZ,    CALLEJO, SR. and    CHICO-NAZARIO, JJ.Promulgated:

Alfonso S. Magpantay,                             Respondent.      June 27, 2006

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

D E C I S I O N  

AUSTRIA-MARTINEZ, J.:  

          Alfonso Magpantay (respondent) was employed as a machine operator with

Genuino Ice Company, Inc. (petitioner) from March 1988 to December

1995.  On November 18, 1996, respondent filed against petitioner a complaint for

illegal dismissal with prayer for moral and exemplary damages.[1]  In his Position

Paper, respondent alleged that he was dismissed from service effective

immediately by virtue of a memorandum, after which he was not allowed anymore

to enter the company premises.  Respondent bewailed that his termination from

employment was done without due process.[2]

 

          Petitioner countered that he was not illegally dismissed, since the dismissal

was based on a valid ground, i.e., he led an illegal strike at petitioner’s sister

company, Genuino Agro Industrial Development Corporation, which lasted from

November 18 to 22, 1995, resulting in big operation losses on the latter’s

part.  Petitioner also maintained that respondent’s dismissal was made after he was

accorded due process.[3]

 

          Respondent replied, however, that assuming that he led such illegal strike, he

could not be liable therefore because it was done in petitioner’s sister company

which is a separate and distinct entity from petitioner.[4]

 

          Petitioner initially claimed that respondent’s acts were tantamount to serious

misconduct or willful disobedience, gross and habitual neglect of duties, and

breach of trust. Subsequently, petitioner amended its position paper to include

insubordination among the grounds for his dismissal, since it came out during

respondent’s cross-examination, and the matter was reported only after the new

personnel manager assumed his position in August 1996.[5]

 

          On August 14, 1998, the Labor Arbiter of the National Labor Relations

Commission (NLRC) dismissed the case for lack of merit[6] finding that petitioner

had valid cause to dismiss respondent. 

 

          Respondent appealed from the Labor Arbiter’s Decision.  The NLRC,

in  its  Decision  dated June 30, 1999,  sustained  the  findings  of  the  Labor

Arbiter and denied the appeal for lack of merit.[7]

 

          Respondent filed a motion for reconsideration of the NLRC Decision, which

was denied in a Resolution dated August 31, 1999.[8]

 

          On October 29, 1999, entry of judgment was made on the NLRC Resolution

dated August 31, 1999.[9]

 

          On February 7, 2000, respondent filed a special civil action

for certiorari with the Court of Appeals (CA), docketed as CA-G.R. SP No.

57105.  Respondent’s counsel stated that it was on December 20, 1999 that he

received the NLRC Resolution dated August 31, 1999.[10]

 

          In his petition before the CA, respondent alleged that the Labor Arbiter

committed an error in ruling that his dismissal was for a valid cause; and reiterated

his claim that his dismissal was made without due process.[11]

 

          Petitioner filed its Comment, contending that the petition was filed out of

time, considering that contrary to respondent’s claim that the NLRC Resolution

dated August 31, 1999 was received on December 20, 1999, it was actually

received on September 15, 1999, as shown in the registry return card.  Petitioner

also reiterated its arguments that respondent was dismissed for cause and with due

process.

 

          On August 3, 2000, the CA[12] rendered the assailed Decision granting the

petition  and  declaring respondent’s dismissal as illegal.  The dispositive

portion of the Decision reads: 

WHEREFORE, the petition is GRANTED.  The dismissal of petitioner is hereby declared as illegal.  Respondent company is ORDERED to pay to petitioner separation pay and full backwages.  Let this case be remanded to the labor arbiter for the computation of the aforesaid awards.

 

SO ORDERED.[13]

 

          Petitioner filed a motion for reconsideration which the CA denied per its

Resolution dated March 16, 2001.[14]

 

          Hence, herein petition for review on certiorari under Rule 45 of the Rules of

Court stating the following issues: 

1.         Whether or not the Court of Appeals erred and committed grave abuse of discretion in giving due course to the respondent’s Petition for Certiorari?

 2.         Whether or not the Court a quo erred and committed grave abuse

of discretion in declaring that the respondent was illegally dismissed from employment?

 3.         Whether or not the Court a quo erred and committed grave abuse

of discretion in ordering the payment of separation pay and full backwages to the respondent?[15]

  

At the outset, it should be stated that under Rule 45 of the Rules of Court,

only questions of law may be raised, the reason being that this Court is not a trier

of facts.  It is not for this Court to reexamine and reevaluate the evidence on

record.[16]  However, considering that the CA came up with an opinion different

from that of the Labor Arbiter and the NLRC,   the Court is

now constrained to review the evidence on record.[17]

 

On the first issue, petitioner argues that the CA should have dismissed

respondent’s petition for having been filed out of time.  According to petitioner,

since the registry return receipt shows that the NLRC Resolution dated August 31,

1999 denying respondent’s motion for reconsideration was received on September

15, 1999, the petition filed onFebruary 7, 2000 was, therefore, 85 days late.

 

          Respondent, however, counters that the person who received the NLRC

Resolution dated August 31, 1999 on September 15, 1999, a certain Mirela G.

Ducut of the Computer Services Department, was not a duly-authorized

representative of the FEU Legal Aid Bureau, as it is only Ellen Dela Paz, who is

authorized to receive all communications addressed to the office. 

 

          The CA sustained respondent’s contention that since the service was not

made to an authorized person, it was not legally effective, and the counting of the

period should be reckoned from the date of actual receipt by counsel, which was

on December 20, 1999.

 

          The New Rules of Procedure of the NLRC provides the rule for the service

of notices and resolutions in NLRC cases, to wit: 

Sec. 4.  Service of notices and resolutions. – a) Notices or summons and copies of orders, resolutions or decisions shall be served on the parties to the case personally by the bailiff or the duly authorized public officer within three (3) days from receipt thereof by registered mail; Provided, that where a party is represented by counsel or authorized representative, service shall be made on such counsel or authorized representative;  x  x  x

 

The presumption is that the decision was delivered to a person in his office,

who was duly authorized to receive papers for him, in the absence of proof to the

contrary.[18] It is likewise a fundamental rule that unless the contrary is proven,

official duty is presumed to have been performed regularly and judicial

proceedings regularly conducted, which includes the presumption of regularity of

service of summons and other notices.[19]  The registry return of the registered mail

as having been received is prima facie proof of the facts indicated therein.  Thus, it

was necessary for respondent to rebut that legal presumption with competent and

proper evidence. 

 

In an attempt to disprove that there was proper receipt of the Resolution,

respondent’s counsel presented an Affidavit executed by Ellen dela Paz, who

attested that she is the only person authorized to receive communications for and in

behalf of the FEU Legal Aid Bureau; that she never received the NLRC Resolution

dated August 31, 1999 on September 15, 1999; and that it was only on December

20, 1999, through respondent, that they learned of said Resolution.[20] 

 

Records show that Ducut is not an employee of the FEU Legal Aid Bureau,

but is connected with the Computer Services Department.  The FEU Legal Aid

Bureau has its own personnel which include Ms. dela Paz who is the one

authorized to receive communications in behalf of the office.   It has been ruled

that a service of a copy of a decision on a person who is neither a clerk nor one in

charge of the attorney’s office is invalid.[21]  This was the Court’s ruling

in Cañete v. National Labor Relations Commission,[22] to wit: 

We have ruled that where a copy of the decision is served on a person who is neither a clerk nor one in charge of the attorney’s office, such service is invalid.  In the case at bar, it is undisputed thatNenette Vasquez, the person who received a copy of the labor arbiter’s Decision, was neither a clerk of Atty. Chua, respondent’s counsel, nor a person in charge of Atty. Chua’s office.  Hence, her receipt of said Decision on March 15, 1993 cannot be considered as notice to Atty. Chua.  Since a copy of the Decision was actually delivered by Vasquez to Atty. Chua’s clerk only on March 16, 1993, it was only on this date that the ten-day period for the filing of respondent’s appeal commenced to run.  Thus, respondent’s March 26, 1993 appeal to the NLRC was seasonably filed.[23]

  

This was recently reiterated in Prudential Bank v. Business Assistance

Group, Inc.,[24] where the Court accepted the affidavit executed by Arlan Cayno

denying that he was an employee of Gella, Danguilan, Nabaza & Associates law

firm authorized to receive legal or judicial processes.  Cayno likewise disclaimed

knowledge of the whereabouts of the notice.  According to the Court, since Mr.

Cayno was not an employee of the said law firm authorized to receive notices in its

behalf, his alleged receipt of the notice is without any effect in law. 

 

Hence, the CA was correct in ruling that the reckoning period should be the

date when respondent’s counsel actually received the NLRC Resolution

dated August 31, 1999, which was on December 20, 1999.

         

Petitioner, however, pointed out that a certain Ruby D.G. Sayat received a

copy of their Motion for Reconsideration filed by registered mail on August 16,

2000.[25] Respondent contended that at the time Sayat received the motion, she was

then detailed at the office and was authorized to receive said pleading, and that it

was an isolated and exceptional instance.[26]  On this matter, the FEU Acting

Postmaster certified that Sayat is a permanent employee of the FEU Legal Aid

Bureau.[27]  As such, she is authorized to receive communications in behalf of the

office and need not possess an express authority to do so. 

 

More importantly, the Court has consistently frowned upon the dismissal of

an appeal on purely technical grounds.  While the right to appeal is a statutory, not

a natural right, it is, nonetheless, an essential part of our judicial system.  Courts

should proceed with caution so as not to deprive a party of the right to appeal, but

rather, ensure amplest opportunity for the proper and just disposition of a cause,

free from the constraints of technicalities.[28]

 

On the issue of illegal dismissal, both the Labor Arbiter and the NLRC were

one in concluding that petitioner had just cause for dismissing respondent, as his

act of leading a strike at petitioner’s company for four days, his absence from work

during such time, and his failure to perform his duties during such absence, make

up a cause for habitual neglect of duties, while his failure to comply with

petitioner’s order for him to transfer to the GMA, Cavite Plant constituted

insubordination or willful disobedience.  The CA, however, differed with said

conclusion and found that respondent’s attitude “has not been proved to be visited

with any wrongdoing”, and that his four-day absence does not appear to be both

gross and habitual.

 

The Court sustains the CA’s finding that respondent’s four-day absence does

not amount to a habitual neglect of duty; however, the Court finds that respondent

was validly dismissed on ground of willful disobedience or insubordination.

 

Under Article 282 of the Labor Code, as amended, an employer may

terminate an employment for any of the following causes: (a) serious misconduct

or willful disobedience by the employee of the lawful orders of his employer or

representative in connection with his work; (b) gross and habitual neglect by

the employee of his duties; (c) fraud or willful breach by the employee of the trust

reposed in him by his employer or duly authorized representative; (d) commission

of a crime or offense by the employee against the person of his employer or any

immediate member of his family or his duly authorized representative; and, (e)

other causes analogous to the foregoing.[29] The employer has the burden of proving

that the dismissal was for a just cause; failure to show this would necessarily mean

that the dismissal was unjustified and, therefore, illegal.[30] 

 

Neglect of duty, to be a ground for dismissal, must be both gross and

habitual.[31]  Gross negligence connotes want of care in the performance of one’s

duties.  Habitual neglect implies repeated failure to perform one’s duties for a

period of time, depending upon the circumstances.  On the other hand, fraud and

willful neglect of duties imply bad faith on the part of the employee in failing to

perform his job to the detriment of the employer and the latter’s business.[32]  Thus,

the single or isolated act of negligence does not constitute a just cause for the

dismissal of the employee.[33]

 

Thus, the Court agrees with the CA that respondent’s four-day absence is not

tantamount to a gross and habitual neglect of duty.  As aptly stated by the CA,

“(W)hile he may be found by the labor courts to be grossly negligent of his duties,

he has never been proven to be habitually absent in a span of seven (7) years as

GICI’s employee.  The factual circumstances and evidence do not clearly

demonstrate that petitioner’s [respondent] absences contributed to the detriment of

GICI’s operations and caused irreparable damage to the company.”[34]

 

Petitioner, however, insists that during his four-day absence, respondent was

leading an illegal strike in its sister company.  In the first place, there is no

showing that the strike held at the Genuino Agro Industrial Development

Corporation is illegal.  It is a basic rule in evidence that each party must prove his

affirmative allegation.  Since the burden of evidence lies with the party who asserts

the affirmative allegation, the plaintiff or complainant has to prove his affirmative

allegations in the complaint and the defendant or the respondent has to prove the

affirmative allegation in his affirmative defenses and counterclaim. [35]  Since it was

petitioner who alleged that such strike is illegal, petitioner must, therefore, prove

it.  Except for such bare allegation, there is a dearth of evidence in this case

proving the illegality of said strike. 

 

However, as previously stated, the Court finds that respondent was validly

dismissed on the ground of insubordination or willful disobedience. 

 

On this point, the CA opined that petitioner included insubordination as a

“mere after-thought.”  It noted that petitioner seemed to be “irresolute” in stating

the cause of respondent’s dismissal, as in its Position Paper, it originally relied on

respondent’s four-day absence or participation in the illegal strike as a cause for

dismissal but later on amended its Position Paper to include insubordination.[36]  Thus, the CA did not make any factual finding or conclusion in its

Decision vis-à-vis petitioner’s allegation of respondent’s insubordination.

