Labor Cases

labor relations, labor law, labor digests
View more...
   EMBED

Share

Preview only show first 6 pages with water mark for full document please download

Transcript

Aris (Phils.) Inc. vs. NLRC [G.R. No. 905501. August 05, 1991] 16AUG Ponente: DAVIDE, JR., J. FACTS: On 11 April 1988, private respondents, who were employees of petitioner, aggrieved by management’s failure to attend to their complaints concerning their working surroundings which had become detrimental and hazardous, requested for a grievance conference. Private respondents lost no time in filing a complaint for illegal dismissal against petitioner with NLRC of NCR. After due trial, Aris (Phils.), Inc. is hereby ordered to reinstate within ten (10) days from receipt private respondents to their former respective positions or any substantial equivalent positions if already filled up, without loss of seniority right and privileges but with limited backwages of six (6) months. Private respondents filed a Motion For Issuance of a Writ of Execution pursuant to Section 12 of R.A. No. 6715. Petitioner and complainants filed their own Appeals. Petitioner filed an Opposition to the motion for execution alleging that Section 12 of R.A. No. 6715 on execution pending appeal cannot be applied retroactively to cases pending at the time of its effectivity because it does not expressly provide that it shall be given retroactive effect and to give retroactive effect to Section 12 thereof to pending cases would not only result in the imposition of an additional obligation on petitioner but would also dilute its right to appeal since it would be burdened with the consequences of reinstatement without the benefit of a final judgment. ISSUE: Whether or not the provision under Section 12 of R.A. No. 6715 is constitutional. HELD: YES. Petition was dismissed for lack of merit. Costs against petitioners. RATIO: Presumption against unconstitutionality. The validity of the questioned law is not only supported and sustained by the foregoing considerations. As contended by the Solicitor General, it is a valid exercise of the police power of the State. Certainly, if the right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of its permanent police power on the theory that the preservation of the lives of the citizens is a basic duty of the State, that is more vital than the preservation of corporate profits. Then, by and pursuant to the same power, the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and its family. Moreover, the questioned interim rules of the NLRC can validly be given retroactive effect. They are procedural or remedial in character, promulgated pursuant to the authority vested upon it under Article 218(a) of the Labor Code of the Philippines, as amended. Settled is the rule that procedural laws may be given retroactive effect. There are no vested rights in rules of procedure. A remedial statute may be made applicable to cases pending at the time of its enactment. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 90501 August 5, 1991 ARIS (PHIL.) INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER FELIPE GARDUQUE III, LEODEGARIO DE GUZMAN, LILIA PEREZ, ROBERTO BESTAMONTE, AIDA OPENA, REYNALDO TORIADO, APOLINARIO GAGAHINA, RUFINO DE CASTRO, FLORDELIZA RAYOS DEL SOL, STEVE SANCHO, ESTER CAIRO, MARIETA MAGALAD, and MARY B. NADALA, respondents. Cesar C. Cruz & Partners for petitioner. Zosimo Morillo for respondent Rayos del Sol. Banzuela, Flores, Miralles, Raneses, Sy & Associates for private respondents. DAVIDE, JR., J.:p Petitioner assails the constitutionality of the amendment introduced by Section 12 of Republic Act No. 6715 to Article 223 of the Labor Code of the Philippines (PD No. 442, as amended) allowing execution pending appeal of the reinstatement aspect of a decision of a labor arbiter reinstating a dismissed or separated employee and of Section 2 of the NLRC Interim Rules on Appeals under R.A. No. 6715 implementing the same. It also questions the validity of the Transitory Provision (Section 17) of the said Interim Rules. The challenged portion of Section 12 of Republic Act No. 6715, which took effect on 21 March 1989, reads as follows: SEC 12. Article 223 of the same code is amended to read as follows: ART. 223. Appeal. xxx xxx xxx In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, in so far as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided therein. This is a new paragraph ingrafted into the Article. Sections 2 and 17 of the "NLRC Interim Rules On Appeals Under R.A. No. 6715, Amending the Labor Code", which the National Labor Relations Commission (NLRC) promulgated on 8 August 1989, provide as follows: Section 2. Order of Reinstatement and Effect of Bond. — In so far as the reinstatement aspect is concerned, the decision of the Labor Arbiter reinstating a dismissed or separated employee shall immediately be executory even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation, or, at the option of the employer, merely be reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement. xxx xxx xxx Section 17. Transitory provision. — Appeals filed on or after March 21, 1989, but prior to the effectivity of these Interim Rules must conform to the requirements as herein set forth or as may be directed by the Commission. The antecedent facts and proceedings which gave rise to this petition are not disputed: On 11 April 1988, private respondents, who were employees of petitioner, aggrieved by management's failure to attend to their complaints concerning their working surroundings which had become detrimental and hazardous, requested for a grievance conference. As none was arranged, and believing that their appeal would be fruitless, they grouped together after the end of their work that day with other employees and marched directly to the management's office to protest its long silence and inaction on their complaints. On 12 April 1988, the management issued a memorandum to each of the private respondents, who were identified by the petitioner's supervisors as the most active participants in the rally requiring them to explain why they should not be terminated from the service for their conduct. Despite their explanation, private respondents were dismissed for violation of company rules and regulations, more specifically of the provisions on security and public order and on inciting or participating in illegal strikes or concerted actions. Private respondents lost no time in filing a complaint for illegal dismissal against petitioner and Mr. Gavino Bayan with the regional office of the NLRC at the National Capital Region, Manila, which was docketed therein as NLRC-NCR-00-0401630-88. After due trial, Labor Arbiter Felipe Garduque III handed down on 22 June 1989 a decision' the dispositive portion of which reads: ACCORDINGLY, respondent Aris (Phils.), Inc. is hereby ordered to reinstate within ten (10) days from receipt hereof, herein complainants Leodegario de Guzman, Rufino de Castro, Lilia M. Perez, Marieta Magalad, Flordeliza Rayos del Sol, Reynaldo Toriado, Roberto Besmonte, Apolinario Gagahina, Aidam (sic) Opena, Steve C. Sancho Ester Cairo, and Mary B. Nadala to their former respective positions or any substantial equivalent positions if already filled up, without loss of seniority right and privileges but with limited backwages of six (6) months except complainant Leodegario de Guzman. All other claims and prayers are hereby denied for lack of merit. SO ORDERED. On 19 July 1989, complainants (herein private respondents) filed a Motion For Issuance of a Writ of Execution 2pursuant to the above-quoted Section 12 of R.A. No. 6715. On 21 July 1989, petitioner filed its Appeal. 3 On 26 July 1989, the complainants, except Flor Rayos del Sol, filed a Partial Appeal. On 10 August 1989, complainant Flor Rayos del Sol filed a Partial Appeal. 5 4 On 29 August 1989, petitioner filed an Opposition 6 to the motion for execution alleging that Section 12 of R.A. No. 6715 on execution pending appeal cannot be applied retroactively to cases pending at the time of its effectivity because it does not expressly provide that it shall be given retroactive effect 7 and to give retroactive effect to Section 12 thereof to pending cases would not only result in the imposition of an additional obligation on petitioner but would also dilute its right to appeal since it would be burdened with the consequences of reinstatement without the benefit of a final judgment. In their Reply 8 filed on 1 September 1989, complainants argued that R.A. No. 6715 is not sought to be given retroactive effect in this case since the decision to be executed pursuant to it was rendered after the effectivity of the Act. The said law took effect on 21 March 1989, while the decision was rendered on 22 June 1989. Petitioner submitted a Rejoinder to the Reply on 5 September 1989. 9 On 5 October 1989, the Labor Arbiter issued an Order granting the motion for execution and the issuance of a partial writ of execution 10 as far as reinstatement of herein complainants is concerned in consonance with the provision of Section 2 of the rules particularly the last sentence thereof. In this Order, the Labor Arbiter also made reference to Section 17 of the NLRC Interim Rules in this wise: Since Section 17 of the said rules made mention of appeals filed on or after March 21, 1989, but prior to the effectivity of these interim rules which must conform with the requirements as therein set forth (Section 9) or as may be directed by the Commission, it obviously treats of decisions of Labor Arbiters before March 21,1989. With more reason these interim rules be made to apply to the instant case since the decision hereof (sic) was rendered thereafter. 11 Unable to accept the above Order, petitioner filed the instant petition on 26 October 1989 12 raising the issues adverted to in the introductory portion of this decision under the following assignment of errors: A. THE LABOR ARBITER A QUO AND THE NLRC, IN ORDERING THE REINSTATEMENT OF THE PRIVATE RESPONDENTS PENDING APPEAL AND IN PROVIDING FOR SECTION 2 OF THE INTERIM RULES, RESPECTIVELY, ACTED WITHOUT AND IN EXCESS OF JURISDICTION SINCE THE BASIS FOR SAID ORDER AND INTERIM RULE, i.e., SECTION 12 OF R.A. 6715 IS VIOLATIVE OF THE CONSTITUTIONAL GUARANTY OF DUE PROCESS IT BEING OPPRESSIVE AND UNREASONABLE. B. GRANTING ARGUENDO THAT THE PROVISION IN(SIC) REINSTATEMENT PENDING APPEAL IS VALID, NONETHELESS, THE LABOR ARBITER A QUO AND THE NLRC STILL ACTED IN EXCESS AND WITHOUT JURISDICTION IN RETROACTIVELY APPLYING SAID PROVISION TO PENDING LABOR CASES. In Our resolution of 7 March 1989, We required the respondents to comment on the petition. Respondent NLRC, through the Office of the Solicitor General, filed its Comment on 20 November 1989. 