 

While its perception may be true, it should not have deterred the CA from

making any resolution on the matter.  For one, respondent was able to argue

against petitioner’s allegation of insubordination before the Labor Arbiter [37] and

the NLRC.[38]  For another, it was respondent himself who raised the subject before

the CA, wherein he stated in his Petition, inter alia, viz.:37.  Miserably, public respondent [NLRC] justified the validity of

his dismissal by holding that the 12 December 1995 Memorandum showed that it was effected with due process.   x   x   x

 

x x x x 

38.  How could the foregoing memorandum justify petitioner’s dismissal for allegedly joining the four (4) days strike when it refers to his alleged refusal to transfer?  This memorandum shows glaring violations of his right to substantive and procedural due process and reveal the true circumstances of his dismissal, to wit: 1) petitioner was dismissed because of his failure to abide with the management’s decision to transfer him, and not on his alleged participation in the four (4) day strike or his absence on those dates;  x  x  x; 3) while the true cause of his dismissal is his failure to abide with the decision to transfer, private respondent belatedly and self-servingly claimed that he was dismissed because of the alleged strike; 4) the Labor Arbiter’s decision that the dismissal is valid is based on speculation in that while it was clear that petitioner was actually dismissed for refusing the transfer, he held that the dismissal is justified because petitioner absented for four (4) days to join the strike elsewhere; x   x   x [39]  (Emphasis supplied)

 

Further, the proceedings before the Labor Arbiter and the NLRC are non-

litigious in nature.[40]  As such, the proceedings before it are not bound by the

technical niceties of the law and procedure and the rules obtaining in courts of law,[41] as dictated by Article 221 of the Labor Code:

 ART. 221.  Technical rules not binding and prior resort to

amicable settlement. – In any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall

use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process. 

  

This rule applies equally to both the employee and the employer.  In the

interest of due process, the Labor Code directs labor officials to use all reasonable

means to ascertain the facts speedily and objectively, with little regard to

technicalities or formalities.[42]  What is essential is that every litigant is given

reasonable opportunity to appear and defend his right, introduce witnesses and

relevant evidence in his favor,[43] which undoubtedly, was done in this case.

 

Willful disobedience, or insubordination as otherwise branded in this case,

as a just cause for dismissal of an employee, necessitates the concurrence of at

least two requisites: (1) the employee's assailed conduct must have been willful,

that is, characterized by a wrongful and perverse attitude; and (2) the order violated

must have been reasonable, lawful, made known to the employee and must pertain

to the duties which he had been engaged to discharge.[44]

 

In Coca-Cola Bottlers, Phils. Inc v. Kapisanan ng Malayang Manngagawa

sa Coca-Cola-FFW, it was held that an employer enjoys a wide latitude of

discretion in the promulgation of policies, rules and regulations on work-related

activities of the employees so long as they are exercised in good faith for the

advancement of the employer’s interest and not for the purpose of defeating or

circumventing the rights of the employees under special laws or under valid

agreements.  Company policies and regulations are generally valid and binding on

the parties and must be complied with until finally revised or amended, unilaterally

or preferably through negotiation, by competent authority.  For misconduct or

improper behavior to be a just cause for dismissal, the same must be related to the

performance of the employee’s duties and must show that he has become unfit to

continue working for the employer.[45]

 

In the case at bench, petitioner informed respondent, through a

Memorandum dated November 14, 1995, that he was being transferred to its

GMA, Cavite operations effective November 20, 1995, to wit:

 We have considered you to fill-up the maintenance position

urgently required in our GMA, Cavite business operations.  After thorough evaluation of qualified candidates, we find your qualifications most suited to satisfactorily perform the maintenance activities at GMA, Cavite.

 x   x   x   x[46]

         

Due to his refusal to report to the Cavite plant, petitioner reiterated its order

transferring respondent in its Memorandum dated November 24, 1995,[47] where

respondent was also warned that his failure to report to the Cavite plant will be

considered as an absence without leave (AWOL) and insubordination.  Respondent

was required to comply with the order within 24 hours from receipt, otherwise,

disciplinary action will be imposed on respondent.     Respondent replied with a

request that he remain in the Otis plant since a transfer to the Cavite plant will

entail additional expenditure and travel time on his part.[48]

 

          Petitioner again wrote respondent inviting him to appear before the Plant

Level Investigation on December 11, 1995 for the latter to be able to clarify his

reasons for refusing the transfer.[49] 

 

          Finally, petitioner issued its Memorandum dated December 12,

1995 informing respondent of its decision to terminate his services.  The

Memorandum reads, in part:

 The management panel has discussed and deliberated thoroughly

on your case regarding your transfer to GMA Plant in GMA, Cavite which was supposed to be effective on 20 November, 1995 but unfortunately you refused to comply despite our repeated

instructions to you to assume your new assignment while your case had been under grievance machinery.

 On 09 December, 1995 a letter memorandum was served to you

informing you to appear at plant level investigation to be conducted on 11 December, 1995.  The management panel in consideration to (sic) your reasons for not transferring to GMA Plant as stated in your reply dated December 07, 1995, offered you to provide monetary allowance to at least compensate for your assumed additional expenses.  However, you turned down this action of good faith from the management.

 x   x   x   x Your written explanation and the outcome of the plant level

investigation clearly showed your willful or intentional disobedience.  It was insubordination in its highest order.  In this regard, much to our regret, we have no other recourse but to terminate your services with us for cause and causes cited in the foregoing effective 13 December 1995.

 x   x   x   x[50]

 

The rule is that the transfer of an employee ordinarily lies within the ambit

of the employer’s prerogatives.  The employer exercises the prerogative to transfer

an employee for valid reasons and according to the requirement of its business,

provided the transfer does not result in demotion in rank or diminution of the

employee’s salary, benefits and other privileges.[51] 

 

In this case, petitioner’s order for respondent to transfer to the GMA, Cavite

Plant is a reasonable and lawful order was made known to him and pertains to his

duties as a machine operator.  There was no demotion involved or diminution of

salary, benefits and other privileges, and in fact, petitioner was even willing to

provide respondent with monetary allowance to defray whatever additional

expenses he may incur with the transfer. 

 

In Allied Banking Corporation v. Court of Appeals,[52] the Court ruled that an

employee cannot validly refuse a transfer order on the ground of parental

obligations, additional expenses, and the anguish he would suffer if assigned away

from his family.  Citing Homeowners Savings and Loan Association, Inc. v.

National Labor Relations Commission,[53] the Court stated: 

The acceptability of the proposition that transfer made by an employer for an illicit or underhanded purpose – i.e., to defeat an employee’s right to self-organization, to rid himself of an undesirable worker, or to penalize an employee for union activities – cannot be upheld is self-evident and cannot be gainsaid.  The difficulty lies in the situation where no such illicit, improper or underhanded purpose can be ascribed to the employer, the objection to the transfer being grounded solely upon the personal inconvenience or hardship that will be caused to the employee by reason of the transfer.  What then?

 This was the very same situation we faced in Phil. Telegraph and

Telephone Corp. v. Laplana.  In that case, the employee, Alicia Laplana, was a cashier at the Baguio City Branch of PT&T who was directed to transfer to the company’s branch office at Laoag City.  In refusing the transfer, the employee averred that she had established Baguio City as her permanent residence and that such transfer will involve additional expenses on her part, plus the fact that an assignment to a far place will be a big sacrifice for her as she will be kept away from her family which might adversely affect her efficiency.  In ruling for the employer, the Court upheld the transfer from one city to another within the country as valid as long as there is no bad faith on the part of the employer.   We held then:

 “Certainly the Court cannot accept the proposition

that when an employee opposes his employer’s decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee’s wishes that should be made to prevail.”

 

Such being the case, respondent cannot adamantly refuse to abide by the

order of transfer without exposing himself to the risk of being dismissed.  Hence,

his dismissal was for just cause in accordance with Article 282 (a) of the Labor

Code.  Consequently, respondent is not entitled to reinstatement or separation pay

and backwages.

 

Lastly, on the issue of due process, Section 2 (d), Rule 1, Book VI of the

Omnibus Rules Implementing the Labor Code provides for the standards of due

process, which shall be substantially observed, to wit:

 For termination of employment based on just causes as defined in

Article 282 of the Labor Code: (i)         A written notice served on the employee specifying the

ground or grounds of termination, and giving said employee reasonable opportunity within which to explain his side.

 (ii)        A hearing or conference during which the employee

concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him.

 (iii)       A written notice of termination served on the employee

indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

 

Simply stated, the employer must furnish the employee a written notice

containing a statement of the cause for termination and to afford said employee

ample opportunity to be heard and defend himself with the assistance of his

representative, if he so desires, and the employee must be notified in writing of the

decision dismissing him, stating clearly the reasons therefor.[54] 

 

The CA found that petitioner failed to observe the twin requirements of

notice and hearing, stating that its Memorandum dated December 13, 1995 does

not squarely meet the standards of due process.  The circumstances surrounding

respondent’s dismissal, however, prove the contrary.  The CA failed to take into

account that prior to the Memorandum dated December 13, 1995, petitioner sent

respondent several memoranda apprising him of the possible implications of his

refusal to comply with the    order of transfer.  Thus, in its Memorandum

dated November 24, 1995, petitioner notified respondent that his continued non-

compliance with the order of transfer might bring about disciplinary action.[55]  Respondent replied to this memorandum, stating the reasons for his

refusal, i.e., additional expenses, longer travel time, and union concerns.[56]  Petitioner sent another Memorandum on December 9, 1995, asking respondent

to appear on December 11, 1995, for further clarification of his reasons for

refusing the transfer.[57]  Despite the meeting, and since respondent, apparently,

stubbornly refused to heed petitioner’s order, it was then that the Memorandum

dated December 13, 1995 was issued to respondent informing him of the

management’s decision to terminate his services.  Clearly, respondent’s right to

due process was not violated.

 

WHEREFORE, the petition is GRANTED.  The CA Decision

dated August 3, 2000 and Resolution dated March 16, 2001 are SET ASIDE, and

the NLRC Decision dated June 30, 1999 is REINSTATED.

 

No costs.

 

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS,respondents.

R E S O L U T I O N

FELICIANO, J.:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition forCertiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent National Labor Relations Commission (NLRC), which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month pay to private respondent employees computed on the basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B.Trajano, in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of Section 5 (a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union.

In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation, and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case.

Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions must fail.

The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on 15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed.

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases present quite different factual situations (although the same word "commissions" was used or invoked) the legal characterizations of which must accordingly differ.

The Third Division in Durplicators found that:

In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation.

In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note the following facts on record:

Salesmen's Total Earnings and 13th Month Pay For the Year 1986 2

Name of Total Amount Paid Montly FixedSalesman Earnings as 13th Month Pay Wages x 12 3

Baylon, P76,610.30 P1,350.00 P16,200.00Benedicto

Bautista 90,780.85 1,182.00 14,184.00Salvador

Brito, 64,382.75 1,238.00 14,856.00Tomas

Bunagan, 89,287.75 1,266.00 15,192.00Jorge

Canilan, 74,678.17 1,350.00 16,200.00Rogelio

Dasig, 54,625.16 1,378,00 16,536.00Jeordan

Centeno, 51,854.15 1,266.04 15,192.00Melecio, Jr.

De los Santos 73,551.39 1,322.00 15,864.00Ricardo

del Mundo, 108,230.35 1,406.00 16,872.00Wilfredo

Garcia, 93,753.75 1,294.00 15,528.00Delfin

Navarro, 98,618.71 1,266.00 15,192.00Ma. Teresa

Ochosa, 66,275.65 1,406.00 16,872.00Rolano

Quisumbing, 101,065.75 1,406.00 16,872.00Teofilo

Rubina, 42,209.73 1,266.00 15,192.00Emma

Salazar, 64,643.65 1,238.00 14,856.00Celso

Sopelario, 52,622.27 1,350.00 16,200.00Ludivico

Tan, 30,127.50 1,238.00 14,856.00Leynard

Talampas, 146,510.25 1,434.00 17,208.00Pedro

Villarin, 41,888.10 1,434.00 17,208.00Constancio

Carrasco, 50,201.20 403.75*Cicero

Punzalan, 24,351.89 1,266.00 15,192.00Reynaldo

Poblador, 25,516.75 323.00*Alberto

Cruz, 32,950.45 323.00*Danilo

Baltazar, 15,681.35 323.00*Carlito

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay.

In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these were paid to the medical representatives and rank-and-file employees as "productivity bonuses." 4 The Second Division characterized these payments as additional monetary benefits not properly included in the term "basic salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms:

As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . . . . From the legal point of view a bonus is not and mandable and enforceable obligation. It is so when It is made part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . . . 6 (Emphasis supplied)

In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 7 the Court amplified:

. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its payment. If it is an additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or actual work accomplished. If the desired goal of production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v.National Labor Relations Commission: 9

A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10(Emphasis supplied)

If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay.