13Meeting squarely the issues raised by petitioner, it submits that the provision concerning the mandatory and automatic reinstatement of an employee whose dismissal is found unjustified by the labor arbiter is a valid exercise of the police power of the state and the contested provision "is then a police legislation." As regards the retroactive application thereof, it maintains that being merely procedural in nature, it can apply to cases pending at the time of its effectivity on the theory that no one can claim a vested right in a rule of procedure. Moreover, such a law is compatible with the constitutional provision on protection to labor. On 11 December 1989, private respondents filed a Manifestation 14 informing the Court that they are adopting the Comment filed by the Solicitor General and stressing that petitioner failed to comply with the requisites for a valid petition for certiorari under Rule 65 of the Rules of Court. On 20 December 1989, petitioner filed a Rejoinder 15 to the Comment of the Solicitor General. In the resolution of 11 January 1990, 16 We considered the Comments as respondents' Answers, gave due course to the petition, and directed that the case be calendared for deliberation. In urging Us to declare as unconstitutional that portion of Section 223 of the Labor Code introduced by Section 12 of R.A. No. 6715, as well as the implementing provision covered by Section 2 of the NLRC Interim Rules, allowing immediate execution, even pending appeal, of the reinstatement aspect of a decision of a labor arbiter reinstating a dismissed or separated employee, petitioner submits that said portion violates the due process clause of the Constitution in that it is oppressive and unreasonable. It argues that a reinstatement pending appeal negates the right of the employer to self-protection for it has been ruled that an employer cannot be compelled to continue in employment an employee guilty of acts inimical to the interest of the employer; the right of an employer to dismiss is consistent with the legal truism that the law, in protecting the rights of the laborer, authorizes neither the oppression nor the destruction of the employer. For, social justice should be implemented not through mistaken sympathy for or misplaced antipathy against any group, but even-handedly and fairly. 17 To clinch its case, petitioner tries to demonstrate the oppressiveness of reinstatement pending appeal by portraying the following consequences: (a) the employer would be compelled to hire additional employees or adjust the duties of other employees simply to have someone watch over the reinstated employee to prevent the commission of further acts prejudicial to the employer, (b) reinstatement of an undeserving, if not undesirable, employee may demoralize the rank and file, and (c) it may encourage and embolden not only the reinstated employees but also other employees to commit similar, if not graver infractions. These rationalizations and portrayals are misplaced and are purely conjectural which, unfortunately, proceed from a misunderstanding of the nature and scope of the relief of execution pending appeal. Execution pending appeal is interlinked with the right to appeal. One cannot be divorced from the other. The latter may be availed of by the losing party or a party who is not satisfied with a judgment, while the former may be applied for by the prevailing party during the pendency of the appeal. The right to appeal, however, is not a constitutional, natural or inherent right. It is a statutory privilege of statutory origin 18 and, therefore, available only if granted or provided by statute. The law may then validly provide limitations or qualifications thereto or relief to the prevailing party in the event an appeal is interposed by the losing party. Execution pending appeal is one such relief long recognized in this jurisdiction. The Revised Rules of Court allows execution pending appeal and the grant thereof is left to the discretion of the court upon good reasons to be stated in a special order. 19 Before its amendment by Section 12 of R.A. No. 6715, Article 223 of the Labor Code already allowed execution of decisions of the NLRC pending their appeal to the Secretary of Labor and Employment. In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working-man. These provisions are the quintessence of the aspirations of the workingman for recognition of his role in the social and economic life of the nation, for the protection of his rights, and the promotion of his welfare. Thus, in the Article on Social Justice and Human Rights of the Constitution, 20 which principally directs Congress to give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good, the State is mandated to afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all; to 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, security of tenure, human conditions of work, and a living wage, to participate in policy and decision-making processes affecting their rights and benefits as may be provided by law; and to promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes. Incidentally, a study of the Constitutions of various nations readily reveals that it is only our Constitution which devotes a separate article on Social Justice and Human Rights. Thus, by no less than its fundamental law, the Philippines has laid down the strong foundations of a truly just and humane society. This Article addresses itself to specified areas of concern labor, agrarian and natural resources reform, urban land reform and housing, health, working women, and people's organizations and reaches out to the underprivileged sector of society, for which reason the President of the Constitutional Commission of 1986, former Associate Justice of this Court Cecilia Muñoz-Palma, aptly describes this Article as the "heart of the new Charter." 21 These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms With equal intensity. 22 Labor is an indispensable partner for the nation's progress and stability. If in ordinary civil actions execution of judgment pending appeal is authorized for reasons the determination of which is merely left to the discretion of the judge, We find no plausible reason to withhold it in cases of decisions reinstating dismissed or separated employees. In such cases, the poor employees had been deprived of their only source of livelihood, their only means of support for their family their very lifeblood. To Us, this special circumstance is far better than any other which a judge, in his sound discretion, may determine. In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal. The validity of the questioned law is not only supported and sustained by the foregoing considerations. As contended by the Solicitor General, it is a valid exercise of the police power of the State. Certainly, if the right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of its permanent police power on the theory that the preservation of the lives of the citizens is a basic duty of the State, that is more vital than the preservation of corporate profits. 23 Then, by and pursuant to the same power, the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and its family. The charge then that the challenged law as well as the implementing rule are unconstitutional is absolutely baseless. Laws are presumed constitutional. 24 To justify nullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication; a law shall not be declared invalid unless the conflict with the constitution is clear beyond reasonable doubt. 25 In Parades, et al. vs. Executive Secretary 26 We stated: 2. For one thing, it is in accordance with the settled doctrine that between two possible constructions, one avoiding a finding of unconstitutionality and the other yielding such a result, the former is to be preferred. That which will save, not that which will destroy, commends itself for acceptance. After all, the basic presumption all these years is one of validity. The onerous task of proving otherwise is on the party seeking to nullify a statute. It must be proved by clear and convincing evidence that there is an infringement of a constitutional provision, save in those cases where the challenged act is void on its face. Absent such a showing, there can be no finding of unconstitutionality. A doubt, even if well-founded, does not suffice. Justice Malcolm's aphorism isapropos: To doubt is to sustain. 27 The reason for this: ... can be traced to the doctrine of separation of powers which enjoins on each department a proper respect for the acts of the other departments. ... The theory is that, as the joint act of the legislative and executive authorities, a law is supposed to have been carefully studied and determined to be constitution before it was finally enacted. Hence, as long as there is some other basis that can be used by the courts for its decision, the constitutionality of the challenged law will not be touched upon and the case will be decided on other available grounds. 28 The issue concerning Section 17 of the NLRC Interim Rules does not deserve a measure of attention. The reference to it in the Order of the Labor Arbiter of 5 October 1989 was unnecessary since the procedure of the appeal proper is not involved in this case. Moreover, the questioned interim rules of the NLRC, promulgated on 8 August 1989, can validly be given retroactive effect. They are procedural or remedial in character, promulgated pursuant to the authority vested upon it under Article 218(a) of the Labor Code of the Philippines, as amended. Settled is the rule that procedural laws may be given retroactive effect. 29 There are no vested rights in rules of procedure. 30 A remedial statute may be made applicable to cases pending at the time of its enactment. 31 WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against petitioner. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-15045 January 20, 1961 IN RE: PETITION FOR EXEMPTION FROM COVERAGE BY THE SOCIAL SECURITY SYSTEM. ROMAN CATHOLIC ARCHBISHOP OF MANILA, petitioner-appellant, vs. SOCIAL SECURITY COMMISSION, respondent-appellee. Feria, Manglapus and Associates for petitioner-appellant. Legal Staff, Social Security System and Solicitor General for respondent-appellee. GUTIERREZ DAVID, J.: On September 1, 1958, the Roman Catholic Archbishop of Manila, thru counsel, filed with the Social Security Commission a request that "Catholic Charities, and all religious and charitable institutions and/or organizations, which are directly or indirectly, wholly or partially, operated by the Roman Catholic Archbishop of Manila," be exempted from compulsory coverage of Republic Act No. 1161, as amended, otherwise known as the Social Security Law of 1954. The request was based on the claim that the said Act is a labor law and does not cover religious and charitable institutions but is limited to businesses and activities organized for profit. Acting upon the recommendation of its Legal Staff, the Social Security Commission in its Resolution No. 572, series of 1958, denied the request. The Roman Catholic Archbishop of Manila, reiterating its arguments and raising constitutional objections, requested for reconsideration of the resolution. The request, however, was denied by the Commission in its Resolution No. 767, series of 1958; hence, this appeal taken in pursuance of section 5(c) of Republic Act No. 1161, as amended. Section 9 of the Social Security Law, as amended, provides that coverage "in the System shall be compulsory upon all members between the age of sixteen and sixty rears inclusive, if they have been for at least six months a the service of an employer who is a member of the System, Provided, that the Commission may not compel any employer to become member of the System unless he shall have been in operation for at least two years and has at the time of admission, if admitted for membership during the first year of the System's operation at least fifty employees, and if admitted for membership the following year of operation and thereafter, at least six employees x x x." The term employer" as used in the law is defined as any person, natural or juridical, domestic or foreign, who carries in the Philippines any trade, business, industry, undertaking, or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations owned or controlled by the Government" (par. [c], see. 8), while an "employee" refers to "any person who performs services for an 'employer' in which either or both mental and physical efforts are used and who receives compensation for such services" (par. [d], see. 8). "Employment", according to paragraph [i] of said section 8, covers any service performed by an employer except those expressly enumerated thereunder, like employment under the Government, or any of its political subdivisions, branches or instrumentalities including corporations owned and controlled by the Government, domestic service in a private home, employment purely casual, etc. From the above legal provisions, it is apparent that the coverage of the Social Security Law is predicated on the existence of an employer-employee relationship of more or less permanent nature and extends to employment of all kinds except those expressly excluded. Appellant contends that the term "employer" as defined in the law should — following the principle of ejusdem generis — be limited to those who carry on "undertakings or activities which have the element of profit or gain, or which are pursued for profit or gain," because the phrase ,activity of any kind" in the definition is preceded by the words "any trade, business, industry, undertaking." The contention cannot be sustained. The rule ejusdem generisapplies only where there is uncertainty. It is not controlling where the plain purpose and intent of the Legislature would thereby be hindered and defeated. (Grosjean vs. American Paints Works [La], 160 So. 449). In the case at bar, the definition of the term "employer" is, we think, sufficiently comprehensive as to include religious and charitable institutions or entities not organized for profit, like herein appellant, within its meaning. This is made more evident by the fact that it contains an exception in which said institutions or entities are not included. And, certainly, had the Legislature really intended to limit the operation of the law to entities organized for profit or gain, it would not have defined an "employer" in such a way as to include the Government and yet make an express exception of it. It is significant to note that when Republic Act No. 1161 was enacted, services performed in the employ of institutions organized for religious or charitable purposes were by express provisions of said Act excluded from coverage thereof (sec. 8, par. [j] subpars. 7 and 8). That portion of the law, however, has been deleted by express provision of Republic Act No. 1792, which took effect in 1957. This is clear indication that the Legislature intended to include charitable and religious institutions within the scope of the law. In support of its contention that the Social Security Law was intended to cover only employment for profit or gain, appellant also cites the discussions of the Senate, portions of which were quoted in its brief. There is, however, nothing whatsoever in those discussions touching upon the question of whether the law should be limited to organizations for profit or gain. Of course, the said discussions dwelt at length upon the need of a law to meet the problems of industrializing society and upon the plight of an employer who fails to make a profit. But this is readily explained by the fact that the majority of those to be affected by the operation of the law are corporations and industries which are established primarily for profit or gain. Appellant further argues that the Social Security Law is a labor law and, consequently, following the rule laid down in the case of Boy Scouts of the Philippines vs. Araos (G.R. No. L-10091, January 29, 1958) and other cases1, applies only to industry and occupation for purposes of profit and gain. The cases cited, however, are not in point, for the reason that the law therein involved expressly limits its application either to commercial, industrial, or agricultural establishments, or enterprises. . Upon the other hand, the Social Security Law was enacted pursuant to the "policy of the Republic of the Philippines to develop, establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the Philippines and shall provide protection to employees against the hazards of disability, sickness, old age and death." (See. 2, Republic Act No. 1161, as amended.) Such enactment is a legitimate exercise of the police power. It affords protection to labor, especially to working women and minors, and is in full accord with the constitutional provisions on the "promotion of social justice to insure the well-being and economic security of all the people." Being in fact a social legislation, compatible with the policy of the Church to ameliorate living conditions of the working class, appellant cannot arbitrarily delimit the extent of its provisions to relations between capital and labor in industry and agriculture. There is no merit in the claim that the inclusion of religious organizations under the coverage of the Social Security Law violates the constitutional prohibition against the application of public funds for the use, benefit or support of any priest who might be employed by appellant. The funds contributed to the System created by the law are not public funds, but funds belonging to the members which are merely held in trust by the Government. At any rate, assuming that said funds are impressed with the character of public funds, their payment as retirement death or disability benefits would not constitute a violation of the cited provisions of the Constitution, since such payment shall be made to the priest not because he is a priest but because he is an employee. Neither may it be validly argued that the enforcement of the Social Security Law impairs appellant's right to disseminate religious information. All that is required of appellant is to make monthly contributions to the System for covered employees in its employ. These contributions, contrary to appellant's contention, are not in the nature of taxes on employment." Together with the contributions imposed upon the employees and the Government, they are intended for the protection of said employees against the hazards of disability, sickness, old age and death in line with the constitutional mandate to promote social justice to insure the well-being and economic security of all the people. IN VIEW OF THE FOREGOING, Resolutions Nos. 572 kind 767, series of 1958, of the Social Security Commission are hereby affirmed. So ordered with costs against appellant. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 61594 September 28, 1990 PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner, vs HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG, respondents. Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner. Ledesma, Saludo & Associates for private respondents. FELICIANO, J.: On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to do business in the Philippines, executed in Manila two (2) separate contracts of employment, one with private respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January 1979, provided in pertinent portion as follows: 5. DURATION OF EMPLOYMENT AND PENALTY This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties. xxx xxx xxx 6. TERMINATION xxx xxx xxx Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's salary. xxx xxx xxx 10. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement. Respondents then commenced training in Pakistan. After their training period, they began discharging their job functions as flight attendants, with base station in Manila and flying assignments to different parts of the Middle East and Europe. On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales and Mamasig advising both that their services as flight stewardesses would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they had) executed with [PIA]." 2 On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint, docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual ordered the parties to submit their position papers and evidence supporting their respective positions. The PIA submitted its position paper, 3 but no evidence, and there claimed that both private respondents were habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities of "personal effects"; and that PIA personnel at the Manila International Airport had been discreetly warned by customs officials to advise private respondents to discontinue that practice. PIA further claimed that the services of both private respondents were terminated pursuant to the provisions of the employment contract. In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private respondents with full backwages or, in the alternative, the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-year period of their employment contracts; the payment to private respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a bonus to each of the private respondents equivalent to their one-month salary. 4 The Order stated that private respondents had attained the status of regular employees after they had rendered more than a year of continued service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was illegal and entitled private respondents to reinstatement with full backwages. On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to pay each of the complainants [private respondents] their salaries corresponding to the unexpired portion of the contract[s] [of employment] . . .". 5 In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the Deputy Minister as having been rendered without jurisdiction; for having been rendered without support in the evidence of record since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of petitioner's rights under the employment contracts with private respondents. 1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction over the same being lodged in the Arbitration Branch of the National Labor Relations Commission ("NLRC") It appears to us beyond dispute, however, that both at the time the complaint was initiated in September 1980 and at the time the Orders assailed were rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over termination cases. Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one (1) year of service without prior clearance from the Department of Labor and Employment: Art. 278. Miscellaneous Provisions — . . . (b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the employment of employees with at least one year of service during the last two (2) years, whether such service is continuous or broken, without prior written authority issued in accordance with such rules and regulations as the Secretary may promulgate . . . (emphasis supplied) Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case of a termination without the necessary clearance, the Regional Director was authorized to order the reinstatement of the employee concerned and the payment of backwages; necessarily, therefore, the Regional Director must have been given jurisdiction over such termination cases: Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal without prior clearance shall be conclusively presumed to be termination of employment without a just cause. The Regional Director shall, in such case order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismissal until the time of reinstatement. (emphasis supplied) Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly very explicit about the jurisdiction of the Regional Director over termination of employment cases: Under PD 850, termination cases — with or without CBA — are now placed under the original jurisdiction of the Regional Director. Preventive suspension cases, now made cognizable for the first time, are also placed under the Regional Director. Before PD 850, termination cases where there was a CBA were under the jurisdiction of the grievance machinery and voluntary arbitration, while termination cases where there was no CBA were under the jurisdiction of the Conciliation Section. In more details, the major innovations introduced by PD 850 and its implementing rules and regulations with respect to termination and preventive suspension cases are: 1. The Regional Director is now required to rule on every application for clearance, whether there is opposition or not, within ten days from receipt thereof. xxx xxx xxx (Emphasis supplied) 2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still his order was null and void because it had been issued in violation of petitioner's right to procedural due process . 6 This claim, however, cannot be given serious consideration. Petitioner was ordered by the Regional Director to submit not only its position paper but also such evidence in its favor as it might have. Petitioner opted to rely solely upon its position paper; we must assume it had no evidence to sustain its assertions. Thus, even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to the Ministry of Labor and Employment. 7 There is another reason why petitioner's claim of denial of due process must be rejected. At the time the complaint was filed by private respondents on 21 September 1980 and at the time the Regional Director issued his questioned order on 22 January 1981, applicable regulation, as noted above, specified that a "dismissal without prior clearance shall be conclusively presumed to be termination of employment without a cause", and the Regional Director was required in such case to" order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismiss until . . . reinstatement." In other words, under the then applicable rule, the Regional Director did not even have to require submission of position papers by the parties in view of the conclusive (juris et de jure) character of the presumption created by such applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and Employment , 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules and Regulations, the termination of [an employee] which was without previous clearance from the Ministry of Labor is conclusively presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary proof however strong." 3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. 9 Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the parties; while paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to terminate the employment agreement at any time by giving one-month's notice to the employee or, in lieu of such notice, one-months salary. A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties. 10 The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations. As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into, and hence refused to give effect to said paragraph 5. These Articles read as follows: Art. 280. Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his reinstatement. Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in detail the question of whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. After an extensive examination of the history and development of Articles 280 and 281, the Court reached the conclusion that a contract providing for employment with a fixed period was not necessarily unlawful: There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist e.g. where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non would an agreement fixing a period be essentially evil or illicit, therefore anathema Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employers" using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. xxx xxx xxx Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. (emphasis supplied) It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to evade. Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years , 13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code. Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case, i.e., the employer-employee relationship between petitioner PIA and private respondents. We have already pointed out that the relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the sole venue for the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationship between the parties, upon the other: the contract was not only executed in the Philippines, it was also performed here, at least partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative agencies as a proper forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. 14 We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess of jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3) years backwages without qualification or deduction. Should their reinstatement to their former or other substantially equivalent positions not be feasible in view of the length of time which has gone by since their services were unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting to one (1) month's salary for every year of service rendered by them, including the three (3) years service putatively rendered. ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years backwages, without deduction or qualification; and (2) should reinstatement of private respondents to their former positions or to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents separation pay amounting to one (1)-month's salary for every year of service actually rendered by them and for the three (3) years putative service by private respondents. The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs against petitioner. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 120095 August 5, 1996 JMM PROMOTION AND MANAGEMENT, INC., and KARY INTERNATIONAL, INC., petitioner, vs. HON. COURT OF APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of the Department of Labor and Employment, HON. JOSE BRILLANTES, in his capacity as acting Secretary of the Department of Labor and Employment and HON. FELICISIMO JOSON, in his capacity as Administrator of the Philippine Overseas Employment Administration, respondents. KAPUNAN, J.:p The limits of government regulation under the State's police power are once again at the vortex of the instant controversy. Assailed is the government's power to control deployment of female entertainers to Japan by requiring an Artist Record Book (ARB) as a precondition to the processing by the POEA of any contract for overseas employment. By contending that the right to overseas employment is a property right within the meaning of the Constitution, petitioners vigorously aver that deprivation thereof allegedly through the onerous requirement of an ARB violates the due process clause and constitutes an invalid exercise of the police power. The factual antecedents are undisputed. Following the much-publicized death of Maricris Sioson in 1991, former President Corazon C. Aquino ordered a total ban against the deployment of performing artists to Japan and other foreign destinations. The ban was, however, rescinded after leaders of the overseas employment industry promised to extend full support for a program aimed at removing kinks in the system of deployment. In its place, the government, through the Secretary of Labor and Employment, subsequently issued Department Order No. 28, creating the Entertainment Industry Advisory Council (EIAC), which was tasked with issuing guidelines on the training, testing certification and deployment of performing artists abroad. Pursuant to the EIAC's recommendations, 1 the Secretary of Labor, on January 6, 1994, issued Department Order No. 3 establishing various procedures and requirements for screening performing artists under a new system of training, testing, certification and deployment of the former. Performing artists successfully hurdling the test, training and certification requirement were to be issued an Artist's Record Book (ARB), a necessary prerequisite to processing of any contract of employment by the POEA. Upon request of the industry, implementation of the process, originally scheduled for April 1, 1994, was moved to October 1, 1994. Thereafter, the Department of Labor, following the EIAC's recommendation, issued a series of orders fine-tuning and implementing the new system. Prominent among these orders were the following issuances: 1. Department Order No. 3-A, providing for additional guidelines on the training, testing, certification and deployment of performing artists. 