It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified physicians and inform much physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz.:

Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay.

We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properlyexcluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay.

We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides no legal basis for including within the term "commission" there used additional payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however, correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid.

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b) aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be entertained.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.

 

Republic of the PhilippinesSupreme Court

Manila 

THIRD DIVISION  EASTERN TELECOMMUNICATIONS PHILIPPINES, INC.,                                  Petitioner,

- versus -

EASTERN TELECOMS EMPLOYEES UNION,                               Respondent.

G.R. No. 185665

Present:

VELASCO, JR., J., Chairperson,

BERSAMIN,*

ABAD,

MENDOZA, and

PERLAS-BERNABE, JJ.

Promulgated:

       February 8, 2012x ----------------------------------------------------------------------------------------x 

D E C I S I O N MENDOZA, J.:  

          Before the Court is a petition for review on certiorari seeking  modification of the June 25, 2008 Decision[1] of the Court of Appeals (CA) and its December 12, 2008 Resolution,[2] in CA-G.R. SP No. 91974, annulling the April 28, 2005 Resolution[3] of the National Labor Relations Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled “In the Matter of the Labor Dispute in Eastern Telecommunications, Philippines, Inc.”

 The Facts

           As synthesized by the NLRC, the facts of the case are as follows, viz: 

Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing telecommunications facilities, particularly leasing international date lines or circuits, regular landlines, internet and data services, employing approximately 400 employees.

 Eastern Telecoms Employees Union (ETEU) is the

certified exclusive bargaining agent of the company’s rank and file employees with a strong following of 147 regular members. It has an existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side Agreement signed on September 3, 2001.

 In essence, the labor dispute was a spin-off of the

company’s plan to defer payment of the 2003 14th, 15th and 16th month bonuses sometime in April 2004. The company’s main ground in postponing the payment of bonuses is due to allege continuing deterioration of company’s financial position which started in the year 2000. However, ETPI while postponing payment of bonuses sometime in April 2004, such payment would also be subject to availability of funds.

 Invoking the Side Agreement of the existing

Collective Bargaining Agreement for the period 2001-2004 between ETPI and ETEU which stated as follows:

 “4. Employment Related Bonuses. The

Company confirms that the 14th, 15th and 16th month bonuses (other than 13th month pay) are granted.”

 The union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine the date when the bonus should be paid. 

In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would only be made in April 2004 to which date of payment, the union agreed. Thus, considering the agreement forged between the parties, the said agreement was reduced to a Memorandum of Agreement. The union requested that the President of the company should be made a signatory to the agreement, however, the latter refused to sign. In addition to such a refusal, the company made a sudden turnaround in its position by declaring that they will no longer pay the bonuses until the issue is resolved through compulsory arbitration.

  The company’s change in position was contained in

a letter dated April 14, 2004 written to the union by Mr. Sonny Javier, Vice-President for Human Resources and Administration, stating that “the deferred release of bonuses had been superseded and voided due to the union’s filing of the issue to the NCMB on July 18, 2003.” He declared that “until the matter is resolved in a compulsory arbitration, the company cannot and will not pay any ‘bonuses’ to any and all union members.”

 Thus, on April 26, 2004, ETEU filed a Notice of

Strike on the ground of unfair labor practice for failure of ETPI to pay the bonuses in gross violation of the economic provision of the existing CBA.

 

On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in an industry considered vital to the economy and any work disruption thereat will adversely affect not only its operation but also that of the other business relying on its services, certified the labor dispute for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended.

 Acting on the certified labor dispute, a hearing was

called on July 16, 2004 wherein the parties have submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14th, 15th and 16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were directed to submit their respective position papers and evidence in support thereof after which submission, they agreed to have the case considered submitted for decision.[4]

  

In its position paper,[5] the Eastern Telecoms Employees Union (ETEU) claimed that Eastern Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out 14th month bonus during the month of April, and 15th and 16th month bonuses every December of each year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any net profits. ETEU posited that by reason of its long and regular concession, the payment of these monetary benefits had ripened into a company practice which could no longer be unilaterally withdrawn by ETPI. ETEU added that this long-standing company practice had been expressly confirmed in the Side Agreements of the 1998-2001 and 2001-2004 Collective Bargaining Agreements (CBA) which provided for the continuous grant of these bonuses in no uncertain terms. ETEU theorized that the grant of the subject bonuses is not only a company practice but also a contractual obligation of ETPI to the union members.

 ETEU contended that the unjustified and malicious refusal of the company

to pay the subject bonuses was a clear violation of the economic provision of the CBA and constitutes unfair labor practice (ULP). According to ETEU, such refusal was nothing but a ploy to spite the union for bringing the matter of delay in the

payment of the subject bonuses to the National Conciliation and Mediation Board (NCMB). It prayed for the award of moral and exemplary damages as well as attorney’s fees for the unfair labor practice allegedly committed by the company.

 On the other hand, ETPI in its position paper,[6] questioned the authority of

the NLRC to take cognizance of the case contending that it had no jurisdiction over the issue which merely involved the interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and 14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject bonuses were not part of the legally demandable wage and the grant thereof to its employees was an act of pure gratuity and generosity on its part, involving the exercise of management prerogative and always dependent on the financial performance and realization of profits. It posited that it resorted to the discontinuance of payment of the bonuses due to the unabated huge losses that the company had continuously experienced. It claimed that it had been suffering serious business losses since 2000 and to require the company to pay the subject bonuses during its dire financial straits would in effect penalize it for its past generosity. It alleged that the non-payment of the subject bonuses was neither flagrant nor malicious and, hence, would not amount to unfair labor practice.

 Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side

Agreement was a mere affirmation that the distribution of bonuses was discretionary to the company, premised and conditioned on the success of the business and availability of cash. It submitted that said bonus provision partook of the nature of a “one-time” grant which the employees may demand only during the year when the Side Agreement was executed and was never intended to cover the entire term of the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to its employees, the drastic decline in its financial condition had already legally released it therefrom pursuant to Article 1267 of the Civil Code.

 On April 28, 2005, the NLRC issued its Resolution dismissing ETEU’s

complaint and held that ETPI could not be forced to pay the union members the 14th, 15th and 16thmonth bonuses for the year 2003 and the 14th month bonus for the

year 2004 inasmuch as the payment of these additional benefits was basically a management prerogative, being an act of generosity and munificence on the part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI may not be obliged to pay these extra compensations in view of the substantial decline in its financial condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating that no sufficient and substantial evidence was adduced to attribute malice to the company for its refusal to pay the subject bonuses. The dispositive portion of the resolution reads:

 WHEREFORE, premises considered, the instant

complaint is hereby DISMISSED for lack of merit.           

SO ORDERED.[7]

 Respondent ETEU moved for reconsideration but the motion was denied by

the NLRC in its Resolution dated August 31, 2005. Aggrieved, ETEU filed a petition for certiorari[8] before the CA ascribing

grave abuse of discretion on the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were part of the union members’ wages, salaries or compensations. In addition, ETEU asserted that the NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give said bonuses to the union members.

 In its assailed June 25, 2008 Decision, the CA declared that the Side

Agreements of the 1998 and 2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees without qualification or condition. It also found that the grant of said bonuses has already ripened into a company practice and their denial would amount to diminution of the employees’ benefits. It held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC finding that the allegation of ULP was devoid of merit. The dispositive portion of the questioned decision reads:

 

WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the National Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE. Respondent Eastern Telecommunications Philippines, Inc. is ordered to pay the members of petitioner their 14th, 15th and 16th month bonuses for the year 2003 and 14th month for the year 2004. The complaint for unfair labor practice against said respondent is DISMISSED.

                                   SO ORDERED.[9]

   

ISSUES Dissatisfied, ETPI now comes to this Court via Rule 45, raising the

following errors allegedly committed by the CA, to wit: 

I.THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED AND SET ASIDE THE RESOLUTIONS OF THE NLRC DISREGARDING THE WELL SETTLED RULE THAT A WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION. 

II. 

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT DISREGARDED THE RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES ARE ACCORDED FINALITY IF THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED ON SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS.

 III.

 

IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER THAT THE BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS NOT DEPENDENT ON THE REALIZATION OF PROFITS.

 IV.

 THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT DISREGARDED THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS SUFFERING FROM TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE FINANCIAL DISTRESS OF EASTERN COMMUNICATIONS. 

V. 

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED AT THE CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED INTO A COMPANY PRACTICE.[10]

  A careful perusal of the voluminous pleadings filed by the parties leads the

Court to conclude that this case revolves around the following core issues: 1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for the year 2004 to the members of respondent union; and 2. Whether or not the CA erred in not dismissing outright ETEU’s petition for certiorari.

 ETPI insists that it is under no legal compulsion to pay 14th, 15th and

16th month bonuses for the year 2003 and 14th month bonus for the year 2004 contending that they are not part of the demandable wage or salary and that their grant is conditional based on successful business performance and the availability of company profits from which to source the same. To thwart ETEU’s monetary

claims, it insists that the distribution of the subject bonuses falls well within the company’s prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof especially since it is currently plagued with economic difficulties and financial losses. It alleges that the company’s fiscal situation greatly declined due to tremendous and extraordinary losses it sustained beginning the year 2000. It claims that it cannot be compelled to act liberally and confer upon its employees additional benefits over and above those mandated by law when it cannot afford to do so. It posits that so long as the giving of bonuses will result in the financial ruin of an already distressed company, the employer cannot be forced to grant the same.

 ETPI further avers that the act of giving the subject bonuses did not ripen

into a company practice arguing that it has always been a contingent one dependent on the realization of profits and, hence, the workers are not entitled to bonuses if the company does not make profits for a given year. It asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a vested property right to a perennial payment of the bonuses. It opines that the bonus provision in the Side Agreement allows the giving of benefits only at the time of its execution. For this reason, it cannot be said that the grant has ripened into a company practice. In addition, it argues that even if such traditional company practice exists, the CA should have applied Article 1267 of the Civil Code which releases the obligor from the performance of an obligation when it has become so difficult to fulfill the same.      

 It is the petitioner’s stance that the CA should have dismissed outright the

respondent union’s petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but, instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that the CA court should have refrained from tackling issues of fact and, instead, limited itself on issues of jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.

 The Court’s Ruling

 

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. The rule, however, admits of several exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court or the lower administrative body, as the case may be.[11] Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds Itself obliged to resolve it.

 The pivotal question determinative of this controversy is whether the

members of ETEU are entitled to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for year 2004.

  After an assiduous assessment of the record, the Court finds no merit in the

petition. From a legal point of view, a bonus is a gratuity or act of liberality of the

giver which the recipient has no right to demand as a matter of right. [12] The grant of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages.[13]

 A bonus, however, becomes a demandable or enforceable obligation when it

is made part of the wage or salary or compensation of the employee. [14] Particularly instructive is the ruling of the Court in Metro Transit Organization, Inc. v. National Labor Relations Commission,[15] where it was written:

 Whether or not a bonus forms part of wages

depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but only to some employees and only when their labor

becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefore, not a part of the wage.   The consequential question that needs to be settled, therefore, is whether the

subject bonuses are demandable or not. Stated differently, can these bonuses be considered part of the wage, salary or compensation making them enforceable obligations?

 The Court believes so. In the case at bench, it is indubitable that ETPI and ETEU agreed on the

inclusion of a provision for the grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement,[16] as well as in the 2001-2004 CBA Side Agreement,[17] which was signed on September 3, 2001. The provision, which was similarly worded, states:

 Employment-Related BonusesThe Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay) are granted.   A reading of the above provision reveals that the same provides for the

giving of 14th, 15th and 16th month bonuses without qualification. The wording of the provision does not allow any other interpretation. There were no conditions specified in the CBA Side Agreements for the grant of the benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by the company. Terse and clear, the said provision does not state that the subject bonuses shall be made to depend on the ETPI’s financial standing or that their payment was contingent upon the realization of profits. Neither does it state that if the company derives no profits, no bonuses are to be given to the employees. In fine, the payment of these bonuses was not related to the profitability of business operations. 

 The records are also bereft of any showing that the ETPI made it clear

before or during the execution of the Side Agreements that the bonuses shall be

subject to any condition. Indeed, if ETPI and ETEU intended that the subject bonuses would be dependent on the company earnings, such intention should have been expressly declared in the Side Agreements or the bonus provision should have been deleted altogether. In the absence of any proof that ETPI’s consent was vitiated by fraud, mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it had full knowledge of the contents thereof and that it was aware of its commitment under the contract. Verily, by virtue of its incorporation in the CBA Side Agreements, the grant of 14th, 15th and 16th month bonuses has become more than just an act of generosity on the part of ETPI but a contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI to the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its argument that the giving of the subject bonuses is a management prerogative.  

 From the foregoing, ETPI cannot insist on business losses as a basis for

disregarding its undertaking. It is manifestly clear that although it incurred business losses of ₱149,068,063.00 in the year 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no uncertain terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002 in the amounts of ₱348,783,013.00 and ₱315,474,444.00, respectively. Still and all, this did not deter it from honoring the bonus provision in the Side Agreement as it continued to give the subject bonuses to each of the union members in 2001 and 2002 despite its alleged precarious financial condition. Parenthetically, it must be emphasized that ETPI even agreed to the payment of the 14th, 15th and 16th month bonuses for 2003 although it opted to defer the actual grant in April 2004. All given, business losses could not be cited as grounds for ETPI to repudiate its obligation under the 2001-2004 CBA Side Agreement.

 The Court finds no merit in ETPI’s contention that the bonus provision

confirms the grant of the subject bonuses only on a single instance because if this is so, the parties should have included such limitation in the agreement. Nowhere in the Side Agreement does it say that the subject bonuses shall be conferred once during the year the Side Agreement was signed. The Court quotes with approval the observation of the CA in this regard:

 ETPI argues that assuming the bonus provision in

the Side Agreement of the 2001-2004 CBA entitles the union members to the subject bonuses, it is merely in the nature of a “one-time” grant and not intended to cover the entire term of the CBA. The contention is untenable. The bonus provision in question is exactly the same as that contained in the Side Agreement of the 1998-2001 CBA and there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of those years. Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the 2001-2004 CBA is only a “one-time” grant.[18] 

 ETPI then argues that even if it is contractually bound to distribute the

subject bonuses to ETEU members under the Side Agreements, its current financial difficulties should have released it from the obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:

 Article 1267. When the service has become so

difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.   The Court is not persuaded. The parties to the contract must be presumed to have assumed the risks of

unfavorable developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. [19] In the case at bench, the Court determines that ETPI’s claimed depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side Agreement.  

 ETPI appears to be well aware of its deteriorating financial condition when

it entered into the 2001-2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU. Considering that ETPI had been

continuously suffering huge losses from 2000 to 2002, its business losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said that the difficulty in complying with its obligation under the Side Agreement was “manifestly beyond the contemplation of the parties.”  Besides, as held in Central Bank of the Philippines v. Court of Appeals,[20] mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation. Contracts, once perfected, are binding between the contracting parties. Obligations arising therefrom have the force of law and should be complied with in good faith. ETPI cannot renege from the obligation it has freely assumed when it signed the 2001-2004 CBA Side Agreement.

 Granting arguendo that the CBA Side Agreement does not contractually

bind petitioner ETPI to give the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an established company practice such that it has virtually become part of the employees’ salary or wage. A bonus may be granted on equitable consideration when the giving of such bonus has been the company’s long and regular practice. In Philippine Appliance Corporation v. Court of Appeals,[21] it was pronounced:

 To be considered a “regular practice,” however, the

giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.  

 The records show that ETPI, aside from complying with the regular 13th

month bonus, has been further giving its employees 14th month bonus every April as well as 15thand 16th month bonuses every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits or not. The considerable length of time ETPI has been giving the special grants to its employees indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such act was not required by law. Accordingly, a

company practice in favor of the employees has been established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the employees.

 The giving of the subject bonuses cannot be peremptorily withdrawn by

ETPI without violating Article 100 of the Labor Code:   

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

 The rule is settled that any benefit and supplement being enjoyed by the

employees cannot be reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full protection.[22]

 Interestingly, ETPI never presented countervailing evidence to refute

ETEU’s claim that the company has been continuously paying bonuses since 1975 up to 2002 regardless of its financial state. Its failure to controvert the allegation, when it had the opportunity and resources to do so, works in favor of ETEU. Time and again, it has been held that should doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.[23]

  WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of

the Court of Appeals and its December 12, 2008 Resolution are AFFIRMED.

FIRST DIVISION  

 MANILA JOCKEY CLUB                        G.R. No. 167760EMPLOYEES LABOR UNION-PTGWO,                                      Petitioner,             Present:                                                                                     

               PUNO, C.J., Chairperson,                                                               SANDOVAL-GUTIERREZ,                            - versus -                                       CORONA,

                                                                        AZCUNA, and                                                                        GARCIA, JJ.                                                             

MANILA JOCKEY CLUB, INC.,            Promulgated:                                                Respondent.           March 7, 2007x - - - - - - - - - - - - - - - - - - - - - - -  - - - - - - - - - - - - - - - - - - - - - - - - - x

 D E C I S I O N

 

GARCIA, J.:              Challenged in this petition for review under Rule 45 of the Rules of Court is the   decision[1] dated   December   17,   2004   of   the   Court   of   Appeals   (CA),   as reiterated in its resolution[2] of April 4, 2005, dismissing the petition for review of herein petitioner in CA-G.R. SP No. 69240, entitled Manila Jockey Club Employees Labor Union- PTGWO v. Manila Jockey Club, Inc.

 

          The facts:

 

          Petitioner   Manila   Jockey   Club   Employees   Labor   Union-PTGWO   and respondent Manila Jockey Club, Inc., a corporation with a legislative franchise to conduct, operate and maintain horse races, entered into a Collective Bargaining Agreement   (CBA)   effective January   1,   1996 to December   31,   2000.  The   CBA governed the economic rights and obligations of respondent’s regular monthly paid rank-and-file employees.[3]  In the CBA, the parties agreed to a 7-hour work schedule from 9:00 a.m. to 12:00 noon and from1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday, as contained under Section 1, Article IV,[4] of the same CBA, to wit:

 

            Section 1.  Both parties to this  Agreement  agree to observe the seven-hour work schedule herewith scheduled to be from 9:00 a.m. to 12:00 noon and 1:00 p.m. to 5 p.m. on work week of Monday to Saturday.  All work performed in excess of seven (7) hours   work   schedule   and   on   days   not   included   within   the   work   week   shall   be considered   overtime   and   paid   as   such.  Except   those   monthly   compensation   which includes work performed during Saturday, Sunday, and Holiday when races are held at the Club.

 

xxx                        xxx                    xxx

 

            Accordingly, overtime on an ordinary working day shall be remunerated in an amount equivalent to the worker's regular basic wage plus twenty five percent (25%) thereof.  Where the employee is permitted or suffered to work on legally mandated holidays or on his designated rest day which is not a legally mandated holiday, thirty percent (30%) shall  be added to his basic wage for a seven hour work;  while work rendered  in  excess  of  seven hours  on  legally  mandated holidays  and rest  days not falling within the aforestated categories day shall be additionally compensated for the overtime work equivalent to his rate for the first seven hours on a legally mandated holiday or rest day plus thirty percent (30%) thereof.

 

The   CBA   likewise   reserved   in   respondent   certain   management   prerogatives, including the determination of the work schedule, as provided under Section 2, Article XI:

 

          Section 2.  The COMPANY shall have exclusive control in the management of the offices and direction of the employees.  This shall include, but shall not be limited to, the right to plan, direct and control office operations, to hire, assign and transfer employees from one job to another or from one department to another; to promote, demote, discipline, suspend, discharge or terminate employees for proper cause and/or in accordance with law, to relieve employees from duty because of lack of work or for other legitimate reasons; or to introduce new or improved methods or facilities; or to change existing methods or facilities to change the schedules of work; and to make and enforce rules  and regulations  to carry  out   the functions of  management,  provided, however, that the COMPANY will not use these rights for the purpose of discrimination against any employee because of his membership in the UNION. Provided, further, that the prerogatives provided for under this Section shall be subject to, and in accordance with pertinent directives, proclamations and their implementing rules and regulations.

 

 

On April  3,   1999,   respondent   issued   an   inter-office   memorandum declaring that, effective April 20, 1999, the hours of work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00 p.m. when horse races are held, that is,   every   Tuesday   and   Thursday.   The   memorandum,   however,   maintained the 9:00 a.m. to 5:00 p.m. schedule for non-race days.

 

On October 12, 1999, petitioner and respondent entered into an Amended and Supplemental CBA retaining Section 1 of Article IV and  Section 2 of Article XI, supra, and clarified that any conflict arising therefrom shall be referred to a voluntary arbitrator for resolution.

 

Subsequently,   before   a   panel   of   voluntary   arbitrators   of   the   National Conciliation and Mediation Board (NCMB), petitioner questioned the above office memorandum as violative of  the prohibition against  non-diminution of  wages and benefits guaranteed under Section 1, Article IV, of the CBA which specified the work schedule of respondent's employees to be from 9:00 a.m. to 5:00 p.m. Petitioner   claimed   that   as   a   result   of   the   memorandum,   the   employees   are precluded from rendering their usual overtime work from 5:00 p.m. to 9:00 p.m.

 

 The NCMB’s panel of voluntary arbitrators, in a decision dated October 18, 2001, upheld respondent's prerogative to change the work schedule of regular monthly-paid   employees   under   Section   2,   Article   XI,   of   the   CBA.  Petitioner moved for reconsideration but the panel denied the motion.

Dissatisfied, petitioner then appealed the panel’s decision to the CA in CA-G.R. SP No. 69240. In the herein assailed decision of December 17, 2004, the CA upheld   that   of   the   panel   and   denied   petitioner’s   subsequent   motion   for reconsideration via its equally challenged resolution of April 4, 2005.

 

Hence, petitioner’s present recourse, raising the following issues:

 

I

 

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED  IN HOLDING THAT RESPONDENT MJCI DID NOT RELINQUISH PART OF ITS MANAGEMENT PREROGATIVE WHEN IT STIPULATED A WORK SCHEDULE IN THE CBA.

 

II

 

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED  IN HOLDING THAT RESPONDENT MJCI DID NOT VIOLATE THE NON-DIMINUTION PROVISION CONTAINED IN ARTICLE 100 OF THE LABOR CODE.

 

 

We DENY.

 

Respondent, as employer, cites the change in the program of horse races as reason for the adjustment of the employees’  work schedule.   It  rationalizes that when the CBA was signed, the horse races started at 10:00 a.m.  When the races were moved to 2:00 p.m., there was no other choice for management but to change the employees' work schedule as there was no work to be done in the morning.  Evidently,  the adjustment  in the work schedule of  the employees  is justified.

 

We   are   not   unmindful   that   every   business   enterprise   endeavors   to increase profits.  As it is, the Court will not interfere with the business judgment of an employer in the exercise of its prerogative to devise means to improve its operation,   provided   that   it   does   not   violate   the   law, CBAs,   and   the   general principles of justice and fair play. We have thus held that management is free to regulate,   according   to   its   own   discretion   and   judgment,   all   aspects   of employment,   including hiring,  work assignments,  working methods,time,  place and manner of work, processes to be followed, supervision of workers, working regulations,   transfer   of   employees,   work   supervision,   layoff   of   workers   and discipline, dismissal, and recall of workers.[5]  

 

While  it is true that Section 1, Article IV of the CBA provides for a 7-hour work   schedule   from 9:00   a.m. to 12:00 noon and   from 1:00   p.m. to 5:00 

p.m. from   Mondays   to   Saturdays,   Section   2,   Article   XI,   however,   expressly reserves on respondent the prerogative to change existing methods or facilities to change the schedules of work.  As aptly ruled by the CA:

 

x x x.  Such exact language lends no other meaning but that while respondent may have allowed the initial determination of the work schedule to be done through collective bargaining, it expressly retained the prerogative to change it.

 

Moreover,   it   cannot   be   said   that   in   agreeing   to   Section   1   of   Article   IV, respondent already waived that customary prerogative of management to set the work schedule.  Had that been the intention, Section 2 of Article XI would not have made any reference at all  to the retention by respondent of that prerogative.  The CBA would have   instead   expressly   prohibited   respondent   from   exercising   it.   x   x   x   As   it   were, however, the CBA expressly recognized in respondent the prerogative to change the work   schedule.  This   effectively   rules   out   any   notion   of   waiver   on   the   part   of respondent of its prerogative to change the work schedule.

 

          The same provision of the CBA also grants respondent the prerogative to relieve  employees   from duty  because  of   lack  of  work.  Petitioner’s  argument, therefore,  that the change  in work schedule violates Article 100 of the Labor Code because  it   resulted  in  the diminution of   the benefit  enjoyed by regular monthly-paid   employees   of   rendering   overtime   work   with   pay,   is untenable.   Section 1, Article IV, of the CBA does not guarantee overtime work for all the employees but merely provides that "all work performed in excess of seven (7) hours work schedule and on days not included within the work week shall be considered overtime and paid as such." 

 

          Respondent   was   not   obliged   to   allow   all   its   employees   to   render overtime  work  everyday  for  the  whole  year,  but  only  those  employees whose  services  were needed  after  their  regular  working  hours  and  only upon  the   instructions  of   management.  The  overtime  pay  was  not given  to  each  employee   consistently,   deliberately   and   unconditionally, but  as  a  compensation   for   additional   services   rendered.  Thus,   overtime 

pay  does  not  fall  within  the  definition  of  benefits  under  Article 100   of the  Labor  Code on prohibition against elimination or diminution of benefits. 

 

          While the Constitution is committed to the policy of social justice and the protection  of   the  working  class,   it   should   not   be   presumed   that  every   labor dispute will be automatically decided in favor of labor.   The partiality for labor has not  in any way diminished our belief  that  justice  in every case  is   for  the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.[6]

 

          WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA are AFFIRMED. 