2. Department Order No. 3-B, pertaining to the Artist Record Book (ARB) requirement, which could be processed only after the artist could show proof of academic and skills training and has passed the required tests. 3. Department Order No. 3-E, providing the minimum salary a performing artist ought to received (not less than US$600.00 for those bound for Japan) and the authorized deductions therefrom. 4. Department Order No. 3-F, providing for the guidelines on the issuance and use of the ARB by returning performing artists who, unlike new artists, shall only undergo a Special Orientation Program (shorter than the basic program) although they must pass the academic test. In Civil Case No. 95-72750, the Federation of Entertainment Talent Managers of the Philippines (FETMOP), on January 27, 1995 filed a class suit assailing these department orders, principally contending that said orders 1) violated the constitutional right to travel; 2) abridged existing contracts for employment; and 3) deprived individual artists of their licenses without due process of law. FETMOP, likewise, averred that the issuance of the Artist Record Book (ARB) was discriminatory and illegal and "in gross violation of the constitutional right... to life liberty and property." Said Federation consequently prayed for the issuance of a writ of preliminary injunction against the aforestated orders. On February 2, 1992, JMM Promotion and Management, Inc. Kary International, Inc., herein petitioners, filed a Motion for Intervention in said civil case, which was granted by the trial court in an Order dated 15 February, 1995. However, on February 21, 1995, the trial court issued an Order denying petitioners' prayed for a writ of preliminary injunction and dismissed the complaint. On appeal from the trial court's Order, respondent court, in CA G.R. SP No. 36713 dismissed the same. Tracing the circumstances which led to the issuance of the ARB requirement and the assailed Department Order, respondent court concluded that the issuance constituted a valid exercise by the state of the police power. We agree. The latin maxim salus populi est surprema lex embodies the character of the entire spectrum of public laws aimed at promoting the general welfare of the people under the State's police power. As an inherent attribute of sovereignty which virtually "extends to all public needs," 2 this "least limitable" 3 of governmental powers grants a wide panoply of instruments through which the state, as parens patriae gives effect to a host of its regulatory powers. Describing the nature and scope of the police power, Justice Malcolm, in the early case of Rubi v. Provincial Board of Mindoro 4 wrote: "The police power of the State," one court has said... is a power coextensive with self-protection, and is not inaptly termed "the law of overruling necessity." It may be said to be that inherent and plenary power in the state which enables it to prohibit all things hurtful to the comfort, safety and welfare of society." Carried onward by the current of legislature, the judiciary rarely attempts to dam the onrushing power of legislative discretion, provided the purposes of the law do not go beyond the great principles that mean security for the public welfare or do not arbitrarily interfere with the right of the individual. 5 Thus, police power concerns government enactments which precisely interfere with personal liberty or property in order to promote the general welfare or the common good. As the assailed Department Order enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that the said order, particularly, its ARB requirement, does not enhance the public welfare or was exercised arbitrarily or unreasonably. A thorough review of the facts and circumstances leading to the issuance of the assailed orders compels us to rule that the Artist Record Book requirement and the questioned Department Order related to its issuance were issued by the Secretary of Labor pursuant to a valid exercise of the police power. In 1984, the Philippines emerged as the largest labor sending country in Asia dwarfing the labor export of countries with mammoth populations such as India and China. According to the National Statistics Office, this diaspora was augmented annually by over 450,000 documented and clandestine or illegal (undocumented) workers who left the country for various destinations abroad, lured by higher salaries, better work opportunities and sometimes better living conditions. Of the hundreds of thousands of workers who left the country for greener pastures in the last few years, women composed slightly close to half of those deployed, constituting 47% between 1987-1991, exceeding this proportion (58%) by the end of 1991, 6 the year former President Aquino instituted the ban on deployment of performing artists to Japan and other countries as a result of the gruesome death of Filipino entertainer Maricris Sioson. It was during the same period that this Court took judicial notice not only of the trend, but also of the fact that most of our women, a large number employed as domestic helpers and entertainers, worked under exploitative conditions "marked by physical and personal abuse." 7 Even then, we noted that "[t]he sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by testimonies of returning workers" compelled "urgent government action." 8 Pursuant to the alarming number of reports that a significant number of Filipina performing artists ended up as prostitutes abroad (many of whom were beaten, drugged and forced into prostitution), and following the deaths of number of these women, the government began instituting measures aimed at deploying only those individuals who met set standards which would qualify them as legitimate performing artists. In spite of these measures, however, a number of our countrymen have nonetheless fallen victim to unscrupulous recruiters, ending up as virtual slaves controlled by foreign crime syndicates and forced into jobs other than those indicated in their employment contracts. Worse, some of our women have been forced into prostitution. Thus, after a number of inadequate and failed accreditation schemes, the Secretary of Labor issued on August 16, 1993, D.O. No. 28, establishing the Entertainment Industry Advisory Council (EIAC), the policy advisory body of DOLE on entertainment industry matters. 9 Acting on the recommendations of the said body, the Secretary of Labor, on January 6, 1994, issued the assailed orders. These orders embodied EIAC's Resolution No. 1, which called for guidelines on screening, testing and accrediting performing overseas Filipino artists. Significantly, as the respondent court noted, petitioners were duly represented in the EIAC, 10 which gave the recommendations on which the ARB and other requirements were based. Clearly, the welfare of Filipino performing artists, particularly the women was paramount in the issuance of Department Order No. 3. Short of a total and absolute ban against the deployment of performing artists to "high risk" destinations, a measure which would only drive recruitment further underground, the new scheme at the very least rationalizes the method of screening performing artists by requiring reasonable educational and artistic skills from them and limits deployment to only those individuals adequately prepared for the unpredictable demands of employment as artists abroad. It cannot be gainsaid that this scheme at least lessens the room for exploitation by unscrupulous individuals and agencies. Moreover, here or abroad, selection of performing artists is usually accomplished by auditions, where those deemed unfit are usually weeded out through a process which is inherently subjective and vulnerable to bias and differences in taste. The ARB requirement goes one step further, however, Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 90634-35 June 6, 1990 CARMELCRAFT CORPORATION &/OR CARMEN V. YULO, President and General Manager, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, CARMELCRAFT EMPLOYEES UNION, PROGRESSIVE FEDERATION OF LABOR, represented by its Local President GEORGE OBANA, respondents. Tee, Tomas & Associates for petitioners. Raul E. Espinosa for private respondents. CRUZ, J.: The Court is appalled by the degree of bad faith that has characterized the petitioners' treatment of their employees. It borders on puredisdain. And on top of this, they now have the temerity to seek from us a relief to which they are clearly not entitled. The petition must be dismissed. The record shows that after its registration as a labor union, the Camelcraft Employees Union sought but did not get recognition from the petitioners. Consequently, it filed a petition for certification election in June 1987. On July 13, 1987, Camelcraft Corporation, through its president and general manager, Carmen Yulo, announced in a meeting with the employees that it would cease operations on August 13, 1987, due to serious financial losses. Operations did cease as announced. On August 17, 1987, the union filed a complaint with the Department of Labor against the petitioners for illegal lockout, unfair labor practice and damages, followed the next day with another complaint for payment of unpaid wages, emergency cost of living allowances, holiday pay, and other benefits. On November 29, 1988, the Labor Arbiter declared the shutdown illegal and violative of the employees' right to selforganization. The claim for unpaid benefits was also granted. 1 After reviewing the decision on appeal, the respondent NLRC declared: WHEREFORE, premises considered, the appealed decision is modified. In addition to the underpayment in their wages, emergency living allowance, 13th month pay, legal holiday pay and premium pay for holidays for a period of three years, the respondents are ordered to pay complainants their separation pay equivalent to one-month pay for every year of service, a fraction of six months or more shall be considered as one (1) whole year. The rest of the disposition stand. 2 We do not find that the above decision is tainted with grave abuse of discretion. On the contrary, it is comformable to the pertinent laws and the facts clearly established at the hearing. The reason invoked by the petitioner company to justify the cessation of its operations is hardly credible; in fact, it is preposterous when viewed in the light of the other relevent circumstances. Its justification is that it sustained losses in the amount of P 1,603.88 as of December 31, 1986 . 