 

          Costs against petitioner.

 

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 162994             September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs.GLAXO WELLCOME PHILIPPINES, INC., Respondent.

R E S O L U T I O N

TINGA, J.:

Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company.

This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2

Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation.

Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employee’s employment with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months.

Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area.

Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.

In January 1999, Tecson’s superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecson’s superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well.

Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsy’s employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsy’s separation from her company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra.

In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxo’s milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxo’s "least-movement-possible" policy.

In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.

Tecson sought Glaxo’s reconsideration regarding his transfer and brought the matter to Glaxo’s Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such products.

Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half (½) month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the

National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxo’s policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxo’s right to transfer Tecson to another sales territory.

Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxo’s policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives.4

Tecson filed a Motion for Reconsideration of the appellate court’s Decision, but the motion was denied by the appellate court in its Resolution dated March 26, 2004.5

Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMB’s finding that the Glaxo’s policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and training sessions.6

Petitioners contend that Glaxo’s policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees’ right to marry.7

They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited from promoting respondent’s products which were competing with Astra’s products.8

In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecson’s reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal.9

Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies.10

It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based on valid grounds.11

According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astra’s products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxo’s enforcement of the foregoing policy in Tecson’s case was a valid exercise of its management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead.13

Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship with an employee of a competitor company would be detrimental to the interests of Glaxo.14

Glaxo likewise insists that Tecson’s reassignment to another sales area and his exclusion from seminars regarding respondent’s new products did not amount to constructive dismissal.

It claims that in view of Tecson’s refusal to resign, he was relocated from the Camarines Sur-Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecson’s family. Since Tecson’s hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses.15

In addition, Glaxo avers that Tecson’s exclusion from the seminar concerning the new anti-asthma drug was due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecson’s receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan).16

The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxo’s policy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively dismissed.

The Court finds no merit in the petition.

The stipulation in Tecson’s contract of employment with Glaxo being questioned by petitioners provides:

…

10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy.

…17

The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:

1. Conflict of Interest

Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe Glaxo Wellcome.

Specifically, this means that employees are expected:

a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit.

b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses.

c. To avoid outside employment or other interests for income which would impair their effective job performance.

d. To consult with Management on such activities or relationships that may lead to conflict of interest.

1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible.19

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxo’s policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative.

Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry.

The prohibition against personal or marital relationships with employees of competitor companies upon Glaxo’s employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes

that management has rights which are also entitled to respect and enforcement in the interest of fair play.21

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964.23The Court pointed out that the policy was applied to men and women equally, and noted that the employer’s business was highly competitive and that gaining inside information would constitute a competitive advantage.

The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful.25 The only exception occurs when the state29 in any of its manifestations or actions has been found to have become entwined or involved in the wrongful private conduct.27 Obviously, however, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employee’s personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success. . .28

The Court of Appeals also correctly noted that the assailed company policy which forms part of respondent’s Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith."29 He is therefore estopped from questioning said policy.

The Court finds no merit in petitioners’ contention that Tescon was constructively dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the company’s seminar on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.30 None of these conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer.

As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area:

. . . In this case, petitioner’s transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus valid…Note that [Tecson’s] wife holds a sensitive supervisory position as Branch Coordinator in her employer-company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astra’s inventory…she therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioner’s sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the other’s market strategies in the region would be inevitable. [Management’s] appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis…31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed by a medical representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case:

By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract.33

As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecson’s supervisors at Glaxo constantly reminded him about its effects on his employment with the company and on the company’s interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecson’s transfer, Glaxo even considered the welfare of Tecson’s family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

G.R. No. 118978 May 23, 1997

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

 

REGALADO, J.:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone Company (hereafter, PT & T) invokes the alleged concealment of civil status and defalcation of company funds as grounds to terminate the services of an employee. That employee, herein private respondent Grace de Guzman, contrarily argues that what really motivated PT & T to terminate her services was her having contracted marriage during her employment, which is prohibited by petitioner in its company policies. She thus claims that she was discriminated against in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the Labor Code.

Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave.1 Under the Reliever Agreement which she signed with petitioner company, her employment was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent's services as reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both periods. 2 After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated.

On September 2, 1991, private respondent was once more asked to join petitioner company as a probationary employee, the probationary period to cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was single although she had contracted marriage a few months earlier, that is, on May 26, 1991. 3

It now appears that private respondent had made the same representation in the two successive reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she was reminded about the company's policy of not accepting married women for employment. 4

In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&T's policy regarding married women at the time, and that all along she had not deliberately hidden her true civil status. 5Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from the company effective January 29, 1992, 6 which she readily contested by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio City.

At the preliminary conference conducted in connection therewith, private respondent volunteered the information, and this was incorporated in the stipulation of facts between the parties, that she had failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for that amount in favor of petitioner 7. All of these took place in a formal proceeding and with the agreement of the parties and/or their counsel.

On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private respondent, who had already gained the status of a regular employee, was illegally dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent that she had been discriminated against on account of her having contracted marriage in violation of company rules.

On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the subject of an unjust and unlawful discrimination by her employer, PT & T. However, the decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts which should not be condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement of private respondent in her employment with PT & T.

The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter.

1. Decreed in the Bible itself is the universal norm that women should be regarded with love and respect but, through the ages, men have responded to that injunction with indifference, on the hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against womankind been so pervasive as in the field of labor, especially on the matter of equal employment opportunities and standards. In the Philippine setting, women have traditionally been considered as

falling within the vulnerable groups or types of workers who must be safeguarded with preventive and remedial social legislation against discriminatory and exploitative practices in hiring, training, benefits, promotion and retention.

The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones, Section 14, Article II 8on the Declaration of Principles and State Policies, expressly recognizes the role of women in nation-building and commands the State to ensure, at all times, the fundamental equality before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the State shall protect working women through provisions for opportunities that would enable them to reach their full potential.

2. Corrective labor and social laws on gender inequality have emerged with more frequency in the years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our country's commitment as a signatory to the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). 11

Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination against women with respect to terms and conditions of employment, promotion, and training opportunities; Republic Act No. 6955 13 which bans the "mail-order-bride" practice for a fee and the export of female labor to countries that cannot guarantee protection to the rights of women workers; Republic Act No. 7192 14 also known as the "Women in Development and Nation Building Act," which affords women equal opportunities with men to act and to enter into contracts, and for appointment, admission, training, graduation, and commissioning in all military or similar schools of the Armed Forces of the Philippines and the Philippine National Police; Republic Act No. 7322 15 increasing the maternity benefits granted to women in the private sector; Republic Act No. 7877 16 which outlaws and punishes sexual harassment in the workplace and in the education and training environment; and Republic Act No. 8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of policy, inter alia, the deployment of migrant workers, with emphasis on women, only in countries where their rights are secure. Likewise, it would not be amiss to point out that in the Family Code, 18 women's rights in the field of civil law have been greatly enhanced and expanded.

In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138 thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the right of women to be provided with facilities and standards which the Secretary of Labor may establish to ensure their health and safety. For purposes of labor and social legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a woman's right against discrimination with respect to terms and conditions of employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of a female employee.

3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua non prior to severance of the employment ties of an individual under his employ, to convincingly establish, through substantial evidence, the existence of a valid and just cause in dispensing with the services of such employee, one's labor being regarded as constitutionally protected property.

On the other hand, it is recognized that regulation of manpower by the company falls within the so-called management prerogatives, which prescriptions encompass the matter of hiring, supervision of

workers, work assignments, working methods and assignments, as well as regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. 19 As put in a case, an employer is free to regulate, according to his discretion and best business judgment, all aspects of employment, "from hiring to firing," except in cases of unlawful discrimination or those which may be provided by law. 20

In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution. Contrary to petitioner's assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of the company's policy that married women are not qualified for employment in PT & T, and not merely because of her supposed acts of dishonesty.

That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that "you're fully aware that the company is not accepting married women employee (sic), as it was verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch supervisor, private respondent was made to understand that her severance from the service was not only by reason of her concealment of her married status but, over and on top of that, was her violation of the company's policy against marriage ("and even told you that married women employees are not applicable [sic] or accepted in our company.") 22 Parenthetically, this seems to be the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable with the corporation. 23

Verily, private respondent's act of concealing the true nature of her status from PT & T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it should not be simulated. 24 It must rest on an actual breach of duty committed by the employee and not on the employer's caprices. 25 Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified. 26

In the present controversy, petitioner's expostulations that it dismissed private respondent, not because the latter got married but because she concealed that fact, does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her which justified her dismissal.

Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial distinctions, perturbs the Court since private respondent may well be minded to claim that the imputation of dishonesty should be the other way around.

Petitioner would have the Court believe that although private respondent defied its policy against its female employees contracting marriage, what could be an act of insubordination was inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In other words, PT & T says it gives its blessings to its female employees contracting marriage, despite the maternity leaves and other benefits it would consequently respond for and which obviously it would have wanted to avoid. If that employee confesses such fact of marriage, there will be no sanction; but if such employee conceals the same instead of proceeding to the confessional, she will

be dismissed. This line of reasoning does not impress us as reflecting its true management policy or that we are being regaled with responsible advocacy.

This Court should be spared the ennui of strained reasoning and the tedium of propositions which confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful policy against married women, both on the aspects of qualification and retention, which compelled private respondent to conceal her supervenient marriage. It was, however, that very policy alone which was the cause of private respondent's secretive conduct now complained of. It is then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil caused.

Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she failed to remit some of her collections, but that is an altogether different story. The fact is that she was dismissed solely because of her concealment of her marital status, and not on the basis of that supposed defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on this supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was no showing that private respondent deliberately misappropriated the amount or whether her failure to remit the same was through negligence and, if so, whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the same, which she did, and the matter was deemed settled as a peripheral issue in the labor case.

Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was served her walking papers on January 29, 1992, she was about to complete the probationary period of 150 days as she was contracted as a probationary employee on September 2, 1991. That her dismissal would be effected just when her probationary period was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and business of PT & T. 28 The primary standard of determining regular employment is the reasonable connection between the activity performed by the employee in relation to the business or trade of the employer. 29

As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other benefits or their monetary equivalent. 30 However, as she had undeniably committed an act of dishonesty in concealing her status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her three months suspension.

4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner PT & T. The Labor Code state, in no uncertain terms, as follows:

Art. 136. Stipulation against marriage. — It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman shall not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually dismiss,

discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.

This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No. 148, 31better known as the "Women andChild Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the employment of women and children in shops, factories, industrial, agricultural, and mercantile establishments and other places of labor in the then Philippine Islands.

It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine Air Lines, 33a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines requiring that prospective flight attendants must be single and that they will be automatically separated from the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination against married women. Thus:

Of first impression is the incompatibility of the respondent's policy or regulation with the codal provision of law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women employed in ordinary occupations and that the prohibition against marriage of women engaged in extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of their chosen profession.

We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was promulgated. But for the timidity of those affected or their labor unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A close look at Section 8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974.

It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to establish standards that will ensure the safety and health of women employees and in appropriate cases shall by regulation require employers to determine appropriate minimum standards for termination in special occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants.

It is logical to presume that, in the absence of said standards or regulations which are as yet to be established, the policy of respondent against marriage is patently illegal. This finds support in Section 9 of the New Constitution, which provides:

Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or

creed, and regulate the relations between workers and employees. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work . . . .

Moreover, we cannot agree to the respondent's proposition that termination from employment of flight attendants on account of marriage is a fair and reasonable standard designed for their own health, safety, protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not so much against the continued employment of the flight attendant merely by reason of marriage as observed by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their employment. We feel that this needs no further discussion as it had been adequately explained by the Secretary of Labor in his decision of May 2, 1976.

In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles 52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the family as a basic social institution, respectively, as bases for its policy of non-marriage. In both instances, respondent predicates absence of a flight attendant from her home for long periods of time as contributory to an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this modern world, sophisticated technology has narrowed the distance from one place to another. Moreover, respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing circumstances and events.

Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment of women.

The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation 34considered as void a policy of the same nature. In said case, respondent, in dismissing from the service the complainant, invoked a policy of the firm to consider female employees in the project it was undertaking as separated the moment they get married due to lack of facilities for married women. Respondent further claimed that complainant was employed in the project with an oral understanding that her services would be terminated when she gets married. Branding the policy of the employer as an example of "discriminatory chauvinism" tantamount to denying equal employment opportunities to women simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution.

Under American jurisprudence, job requirements which establish employer preference or conditions relating to the marital status of an employee are categorized as a "sex-plus" discrimination where it is imposed on one sex and not on the other. Further, the same should be evenly applied and must not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination laws. Employment rules that forbid or restrict the employment of married women, but do not apply to married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination against employees and applicants on the basis of, among other things, sex. 35

Further, it is not relevant that the rule is not directed against all women but just against married women. And, where the employer discriminates against married women, but not against married

men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage rule applicable to both male and female flight attendants, was regarded as unlawful since the restriction was not related to the job performance of the flight attendants. 37

5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. 38 Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law, morals, good customs, public order, or public policy. 39 Carried to its logical consequences, it may even be said that petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage.

Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good. 40 It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. 41 In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation. 42 That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required.

ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is hereby DISMISSED for lack of merit, with double costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 164774             April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners, vs.RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.

D E C I S I O N

PUNO, J.:

We are called to decide an issue of first impression: whether the policy of the employer banning spouses from working in the same company violates the rights of the employee under the Constitution and the Labor Code or is a valid exercise of management prerogative.

At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.

Petitioner Star Paper Corporation (the company) is a corporation engaged in trading – principally of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its Managing Director.

The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company.1

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married, one of them should resign pursuant to a company policy promulgated in 1995,2 viz.:

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company.

2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above.3

Simbol resigned on June 20, 1998 pursuant to the company policy.4

Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they decide to get married. Comia resigned on June 30, 2000.5

Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker. Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she opted to resign on December 21, 1999.6

The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money and property accountabilities in the company and that they release the latter of any claim or demand of whatever nature.7

Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with co-worker Zuñiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where one of the staff handed her a memorandum. The memorandum stated that she was being dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management asked her to write an explanation. However, after submission of the explanation, she was nonetheless dismissed by the company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her thirteenth month pay.8

Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorney’s fees. They averred that the aforementioned company policy is illegal and contravenes

Article 136 of the Labor Code. They also contended that they were dismissed due to their union membership.

On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.:

[T]his company policy was decreed pursuant to what the respondent corporation perceived as management prerogative. This management prerogative is quite broad and encompassing for it covers hiring, work assignment, working method, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by special law, an employer is free to regulate, according to his own discretion and judgment all the aspects of employment.9 (Citations omitted.)

On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11, 2002. 10

Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for Certiorari.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.:

WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows:

(1) Declaring illegal, the petitioners’ dismissal from employment and ordering private respondents to reinstate petitioners to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement; and

(2) Ordering private respondents to pay petitioners attorney’s fees amounting to 10% of the award and the cost of this suit.13

On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:

1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards marriage and the family of employees and of Article 136 of the Labor Code; and

2. x x x respondents’ resignations were far from voluntary.14

We affirm.

The 1987 Constitution15 states our policy towards the protection of labor under the following provisions, viz.:

Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.

x x x

Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.

The Civil Code likewise protects labor with the following provisions:

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

Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.

The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article 136 of the Labor Code which provides:

Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.

Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the first paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses have the right to choose who between them should resign. Further, they are free to marry persons other than co-employees. Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only intended to carry out its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the prerogatives of management.16

It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons based on their status as a relative, rather than upon their ability.17 These policies focus upon the potential employment problems arising from the perception of favoritism exhibited towards relatives.

With more women entering the workforce, employers are also enacting employment policies specifically prohibiting spouses from working for the same company. We note that two types of employment policies involve spouses: policies banning only spouses from working in the same

company (no-spouse employment policies), and those banning all immediate family members, including spouses, from working in the same company (anti-nepotism employment policies).18

Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there are twenty state statutes20 in the United States prohibiting marital discrimination. Some state courts21 have been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital status and sex discrimination.

In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of employment discrimination: the disparate treatment and the disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of female employees, is discriminatory on its face.22

On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a disproportionate effect on a particular class. For example, although most employment policies do not expressly indicate which spouse will be required to transfer or leave the company, the policy often disproportionately affects one sex.23

The state courts’ rulings on the issue depend on their interpretation of the scope of marital status discrimination within the meaning of their respective civil rights acts. Though they agree that the term "marital status" encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their decisions vary.24

The courts narrowly25 interpreting marital status to refer only to a person's status as married, single, divorced, or widowed reason that if the legislature intended a broader definition it would have either chosen different language or specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is married. They construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse." These courts have upheld the questioned policies and ruled that they did not violate the marital status discrimination provision of their respective state statutes.

The courts that have broadly26 construed the term "marital status" rule that it encompassed the identity, occupation and employment of one's spouse. They strike down the no-spouse employment policies based on the broad legislative intent of the state statute. They reason that the no-spouse employment policy violate the marital status provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual effect on the individual's qualifications or work performance.27 These courts also find the no-spouse employment policy invalid for failure of the employer to present any evidence of business necessity other than the general perception that spouses in the same workplace might adversely affect the business.28 They hold that the absence of such a bona fide occupational qualification29 invalidates a rule denying employment to one spouse due to the current employment of the other spouse in the same office.30 Thus, they rule that unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discriminate against an employee based on the identity of the employee’s spouse.31 This is known as the bona fide occupational qualification exception.

We note that since the finding of a bona fide occupational qualification justifies an employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity for which no alternative exists other than the discriminatory practice.32 To justify a bona fide occupational qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job.33

The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard ofreasonableness of the company policy which is parallel to the bona fide occupational qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors. We considered the prohibition against personal or marital relationships with employees of competitor companies upon Glaxo’s employeesreasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.35

The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the employee was dismissed in violation of petitioner’s policy of disqualifying from work any woman worker who contracts marriage. We held that the company policy violates the right against discrimination afforded all women workers under Article 136 of the Labor Code, but established a permissible exception, viz.:

[A] requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance.37 (Emphases supplied.)

The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not in PT&T.

We do not find a reasonable business necessity in the case at bar.

Petitioners’ sole contention that "the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity"38 is lame. That the second paragraph was meant to give teeth to the first paragraph of the questioned rule39 is evidently not the valid reasonable business necessity required by the law.

It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold

the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employee’s right to security of tenure.

Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employee’s right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company.40

Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislature’s silence41 that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic.

As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her resignation letter was written in her own handwriting. Both ruled that her resignation was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol and Comia.

Estrella claims that she was pressured to submit a resignation letter because she was in dire need of money. We examined the records of the case and find Estrella’s contention to be more in accord with the evidence. While findings of fact by administrative tribunals like the NLRC are generally given not only respect but, at times, finality, this rule admits of exceptions,42 as in the case at bar.

Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged immoral conduct. At first, she did not want to sign the termination papers but she was forced to tender her resignation letter in exchange for her thirteenth month pay.

The contention of petitioners that Estrella was pressured to resign because she got impregnated by a married man and she could not stand being looked upon or talked about as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary, Estrella’s dismissal is declared illegal.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004 isAFFIRMED.1avvphil.net

SO ORDERED.

G.R. No. L-10712            August 10, 1916

ANSELMO FERRAZZINI, plaintiff-appellee, vs.CARLOS GSELL, defendant-appellant.

William A. Kincaid and Thomas L. Hartigan for appellant.Ramon Sotelo for appellee.

TRENT, J.:

This action was brought to recover damages for an alleged wrongful discharge of the plaintiff, who had been employed by the defendant for an indefinite time to work in the latter's industrial enterprises in the city of Manila. The defendant admitted that he discharged the plaintiff without giving him the "written advice of six months in advance" as provided in the contract, but alleged that the discharge was lawful on account of absence, unfaithfulness, and disobedience of orders. The defendant sought affirmative relief for a further alleged breach of the contract by the plaintiff after his discharge. From a judgment in favor of the plaintiff the defendant appealed and now urges that the trial court erred (1) in finding that the plaintiff's discharge was not justified and (2) in declining to consider the counterclaim and enter judgment in accordance therewith.

1. The plaintiff engaged his "skilled service" to the defendant for the entire existence "of this agreement" at a fixed monthly salary and agreed "to devote his entire time and efforts to the best of his knowledge and skill exclusively in carrying out in the most satisfactory manner possible all of the work which may be entrusted to him during the existence of this contract and undertaking,

furthermore, to exercise a strict discretion in all matters pertaining to the work so entrusted to him and the whole thereof, . . . ."

The relation of master and servant, which was created by the contract, cast certain duties and obligations upon the parties, which they were bound to discharge and fulfill; the foremost, on the part of the master, were those of furnishing the servant with a reasonably safe place to work, to pay him for his services, and not to discharge him until the expiration of six months after notice; and the foremost, on the part of the servant, were those of loyalty, faithfulness, and obedience to all reasonable orders not inconsistent with the contract. Consequently, if the plaintiff's discharge were without just cause, it was in violation of the contract of service and he is entitled to recover. Otherwise, he is not, because the breach on his part must necessarily have occurred before his discharge. Hence, the defendant must prove justification for his act for the reason that it was in contravention of the six-months clause in the contract. In order to justify the dismissal of the plaintiff, the defendant must show that the plaintiff was guilty of conduct which can be construed to be a breach of some express or implied provision in the contract of service. If it has been shown that the plaintiff's conduct was inconsistent with the relation of master and servant or incompatible with the due and faithful performance of his duties, his discharge was justified. In view of the fact that the determination of these questions necessarily requires a careful review of the evidence and in view of the further fact that we cannot accept the trial court's findings upon these important points, we think it advisable to set forth briefly the substance of all of the material testimony submitted by both parties.

ANSELMO FERRAZZINI: On Friday evening at supper there was some talk about Mr. Gsell measuring the goods for the umbrellas. Then I said that if Mr. Gsell does this, it is my idea that he has no confidence in his employees. I was talking to everybody in general. There were present Mr. Specht, Mr. Alberto Ferrazzini and Mr. Inhelder. Mr. Specht was an employee of the defendant at the time. I do not remember telling Specht that he was not receiving sufficient salary. The only thing I remember distinctly is that i said `that Mr. Gsell does not seem to have any confidence in us.'

Q.       Is it not a fact that shortly, or sometime before your discharge, you have been in the habit of leaving the factory for considerable periods in the morning to go outside for the purpose of taking a drink? —

A.       As long as I have been with the firm of Carlos Gsell I was allowed in the morning ten or fifteen minutes during the hot season to absent myself to have a drink of beer or whisky and soda; and the same in the afternoon.

Q.       Is it not a fact that Mr. Bender, the manager of the factory, had repeated spoken to you, or had several times spoken to you about your habit of leaving the factory for the purpose of taking a drink, and had prohibited you from doing it, forbade you to do it? —

A.       He merely told me not to do it in such an ostentatious manner. Mr. Bender told me that Mr. Gsell did not like to see me go out in the forenoon and afternoon; I told him that Mr. Gsell himself had told me on one occasion that if I had to have a drink I could go out for it and it would be all right; this was in the presence of Mr. Landvatter.

Q.       Then, am I to understand that when you went out to take a drink it was because you must have one? —

A.       Yes, of course.

Q.       Is it not a fact that Mr. Bender had conversations with you, at least once in the month of March, regarding this matter? —

A.       I don't remember it.

Q.       Were not you frequently spoken to about it? —

A.       No, sir.

CARLOS GSELL: The first reason that led to his dismissal was because several months, through April and May, he had the habit of going out in the morning and afternoon for having a drink; not one but many drinks, because he was out sometimes an hour and an hour and a half; and as I have a factory with 400 working people I have to see that certain discipline is maintained in the factory. I gave instructions to the manager. Mr. Bender, to see that this habit would be dropped, but he (the plaintiff) would not do so. Now what made me pleased to dismiss him was because on a certain night at the mess where he ate with other employees of my house, he provoked one of my employees, a new arrival, and said that all the control I had in the factory was one of mistrust; he said I was suspicious; that I measured the cloth in my office for the umbrellas and that he would not support such treatment from my side; at the same time he said to this newly arrived employee that the salary that he, the new man, got under the contract was not sufficient to live on and that he should not continue to work for me. I asked the plaintiff about the conversation which he had at the mess and he did not deny it. He said that he did not mean it to be so bad. The factory was prejudiced on account of the plaintiff absenting himself, because sometimes I wanted to speak to him, tell him something, and he was not there. I had to wait for him, and then when he came back it was noon perhaps, and it could not be done. I gave instructions to Mr. Bender, the manager, to stop the plaintiff's going out without permission. I did not exactly authorized the plaintiff to go out to drink. I always wanted to stop this. The plaintiff was the older of those who have gone out to drink. The plaintiff held a responsible position. In the first place it was his duty to make repairs to the machinery in all the departments; later he was entrusted with the various departments — not at the same time; once he had the bleaching department; once he had to help out in the umbrella factory; and then he was in charge of the hat factory. The plaintiff had other employees under him.

CARL BENDER: I came to the Philippine Islands in the middle of March as the defendant's manager. I saw that the plaintiff was frequently out of the factory. I told him that we was not allowed to leave the factory without my permission. HE kept up the habit of going out in the morning and afternoon for an hour or more and I told him the second time. He told me that he had permission from the former manager to go out and take a drink. I again told him he must not go out without my permission. Notwithstanding these orders, he was out one whole Saturday afternoon and I reported him to the defendant. The plaintiff went out without permission some thirty-five times after I ordered him not to do so. I had the other employees search for him, but they could not find him. He would go out four or five times a week.

HERMAN INHELDER: I was present at the mess in June when that conversation took place. We were discussing several things, including the business and the way the umbrella factory was run. The plaintiff spoke in a manner that indicated that Mr. Gsell did not trust Mr. Specht. I did not want to have this kind of a conversation going on there and I told the plaintiff he had better leave the house.