3 There is no report, however, of its operations during the period after that date, that is, during the succeeding seven and a half months before it decided to close its business. Significantly, the company is capitalized at P 3 million . 4 Considering such a substantial investment, we hardly think that a loss of the paltry sum of less than P 2,000.00 could be considered serious enough to call for the closure of the company. We agree with the public respondent that the real reason for the decision of the petitioners to cease operations was the establishment of respondent Carmelcraft Employees Union. It was apparently unwelcome to the corporation, which would rather shut down than deal with the union. There is the allegation from the private respondent that the company had suggested that it might decide not to close the business if the employees were to affiliate with another union which the management preferred. 5 This allegation has not been satisfactorily disproved. At any rate, the finding of the NLRC is more believable than the ground invoked by the petitioners. Notably, this justification was made only eight months after the alleged yearend loss and shortly after the respondent union filed a petition for certification election. The act of the petitioners was an unfair labor practice prohibited by Article 248 of the Labor Code, to wit: ART. 248. Unfair labor practices of employers.-It shall be unlawful for an employer to commit any of the following unfair labor practice: (a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization; More importantly, it was a defiance of the constitutional provision guaranteeing to workers the right to self-organization and to enter into collective bargaining with management through the labor union of their own choice and confidence. 6 The determination to cease operations is a prerogative of management that is usually not interfered with by the State as no business can be required to continue operating at a loss simply to maintain the workers in employment. 7 That would be a taking of property without due process of law which the employer has a right to resist. But where it is manifest that the closure is motivated not by a desire to avoid further losses but to discourage the workers from organizing themselves into a union for more effective negotiations with the management, the State is bound to intervene. And, indeed, even without such motivation, the closure cannot be justified because the claimed losses are obviously not serious. In this situation, the employees are entitled to separation pay at the rate of one-half month for every year of service under Art. 283 of the Labor Code. The contention of the petitioners that the employees are estopped from claiming the alleged unpaid wages and other compensation must also be rejected. This claim is based on the waivers supposedly made by the complainants on the understanding that "the management will implement prospectively all benefits under existing labor standard laws." The petitioners argue that this assurance provided the consideration that made the quitclaims executed by the employees valid. They add that the waivers were made voluntarily and contend that the contract should be respected as the law between the parties. Even if voluntarily executed, agreements are invalid if they are contrary to public policy. This is elementary. The protection of labor is one of the policies laid down by the Constitution not only by specific provision but also as part of social justice. The Civil Code itself provides: ART. 6. Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third person with a right recognized by law. ART. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. The subordinate position of the individual employee vis-a-vis management renders him especially vulnerable to its blandishments and importunings, and even intimidations, that may result in his improvidently if reluctantly signing over benefits to which he is clearly entitled. Recognizing this danger, we have consistently held that quitclaims of the workers' benefits win not estop them from asserting them just the same on the ground that public policy prohibits such waivers. That the employee has signed a satisfaction receipt does not result in a waiver; the law does not consider as valid any agreement to receive less compensation than what a worker is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which he is legally entitled. 8 Release and quitclaim is inequitable and incongruous to the declared public policy of the State to afford protection to labor and to assure the rights of workers to security of tenure. 9 We find also untenable the contention of Carmen Yulo that she is not liable for the acts of the petitioner company, assuming it had acted illegally, because the Carmelcraft Corporation is a distinct and separate entity with a legal personality of its own. Yulo claims she is only an agent of the company carrying out the decisions of its board of directors. We do not agree. Our finding is that she is in fact and legal effect the corporation, being not only its president and general manager but also its owner. 10 Moreover, and this is a no less important consideration, she is raising this issue only at this tardy hour, when she should have invoked this argument earlier, when the case was being heard before the labor arbiter and later m the NLRC. It is too late now to shunt these responsibilities to the company after she herself had been found liable. All told, the conduct of the petitioners toward the employees has been less than commendable. Indeed, it is reprehensible. First, the company inveigled them to waive their claims to compensation due them on the promise that future benefits would be paid (and to make matters worse, there is no showing that they were indeed paid). Second, it refused to recognize the respondent union, suggesting to the employees that they join another union acceptable to management. Third, it threatened the employees with the closure of the company and then actually did so when the employees insisted on their demands. All these acts reflect on the bona fides of the petitioners and unmistakably indicate their ill will toward the employees. The petitioners obviously regard the private respondents as mere servants simply because they are paid employees. That is a mistake. Laborers are not just hired help to be exploited, without the right to defend and improve their interest . The working class is an equal partner of management and should always be treated as such. The more labor is prevented from pursuing its legitimate demands for its protection and enhancement, the more it is likely to lose faith in our free institutions and to incline toward Ideologies offering a more if deceptive regime. One way of disabusing our working men and women of this delusion is to assure them that under our form of government, the interests of labor deserve and will get proper recognition from an enlightened and compassionate management, no less than the total sympathy of a solicitous State. WHEREFORE, the petition is DISMISSED and the challenged decision is AFFIRMED, with costs against the petitioner. It is so ordered. Narvasa (Chairman), Gancayco and Medialdea, JJ., concur. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. Nos. 43633-34 September 14, 1990 PABLO ARIZALA, SERGIO MARIBAO, LEONARDO JOVEN, and FELINO BULANDUS, petitioners, vs. THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents. Januario T. Seno for petitioners. NARVASA, J.: Under the Industrial Peace Act, 1 government-owned or controlled corporations had the duty to bargain collectively and were otherwise subject to the obligations and duties of employers in the private sector. 2 The Act also prohibited supervisors to become, or continue to be, members of labor organizations composed of rank-and-file employees, 3 and prescribed criminal sanctions for breach of the prohibition. 4 It was under the regime of said Industrial Peace Act that the Government Service Insurance System (GSIS, for short) became bound by a collective bargaining agreement executed between it and the labor organization representing the majority of its employees, the GSIS Employees Association. The agreement contained a "maintenance-of-membership" clause, 5 i.e., that all employees who, at the time of the execution of said agreement, were members of the union or became members thereafter, were obliged to maintain their union membership in good standing for the duration of the agreement as a condition for their continued employment in the GSIS. There appears to be no dispute that at that time, the petitioners occupied supervisory positions in the GSIS. Pablo Arizala and Sergio Maribao were, respectively, the Chief of the Accounting Division, and the Chief of the Billing Section of said Division, in the Central Visayas Regional Office of the GSIS. Leonardo Joven and Felino Bulandus were, respectively, the Assistant Chief of the Accounting Division (sometimes Acting Chief in the absence of the Chief) and the Assistant Chief of the Field Service and Non-Life Insurance Division (and Acting Division Chief in the absence of the Chief), of the same Central Visayas Regional Office of the GSIS. Demands were made on all four of them to resign from the GSIS Employees Association, in view of their supervisory positions. They refused to do so. Consequently, two (2) criminal cases for violation of the Industrial Peace Act were lodged against them in the City Court of Cebu: one involving Arizala and Maribao 6 and the other, Joven and Bulandus. 7 Both criminal actions resulted in the conviction of the accused in separate decisions. 8 They were each sentenced "to pay a fine of P 500.00 or to suffer subsidiary imprisonment in case of insolvency." They appealed to the Court of Appeals. 