Q.       Did the plaintiff say anything with respect to the amount of salary, which Mr. Specht was receiving? — If so, what? —

A.       I won't pretend that Mr. Ferrazzini said it that night, about the salary, but he said it on several occasions before, and — well — what he did say was that Mr. Specht ought not to work so much for such a small salary.

ALBERTO FERRAZZINI: I was present when the conversation took place in the mess one evening of June last. A discussion arose about Mr. Gsell exercising control over the merchandise or goods. Then the plaintiff said that this seemed to show that Gsell had no confidence in Mr. Specht. Mr. Specht was in charge of the umbrella department. The conversation was then carried on in German and I could not understand what they said.

HANS SPECHT: I am foreman of the umbrella factor of the defendant. During the conversation at the mass the plaintiff told me that the defendant had no confidence in me. I protested and then the plaintiff tried to prove it by stating that the defendant was investigating things in the umbrella factory, verifying the goods for the umbrellas. The plaintiff said nothing about my salary at that time, but on a previous occasion he told me that I was foolish at my age to work for such a small salary. I reported the matter to the defendant.

The plaintiff admits that he stated to those present at the mess that if the defendant measured the cloth for the umbrellas, "It is my idea that he has no confidence in his employees." Mr. Specht, the foreman f the umbrella factory, says that "During the conversation at the mess, the plaintiff told me that the defendant had no confidence in me." The plaintiff testified that he did not remember telling Specht that he (Specht) was not receiving sufficient salary, while Inhelder testified positively that the plaintiff stated on several occasions that Specht ought not to work so much for such a small salary, and Specht also testified positively that "he (the plaintiff) told me that I was foolish at my age to work for such a small salary." As to the plaintiff's absenting himself during working hours for the purpose of drinking, we have, on the one hand, the plaintiff's testimony to the effect that as long as he had been with the firm of Gsell he had been "allowed in the morning ten or fifteen minutes during the hot season to absent himself to have a drink of beer or whiskey, and the same in the afternoon," and that "the manager merely told me not to do it in such an ostentatious manner." While, on the other hand, we have the testimony of the defendant wherein he states that he instructed his manager, Mr. Bender, to direct the plaintiff to discontinue his habit of drinking during working hours, and the testimony of the manager (Bender) to the effect that he expressly directed the plaintiff not to go out without permission. But the plaintiff violated his express order some thirty-five times, keeping up the habit of going out (for the purpose of drinking) in the morning and afternoon for an hour or more at a time. All of the foregoing show a course of conduct on the part of the plaintiff inconsistent with the due and faithful performance of his duties as an employee of the defendant. He sought to create a feeling of unrest among the employees by inducing them to believe that the defendant had no confidence in them and that at least one employee was not receiving sufficiently salary. If it were true that the defendant was measuring the cloth for the umbrellas, he had a right to do so and this fact would not justify the plaintiff in saying that the defendant had no confidence in the employees. Likewise, if it be true that the defendant or his manager did at first authorize the plaintiff to absent himself during working hours for the purpose of drinking, the defendant had a perfect right to withdraw this permission at anytime he saw fit to do so. In fact, the defendant, through his manager, expressly directed the plaintiff to cease leaving the factory for that purpose, but the plaintiff violated this order numerous times. The plaintiff, being at times foreman and at other times in charge of important departments of the factory wherein some four hundred employees were at work, it cannot be questioned but that the defendant not only had a right to prohibit drinking during working hours, but it was his duty to do so for his own interests and the safety of his other employees. But it is intimated in the record that the defendant discharged the plaintiff on account of the conversation at the mess. If it be true that the defendant gave this as his sole reason for so acting at the time he discharged the plaintiff, yet he would not be prevented from setting up at the trial the fact that the plaintiff continued to disobey his orders with reference to absenting himself for the purpose of drinking. The defendant was, at the time he discharged the plaintiff, authorized to take into

consideration the latter's whole course of conduct in determining whether the contract of employment should be terminated. We are, therefore, convinced that real errors was committed by the trial court in its findings of fact and that the record fully justifies a reversal of such findings, and a declaration to the effect that the defendant was justified in terminating the contract of employment.

2. At the opening of the trial in the court below and before any testimony had been taken, counsel for the defendant stated:

I desire to amend my answer at this time by the addition of the following paragraph:

The defendant further alleges for a second and further defense to the complaint herein, and for a counterclaim thereto, that the plaintiff has engaged in business in the Philippine Islands since leaving the service of the defendant and without the defendant's request or consent, in violation of his contract with the defendant; wherefore, the defendant demands judgment against the plaintiff for the sum of ten thousand pesos.

By the COURT: If the plaintiff does not claim any time to answer the new pleadings, the court will grant the amendment as asked for.

By Mr. SOTELO: I note my exception to the admission of a counterclaim at this time; I have no time to prepare myself to meet it.

By the COURT: The court has stated that if counsel for the plaintiff requires time to answer or meet this counterclaim he will be granted time to do so.

By Mr. SOTELO: The attorney for the plaintiff answers to the court that much time has been lost already since the filing of the complaint and the trial, and he wants to go to trial in order that the plaintiff may get what he is justly entitled to.

Testimony in support of the counterclaim was duly introduced before the close of the trial. In the final decision the court said:

The court is of the opinion that the defendant's so-called amendment to his answer, dictated by counsel to the official stenographer, and not `upon motion filed in court, and after notice to the adverse party and an opportunity to be heard,' must be disregarded in the consideration of this case.

This is manifest error. The verbal petition was expressly granted and the proferred amendment accepted by the court. Plaintiff's counsel noted his exception to this ruling and signified his willingness to proceed with the trial. All thereafter considered the answer as thus amended. We must, therefore, dispose of the defendant's counterclaim upon the merits.

That portion of the contract upon which the defendant's counterclaimed is based reads as follows:

That during the term of this contract, and for the period of five years after the termination of the employment of the said party of the second part, whether this contract continue in force for the period of one, two, three or more years, or be sooner terminated, the said party of the second party shall not engage or interest himself in any business enterprises similar to or in competition with those conducted, maintained or operated by the said party of the first day in the Philippines, and shall not assist, aid or encourage any such enterprise by the furnishing of information, advice or suggestions of any kind, and shall not enter into the employ of any

enterprises in the Philippine Islands, whatever, save and except after obtaining special written permission therefor from the said party of the first part. It is further stipulated and agreed that the said party of the second part is hereby obligated and bound to pay unto the party of the first part the sum of ten thousand pesos, Philippine currency (P10,000) as liquidated damages for each and every breach of the present clause of this contract, whether such breach occurred during the employment of the said party of the second part or at any time during the period of five years from and after the termination of said employment, and without regard to the cause of the termination of said employment.

The plaintiff admits that he entered the employment of Mr. Whalen in the Philippine Islands as a foreman on some construction work for a cement factory within a few days after his discharge and without the consent, either written or verbal, of the defendant. This work was entirely different and disassociated from that engaged in by the defendant Gsell, yet this act of the plaintiff was a technical violation of the above-quoted provisions of the contract wherein he expressly agreed and obligated himself "not to enter into the employment of any enterprise in the Philippine Islands, whatever, save and except after obtaining special written permission therefor" from the defendant. The question now arises whether these provisions of the contract are valid and binding upon the plaintiff.

Counsel for the defendant in their printed brief say:

There is no doubt as to the validity of the contract, Gsell vs. Koch (16 Phil. Rep., 1) has settled that question in a similar contract and that decision has never been criticised, but is cited as recently as 1914 with approved. (Lambert vs. Fox, 26 Phil. Rep., 588).

An examination of these cases, as well as others in point, is necessary in order to determine whether or not the question has been settled, and if we find that it is still an open one in this jurisdiction, we must proceed with the case. In pursuing this inquiry it is well to bear in mind (1) that the case under consideration has been tried in both courts exclusively upon the theory that the local law alone is applicable to the contract and (2) that the business in which the plaintiff became engaged was entirely different and distinct from that conducted, maintained or operated by the defendant.

In Gsell vs. Koch, supra, a demurrer was sustained upon the ground that the allegations in the complaint did not constitute a cause of action, and after defendant declined to amend, judgment was entered dismissing the action. On appeal this order was reversed and the record returned with instructions to direct the defendant to answer. The paragraph in the written contract, upon which the judgment of this court rests, reads:

Third. The said Pedro Koch binds himself to pay in cash to Mr. Gsell the sum of ten thousand pesos if, after leaving the firm of C. Gsell, and against the latter's will, he shall engage directly or indirectly in carrying on any business in which the said Carlos Gsell is at present engaged, or within the two and one-half years fixed for the duration of the present contract in these Islands, either as an employee or member of a firm or company, or on his own account; and he furthermore binds himself to pay in cash to Mr. Gsell an equal sum of ten thousand pesos for each violation of any secret of the business entrusted him.

The plaintiff in that case was engaged solely and exclusively in the manufacture of umbrellas, matches, and hats. The secret process for making straw hats had cost the plaintiff some P20,000 and the defendant Koch, after having entered the hat factory under a contract of employment and after having learned the secret process employed by the plaintiff, left the plaintiff's service and engaged in the manufacture of straw hats in violation of the above-quoted provisions of the contract, using the trade secrets which he had thus learned. The provisions in the contract against the

engaging in the manufacturing of straw hats in the Philippine Islands were held to be reasonably necessary for the protection of the plaintiff and not oppressive in so far as the defendant was concerned. In the case under consideration the contract goes far beyond that which formed the basis of the action in the case just cited. Here the plaintiff Ferrazzini was prohibited from engaging in any business or occupation whatever in the Philippine Islands for a period of five years after the termination of this contract of employment without special written permission from the defendant. This plaintiff became engaged, as we have said, as a foreman in a cement factory, while the defendant in the other case became engaged in identically the same business which his employer was carrying on, that is, the manufacture of straw hats. Consequently, the reasons which support the validity of the contract in the one case are not applicable to the other. The same is true of the case of Fornow vs. Hoffmeister (6 Phil. Rep., 33), wherein the decision rests solely upon the question whether the contract was in violation of the contract labor laws. No other question was submitted or decided in that case. Therefore, whether the clause under consideration is valid and enforcible is still an open question.

Articles 1091 and 1255 of the Civil Code read:

ART. 1091. Obligations arising from contracts have legal force between the contracting parties, and must be fulfilled in accordance with their stipulations."

ART. 1255. The contracting parties may make the agreement and establish the clauses and conditions which they may deem advisable, provided they are not in contravention of law, morals, or public order.

Hence, the policy of the law requires that the freedom of persons to enter into contracts shall not be lightly interfered with, but if a contract be not founded upon a legal consideration (causa) or if it conflicts with the morals of the times or contravenes some established interest of society, the courts will not aid in its enforcement.

Passing over the question whether "consideration" of the American law and the "causa" of the civil law are equivalent and whether there was adequate or legal consideration or "causa" on which the contract was founded, we will limit our further inquiry to the determination of the question whether that part of the contract under consideration is against public policy (orden publico).

Manresa, Vol. 8 p. 606, says:

Public policy (orden publico) — which does not here signify the material keeping of public order — represents in the law of persons the public, social and legal interest, that which is permanent and essential of the institutions, that which, even if favoring an individual in whom the right lies, cannot be left to his own will. It is an idea which, in cases of the waiver of any right, is manifested with clearness and force. Thus the jurisprudence on the subject of mortgages contains an interesting declarations on this point in a resolution of January 24, 1898, wherein it was held that: `The power of the husband to give marital permission cannot be validly conferred upon any attorney-in-fact, as the legislator has willed that, for reasons of the interest of society and of family government and discipline it should be vested only in the husband, being personal to him in the highest sense and therefore not capable of being transmitted.'

Mucius Scaevola's (vol. 20, p., 505) conclusion is that:

Agreements in violation of orden publico must be considered as those which conflict with law, whether properly, strictly and wholly a public law (derecho) or whether a law of the person, but law which in certain respects affects the interest of society.

Articles 1893 and 1895 of Merrick's Revised Civil Code of Louisiana, a civil law state, read:

ART. 1893. An obligation without a cause, or with a false or unlawful cause, can have no effect.

ART. 1895. Illegal or immoral cause. — The cause is unlawful, when it is forbidden by law, when it is contra bonos mores or to public order.

In Fabacher vs. Bryant & Mather (46 La. Ann., 820), the plaintiff and one Thomas Egan were engaged in the business of hauling cotton for the presses in the city of New Orleans. Both of these men were members of the Draymen's Association which had adopted a tariff of charges and undertook to distribute among the members the hauling of the various presses. The owners of the press were not consulted either as to the prices to be paid or as to those who should do the hauling. They could not obtain draymen outside of the union. They had to engage those designated by the union. The defendants employed Egan on the latter's representation that he had been so designated. Later the defendants employed the plaintiff upon the same representations. Finally, after investigation, the defendants declined to permit the plaintiff to do the work and carried out their contract with Egan. The plaintiff thereupon instituted this action for damages based upon the breach of his contract by the defendants. On the setting aside of a verdict in favor of the plaintiff by the trial court and an appeal having been duly entered, the Supreme Court affirmed the judgment, directing the dismissal of the case, holding that the plaintiff's contract was plainly repugnant to public policy, citing articles 1893 and 1895 supra. (India Bagging Association vs. Kock, 14 La. ann., 168; Gravier vs. Carraby, 17 La., 118, 142, and cases collected in 20 Hennen's Digest, p. 1007, No. 1.)

In India Bagging Association vs. Kock, supra, an association of eight commercial firms in New Orleans, holders of 7,410 bales of India cotton bagging, was formed, the members binding themselves for the term of three months not to sell any bagging, nor offer to sell any, except with the consent of the majority of them expressed at a meeting; under the penalty of ten dollars for every bale sold or offered for sale. This action was brought against one of the members by the manager of the association for the recovery of a penalty of $7,400 for having sold 740 bales of bagging in contravention of the articles of the association. From a judgment in favor of the association the defendant member appealed and the Supreme Court reversed the judgment saying:

The agreement between the parties was palpably and unequivocably a combination in restraint of trade, and to enhance the price in the market of an article of primary necessity to cotton planters. Such combination are contrary to public order, and cannot be enforced in a court of justice.

By "public policy," as defined by the courts in the United States and England, is intended that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good, which may be termed the "policy of the law," or "public policy in relation to the administration of the law." (Words & Phrases Judicially Defined, vol. 6, p. 5813, and cases cited.) Public policy is the principle under which freedom of contract or private dealing is restricted by law for the good of the public. (Id., Id.) In determining whether a contract is contrary to public policy the nature of the subject matter determines the source from which such question is to be solved. (Hartford Fire Ins. Co. vs. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)

The foregoing is sufficient to show that there is no difference in principle between the public policy (orden publico) in the two jurisdictions (the United States and the Philippine Islands) as determined by the Constitution, laws, and judicial decisions.

In the United States it is well settled that contracts in undue or unreasonable restraint of trade are unenforcible because they are repugnant to the established public policy in that country. Such contracts are illegal in the sense that the law will not enforce them. The Supreme Court of the United States, in Oregon Steam Navigation Co. vs. Winsor (20 Wall., 64), quoted with approval in Gibbs vs. Consolidated Gas Co. of Baltimore (130 U. S., 396), said:

Cases must be judged according to their circumstances, and can only be rightly judged when the reason and grounds of the rule as carefully considered. There are two principal grounds on which the doctrine is founded that a contract in restraint of trade is void as against public policy. One is, the injury to the public by being deprived of the restricted party's industry; and the other is, the injury to the party himself by being precluded from pursuing his occupation, and thus being prevented from supporting himself and his family.

And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:

Pubic welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the other party requires, that contract may be sustained. The question is, whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable.

Chapter 5, title 13, book 2, of our Penal Code makes it a crime for a person to solicit any gift or promise as a consideration for agreeing to refrain from taking part in any public, auction, or attempting to cause bidders to stay away from such auction by means of threats, gifts, promises or any other artifice, with intent to affect the price of the thing auctioned (Art. 542), or to combine for the purpose of lowering or raising wages to an abusive extent, or to regulate the conditions of labor (Art. 543), or by spreading false rumors, or by making use of any other artifice, succeeds in altering the prices which would naturally be obtained in free competition for merchandise, stocks, public and private securities, or any other thing which may be the object of trade and commerce (Art. 544). And Act No. 98, as amended, of the Philippine Commission likewise makes it a crime for any person or corporation, engaged as a common carrier, to subject any particular person, firm, company, corporation, or locality, or any particular kind of traffic to any undue or unreasonable prejudice or discrimination. To this extent the Legislature has expressly covered the subject and left to the courts to determine in each case whether any other particular agreement or contract is contrary to public policy.

It needs no argument to show that an agreement or contract entered into for the purpose of accomplishing any of the prohibited acts mentioned in the above cited provisions of the Penal Code or in Act No. 98 would be unenforcible as being in violation of positive law. Those falling within the provisions of articles 542 and 544 of the Penal Code and Act No. 98 would clearly be agreements or contracts in undue or unreasonable restraint of trade. The meaning given to the word "trade" would determine the question whether those coming within the provisions of article 543 would or would not be the same. If the commercial meaning of the word should govern, and in this sense t has reference to the business of selling or exchanging some tangible substance or commodity for money, or the business of dealing by way of sale in commodities, it would appear that such would not be contract in restraint of trade. This may be the most common significance of the word "trade." but it is not the only one, nor the most comprehensive meaning in which the word is properly used. In the broader sense, it is any occupation or business carried on for subsistence or profit. Anderson's Dictionary of Law gives the following definition: "Generally equivalent to occupation, employment, or

business, whether manual or mercantile; any occupation, employment or business carried on for profit, gain, or livelihood, not in the liberal arts or in the learned professions." In Abbott's Law Dictionary the word is defined as "an occupation, employment or business carried on for gain or profit." Among the definitions given in the Encyclopaedic Dictionary is the following: "The business which a person has learnt, and which he carries on for subsistence or profit; occupation; particularly employment, whether manual or mercantile, as distinguished from the liberal arts or the learned professions and agriculture." Bouvier limits the meaning to commerce and traffic and the handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the broader meaning given by the lexicographers.

The contract under consideration, tested by the law, rules and principles above set forth, is clearly one in undue or unreasonable restraint of trade and therefore against public policy. It is limited as to time and space but not as to trade. It is not necessary for the protection of the defendant, as this is provided for in another part of the clause. It would force the plaintiff to leave the Philippine Islands in order to obtain a livelihood in case the defendant declined to give him the written permission to work elsewhere in this country.

The foregoing are our reasons upon which the short decision and order for judgment, heretofore filed,1 were based.

G.R. No. L-21127             February 9, 1924

ALFONSO DEL CASTILLO, plaintiff-appellant, vs.SHANNON RICHMOND, defendant-appellee.

F.R. Feria for appellant.Manly, Goddard and Lockwood for appellee.

JOHNSON, J.:

This action was commenced in the Court of First Instance of the Province of Albay on the 18th day of October, 1922. Its purpose was to have declared null and of no effect the following contract executed and delivered on the 20th day of July, 1915:

CONTRACT FOR RENDERING SERVICES

Know all men by these presents:

That Shannon Richmond, of lawful age and a resident of the district of Legaspi, and Alfonso del Castillo, also of lawful age and a resident of the district of Daraga of the municipality and Province of Albay, Philippine Islands, have covenanted and agreed one with the other as follows:

1. That Alfonso del Castillo, in consideration of a monthly remuneration of P125 to be paid to him by Shannon Richmond, agrees to enter the employ of said Shannon Richmond beginning this date, as pharmacist, and to take charge of the prescription department of the drugstore known as the Botica Americana situated in the district of Legaspi of the municipality and Province of Albay, Philippine Islands, and to perform all the duties and obligations as such pharmacist together with such other duties in connection with the same that by custom correspond to the pharmacist in a drugstore of this kind.

2. That in consideration of the performance of the duties and obligations above indicated by the said Alfonso del Castillo, Shannon Richmond hereby agrees to pay the said Alfonso del Castillo the salary of P125 each month.

3. That in consideration of the fact that the said Alfonso del Castillo has just graduated as a pharmacist and up to the present time has not been employed in the capacity of a pharmacist and in consideration of this employment and the monthly salary mentioned in this contract, the said Alfonso del Castillo also agrees not to open, nor own nor have any interest directly or indirectly in any other drugstore either in his own name or in the name of another; nor have any connection with or be employed by any other drugstore situated within a radius of our miles from the district of Legaspi, municipality and Province of Albay, while the said Shannon Richmond or his heirs may own or have open a drugstore, or have an interest in any other one within the limits of the districts of Legaspi, Albay, and Daraga of the municipality of Albay, Province of Albay.

4. That either of the parties to this contract may terminate his relations as employer and employee with or without reason, and upon thirty days' notice; remaining, nevertheless, in full force and effect all the other conditions and agreements stipulated in this contract.

5. That the said Alfonso del Castillo furthermore agrees not to divulge or make use of any of the business secrets or private formulas of the said Shannon Richmond.

In these terms, we execute this contract for the rendering of services on this 20th day of July, 1915, in the district of Legaspi, municipality and Province of Albay Philippine Islands.

(Sgd.) "SHANNON RICHMOND"ALFONSO DEL CASTILLO

Signed in the presence of:

(Sgd.) "M. GOYENA"L. AZANA"

The said contract was acknowledge before a notary on the same day of its execution.

The plaintiff alleges that the provisions and conditions contained in the third paragraph of said contract constitute an illegal and unreasonable restriction upon his liberty to contract, are contrary to public policy, and are unnecessary in order to constitute a just and reasonable protection to the defendant; and asked that the same be declared null and void and of no effect. The defendant interposed a general and special defense. In his special defense he alleges "that during the time the plaintiff was in the defendant's employ he obtained knowledge of his trade and professional secrets and came to know and became acquainted and established friendly relations with his customers so that to now annul the contract and permit plaintiff to establish a competing drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to defendant's interest." The defendant further, in an amended answer, alleges "that this action not having been brought within four years from the time the contract referred to in the complaint was executed, the same has prescribed."

During the trial of the cause an effort was made to sustain the allegations of the complaint that paragraph 3 of the said contract constituted an illegal and unreasonable restriction upon the right of the plaintiff to contract and was contrary to public policy. The lower court found that it was unnecessary to pass upon the question of prescription presented by the defendant.

Upon a consideration of the merits, the court a quo concluded "that the contract the annulment of which is sought by the plaintiff is neither oppressive to him, nor unreasonably necessary to protect the defendant's business, nor prejudicial to the public interest." From that judgment the plaintiff appealed to this court. In this court the appellant still insists that said contract is illegal, unreasonable, and contrary to public policy.

From a reading of paragraph 3 of the contract above quoted, it will be seen that the only restriction placed upon the right of the plaintiff is, that he shall "not open, nor own, nor have any interest directly or indirectly in any other drugstore either in his own name or in the name of another; nor have any connection with or be employed by any other drugstore as pharmacist or in any capacity in any drugstore situated within a radius of four miles from the district of Legaspi, municipality and Province of Albay, while the said Shannon Richmond or his heirs may own or have open a drugstore, or to have an interest in any other one within the limits of the districts of Legaspi, Albay, and Daraga of the municipality of Albay, Province of Albay." It will be noted that the restrictions placed upon the plaintiff are strictly limited (a) to a limited district or districts, and (b) during the time while the defendant or his heirs may own or have open a drugstore, or have an interest in any other one within said limited district.

The law concerning contracts which tend to restrain business or trade has gone through a long series of changes from time to time with the changing conditions of trade and commerce. With trifling exceptions, said changes have been a continuous development of a general rule. The early cases show plainly a disposition to avoid and annul all contract which prohibited or restrained any one from using a lawful trade "at any time or at any place," as being against the benefit of the state. Later, however, the rule became well established that if the restriant was limited to "a certain time" and within "a certain place," such contracts were valid and not "against the benefit of the state." Later cases, and we think the rule is now well established, have held that a contract in restraint of trade is valid providing there is a limitation upon either time or place. A contract, however, which restrains a man from entering into a business or trade without either a limitation as to time or place, will be held invalid. (Anchor Electric Co. vs.Hawkes, 171 Mass., 101; Alger vs. Thacher, 19 Pickering [Mass.] 51; Taylor vs. Blanchard, 13 Allen [Mass.], 370; Lufkin Rule Co. vs. Fringeli, 57 Ohio State, 596; Fowle vs. Park, 131 U.S., 88, 97; Diamond Match Co. vs. Roeber, 106 N.Y., 473; National Benefit Co. vs. Union Hospital Co., 45 Minn., 272; Swigert and Howard vs. Tilden, 121 Iowa, 650.)

The public welfare of course must always be considered, and if it be not involved and the restraint upon one party is not greater than protection to the other requires, contracts like the one we are discussing will be sustained. The general tendency, we believe, of modern authority, is to make the test whether the restraint is reasonably necessary for the protection of the contracting parties. If the contract is reasonably necessary to protect the interest of the parties, it will be upheld. (Ollendorff vs. Abrahamson, 38 Phil., 585.)

In that case we held that a contract by which an employee agrees to refrain for a given lenght of time, after the expiration of the term of his employment, from engaging in a business, competitive with that of his employer, is not void as being in restraint of trade if the restraint imposed is not greater than that which is necessary to afford a reasonable protection. In all cases like the present, the question is whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. Of course in establishing whether the contract is a reasonable or unreasonable one, the nature of the business must also be considered. What would be a reasonable restriction as to time and place upon the manufacture of railway locomotive engines might be a very unreasonable restriction when imposed upon the employment of a day laborer.

Considering the nature of the business in which the defendant is engaged, in relation with the limitation placed upon the plaintiff both as to time and place, we are of the opinion, and so decide, that such limitation is legal and reasonable and not contrary to public policy. Therefore the judgment appealed from should be and is hereby affirmed, with costs. So ordered.

Araullo, C.J., Street, Malcolm, Avanceña, Ostrand, Johns and Romualdez, JJ., concur.