9 Arizala's and Maribao's appeal was docketed as CA-G.R. No. 14724-CR; that of Joven and Bulandus, as CA-G.R. No. 14856-CR. The appeals were consolidated on motion of the appellants, and eventuated in a judgment promulgated on January 29, 1976 affirming the convictions of all four appellants. The appellants moved for reconsideration. They argued that when the so called "1973 Constitution" took effect on January 17, 1973 pursuant to Proclamation No. 1104, the case of Arizala and Maribao was still pending in the Court of Appeals and that of Joven and Bulandus, pending decision in the City Court of Cebu; that since the provisions of that constitution and of the Labor Code subsequently promulgated (eff., November 1, 1974), repealing the Industrial Peace Act-placed employees of all categories in government-owned or controlled corporations without distinction within the Civil Service, and provided that the terms and conditions of their employment were to be "governed by the Civil Service Law, rules and regulations" and hence, no longer subject of collective bargaining, the appellants ceased to fall within the coverage of the Industrial Peace Act and should thus no longer continue to be prosecuted and exposed to punishment for a violation thereof. They pointed out further that the criminal sanction in the Industrial Peace Act no longer appeared in the Labor Code. The Appellate Court denied their plea for reconsideration. Hence, the present petition for review on certiorari. The crucial issue obviously is whether or not the petitioners' criminal liability for a violation of the Industrial Peace Act may be deemed to have been obliterated in virtue of subsequent legislation and the provisions of the 1973 and 1987 Constitutions. The petitioners' contention that their liability had been erased is made to rest upon the following premises: 1. Section 1, Article XII-B of the 1973 Constitution does indeed provide that the "Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including government-owned or controlled corporations, .. administered by an independent Civil Service Commission. 2. Article 292 of the Labor Code repealed such parts and provisions of the Industrial Peace Act as were "not adopted as part" of said Code "either directly or by reference." The Code did not adopt the provision of the Industrial Peace Act conferring on employees of governmentowned or controlled corporations the right of self-organization and collective bargaining; in fact it made known that the "terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations," would thenceforth no longer be fixed by collective bargaining but "be governed by the Civil Service Law, rules and regulations." 10 3. The specific penalty for violation of the prohibition on supervisors being members in a labor organization of employees under their supervision has disappeared. 4. The Code also modified the concept of unfair labor practice, decreeing that thenceforth, "it shall be considered merely as an administrative offense rather than a criminal offense (and that) (u)nfair labor practice complaints shall x x be processed like any ordinary labor disputes." 11 On the other hand, in justification of the Appellate Tribunal's affirmance of the petitioners' convictions of violations of the Industrial Peace Act, the People1) advert to the fact that said Labor Code also states that "all actions or claims accruing prior to ... (its) effectivity ... shall be determined in accordance with the laws in force at the time of their accrual;" and 2) argue that the legislature cannot generally intervene and vacate the judgment of the courts, either directly or indirectly, by the repeal of the statute under which said judgment has been rendered. The legal principles governing the rights of self-organization and collective bargaining of rankand-file employees in the government- particularly as regards supervisory, and high level or managerial employees have undergone alterations through the years. Republic Act No. 875 As already intimated, under RA 875 (the Industry Peace Act), 12 persons "employed in proprietary functions of the Government, including but not limited to governmental corporations," had the right of self-organization and collective bargaining, including the right to engage in concerted activities to attain their objectives, e.g. strikes. But those "employed in governmental functions" were forbidden to "strike for the purpose of securing changes or modification in their terms and conditions of employment" or join labor organizations which imposed on their members the duty to strike. The reason obviously was that the terms and conditions of their employment were "governed by law" and hence could not be fixed, altered or otherwise modified by collective bargaining. Supervisory employees were forbidden to join labor organizations composed of employees under them, but could form their own unions. Considered "supervisors' were those 'having authority in the interest of an employer to hire, transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or responsibly to direct them, and to adjust their grievance or effectively to recommend such acts if, in connection with the foregoing, the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment." 13 Republic Act No. 2260 Similar provisions were found in R.A. No. 2260, the Civil Service Act of 1959. This Act declared that the "Philippine Civil Service ... (embraced) all branches, subdivisions and instrumentalities of the government including government-owned and controlled corporations." 14 It prohibited such civil service employees who were "employed in governmental functions" to belong to any labor organization which imposed on their members "the obligation to strike or to join strikes." And one of the first issuances of the President after the proclamation of martial law in September, 1972, was General Order No. 5 which inter alia banned strikes in vital industries," as well as 'all rallies, demonstrations and other forms of group actions." 15 Not so prohibited, however, were those "employed in proprietary functions of the Government including, but not limited to, governmental corporations." 16 The Act also penalized any person who "violates, refuses or neglects to comply with any ... provisions (of the Act) or rules (thereunder promulgated) ... by a fine not exceeding one thousand pesos or by imprisonment not exceeding six months or both such fine and imprisonment in the discretion of the court." 17 The 1973 Constitution The 1973 Constitution laid down the broad principle that "(t)he State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work," 18 and directed that the "National Assembly shall provide for the standardization of compensation of government officials and employees, including those in government-owned or controlled corporations, taking into account the nature of the responsibilities pertaining to, and the qualifications required for, the positions concerned." 19 PD 442, The Labor Code The Labor Code of the Philippines, Presidential Decree No. 442, enacted within a year from effectivity of the 1973 Constitution, 20 incorporated the proposition that the "terms and conditions of employment of all government employees, including employees of governmentowned and controlled corporations ... (are) governed by the Civil Service Law, rules and regulations." 21 It incorporated, too, the constitutional mandate that the salaries of said employees "shall be standardized by the National Assembly." The Labor Code, 22 however "exempted" government employees from the right to selforganization for purposes of collective bargaining. While the Code contained provisions acknowledging the right of "all persons employed in commercial, industrial and agricultural enterprises, including religious, medical or educational institutions operating for profit" to "selforganization and to form, join or assist labor organizations for purposes of collective bargaining," they "exempted from the foregoing provisions: a) security guards; b) government employees, including employees of government government-owned and/ or controlled corporations; c) managerial employees; and d) employees of religious, charitable, medical and educational institutions not operating for profit, provided the latter do not have existing collective agreements or recognized unions at the time of the effectivity of the code or have voluntarily waived their exemption." 23 The reason for denying to government employees the right to "self-organization and to form, join or assist labor organizations for purposes of collective bargaining" is presumably the same as that under the Industrial Peace Act, i.e., that the terms and conditions of government employment are fixed by law and not by collective bargaining. Some inconsistency appears to have arisen between the Labor Code and the Civil Service Act of 1959. Under the Civil Service Act, persons "employed in proprietary functions of the government including, but not limited to, governmental corporations'-not being within "the policy of the Government that the employees therein shall not strike for the purpose of securing changes in their terms and conditions of employment"-could legitimately bargain with their respective employers through their labor organizations, and corollarily engage in strikes and other concerted activities in an attempt to bring about changes in the conditions of their work. They could not however do so under the Labor Code and its Implementing Rules and Regulations; these provided that "government employees, including employees of government-owned and/or controlled corporations," without distinction as to function, were "exempted" (excluded is the better term) from "the right to self-organization and to form, join or assist labor organizations for purposes of collective bargaining," and by implication, excluded as well from the right to engage in concerted activities, such as strikes, as coercive measures against their employers. Members of supervisory unions who were not managerial employees, were declared by the Labor Code to be "eligible to join or assist the rank and file labor organization, and if none exists, to form or assist in the forming of such rank and file organization " 24 Managerial employees, on the other hand, were pronounced as 'not eligible to join, assist or form any labor organization." 25 A "managerial employee" was defined as one vested with power or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to effectively recommend such managerial actions." 26 Presidential Decree No. 807 Clarification of the matter seems to have been very shortly attempted by the Civil Service Decree of the Philippines, Presidential Decree No. 807 (eff., Oct. 6,1975) which superseded the Civil Service Law of 1959 (RA 2260) 27 and repealed or modified "all laws, rules and regulations or parts thereof inconsistent with the provisions" thereof. The Decree categorically described the scope and coverage of the "Civil Service" as embracing 44 every branch, agency, subdivision, and instrumentality of the government, including every government owned or controlled corporation whether performing governmental or propriety function. 28 The effect was seemingly to prohibit government employees (including those "employed in proprietary functions of the Government") to "strike for the purpose of securing changes of their terms and conditions of employment," 29 something which, as aforestated, they were allowed to do under the Civil Service Act of 1959. 30 Be this as it may it seems clear that PD 807 (the Civil Service Decree) did not modify the declared ineligibility of "managerial employees" from joining, assisting or forming any labor organization. Executive Order No. 111 Executive Order No. 111, issued by President Corazon C. Aquino on December 24, 1986 in the exercise of legislative powers under the Freedom Constitution, modified the general disqualification above mentioned of 'government employees, including employees of government-owned and/or controlled corporations" from "the right to self-organization and to form, join or assist labor organizations for purposes of collective bargaining.' It granted to employees "of government corporations established under the Corporation Code x x the right to organize and to bargain collectively with their respective employers ." 31 To all 'other employees in the civil service, ... (it granted merely) the right to form associations for purposes not contrary to law," 32 not for "purposes of collective bargaining." The 1987 Constitution The provisions of the present Constitution on the matter appear to be somewhat more extensive. They declare that the "right to self organization shall not be denied to government employees;" 33 that the State "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;" and that said workers "shall be entitled to security of tenure, humane conditions of work, and a living wage, ... (and) also participate in policy and decisionmaking processes affecting their rights and benefits as may be provided by law. 34 CSC Memorandum Circular No. 6 Memorandum Circular No. 6 of the Civil Service Commission, issued on April 21, 1987 enjoined strikes by government officials and employees, to wit: 35 ... Prior to the enactment by Congress of applicable laws concerning strike by government employees, and considering that there are existing laws which prohibit government officials and employees from resorting to strike, the Commission enjoins, under pain of administrative sanctions, all government officers and employees from staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which will result in temporary stoppage or disruption of public services. To allow otherwise is to undermine or prejudice the government system. Executive Order No. 180 The scope of the constitutional right to self-organization of "government employees" above mentioned, was defined and delineated in Executive Order No. 180 (eff. June 1, 1987). According to this Executive Order, the right of self-organization does indeed pertain to all "employees of all branches, subdivisions, instrumentalities and agencies of the Government, including government-owned or controlled corporations with original charters;" 36such employees "shall not be discriminated against in respect of their employment by reason of their membership in employees' organizations or participation in the normal activities of their organization x x (and their) employment shall not be subject to the condition that they shall not join or shall relinquish their membership in the employees' organizations. 37 However, the concept of the government employees' right of self-organization differs significantly from that of employees in the private sector. The latter's right of self-organization, i.e., "to form, join or assist labor organizations for purposes of collective bargaining," admittedly includes the right to deal and negotiate with their respective employers in order to fix the terms and conditions of employment and also, to engage in concerted activities for the attainment of their objectives, such as strikes, picketing, boycotts. But the right of government employees to "form, join or assist employees organizations of their own choosing" under Executive Order No. 180 is not regarded as existing or available for "purposes of collective bargaining," but simply "for the furtherance and protection of their interests." 38 In other words, the right of Government employees to deal and negotiate with their respective employers is not quite as extensive as that of private employees. Excluded from negotiation by government employees are the "terms and conditions of employment ... that are fixed by law," it being only those terms and conditions not otherwise fixed by law that "may be subject of negotiation between the duly recognized employees' organizations and appropriate government authorities," 39 And while EO No. 180 concedes to government employees, like their counterparts in the private sector, the right to engage in concerted activities, including the right to strike, the executive order is quick to add that those activities must be exercised in accordance with law, i.e. are subject both to "Civil Service Law and rules" and "any legislation that may be enacted by Congress," 40 that "the resolution of complaints, grievances and cases involving government employees" is not ordinarily left to collective bargaining or other related concerted activities, but to "Civil Service Law and labor laws and procedures whenever applicable;" and that in case "any dispute remains unresolved after exhausting all available remedies under existing laws and procedures, the parties may jointly refer the dispute to the (Public Sector Labor-Management) Council for appropriate action." 41 What is more, the Rules and Regulations implementing Executive Order No. 180 explicitly provide that since the "terms and conditions of employment in the government, including any political subdivision or instrumentality thereof and government-owned and controlled corporations with original charters are governed by law, the employees therein shall not strike for the purpose of securing changes thereof. 42 On the matter of limitations on membership in labor unions of government employees, Executive Order No. 180 declares that "high level employees whose functions are normally considered as policy making or managerial, or whose duties are of a highly confidential nature shall not be eligible to join the organization of rank-and-file government employees. 43 A "high level employee" is one "whose functions are normally considered policy determining, managerial or one whose duties are highly confidential in nature. A managerial function refers to the exercise of powers such as: 1. To effectively recommend such managerial actions; 2. To formulate or execute management policies and decisions; or 3. To hire, transfer, suspend, lay off, recall, dismiss, assign or discipline employees. 44 Republic Act No. 6715 The rule regarding membership in labor organizations of managerial and supervisory employees just adverted to, was clarified and refined by Republic Act No. 6715, effective on March 21, 1989, further amending the Labor Code. Under RA 6715 labor unions are regarded as organized either (a) "for purposes of negotiation," or (b) "for furtherance and protection"of the members' rights. Membership in unions organized "for purposes of negotiation" is open only to rank-and-file employees. "Supervisory employees" are ineligible "for membership in a labor organization of the rankand-file employees but may join, assist or form separate labor organizations of their own," i.e., one organized "for furtherance and protection" of their rights and interests. However, according to the Rules implementing RA 6715, "supervisory employees who are included in an existing rank-and- file bargaining unit, upon the effectivity of Republic Act No. 6715 shall remain in that unit ..." Supervisory employees are "those who, in the interest of the employer, effectively recommend such managerial actions 45 if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. 46 Membership in employees' organizations formed for purposes of negotiation are open to rankand-file employees only, as above mentioned, and not to high level employees. 47 Indeed, "managerial employees" or "high level employees" are, to repeat, "not eligible to join, assist or form any labor organization" at all. 48 A managerialemployee is defined as "one who is vested with powers or prerogatives to lay down and execute, management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees." 49 This is how the law now stands, particularly with respect to supervisory employees vis a vis labor organizations of employees under them. Now, the GSIS performs proprietary functions. It is a non-stock corporation, managed by a Board of Trustees exercising the "usual corporate powers." 50 In other words, it exercises all the powers of a corporation under the Corporation Law in so far as they are not otherwise inconsistent with other applicable law. 51 It is engaged essentially in insurance, a business that "is not inherently or exclusively a governmental function, ... (but) is on the contrary, in essence and practice, of a private nature and interest." 52 1. The petitioners contend that the right of self-organization and collectivebargaining had been withdrawn by the Labor Code from government employees including those in government-owned and controlled corporations- chiefly for the reason that the terms and conditions of government employment, all embraced in civil service, may not be modified by collective bargaining because set by law. It is therefore immaterial, they say, whether supervisors are members of rank-and-file unions or not; after all, the possibility of the employer's control of the members of the union thru supervisors thus rendering collective bargaining illusory, which is the main reason for the prohibition, is no longer of any consequence. This was true, for a time. As already discussed, both under the Labor Code and PD 807, government employees, including those in government-owned or controlled corporations, were indeed precluded from bargaining as regards terms and conditions of employment because these were set by law and hence could not possibly be altered by negotiation. But EO 111 restored the right to organize and to negotiate and bargain of employees of "government corporations established under the Corporation Code." And EO 180, and apparently RA 6715, too, granted to all government employees the right of collective bargaining or negotiation except as regards those terms of their employment which were fixed by law; and as to said terms fixed by law, they were prohibited to strike to obtain changes thereof. 2. The petitioners appear to be correct in their view of the disappearance from the law of the prohibition on supervisors being members of labor organizations composed of employees under their supervision. The Labor Code (PD 442) allowed supervisors (if not managerial) to join rank-and-file unions. And under the Implementing Rules of RA 6715, supervisors who were members of existing labor organizations on the effectivity of said RA 6715 were explicitly authorized to "remain therein." 3. The correctness of the petitioners' theory that unfair labor practices ceased to be crimes and were deemed merely administrative offenses in virtue of the Labor Code, cannot be gainsaid. Article 250 of the Labor Code did provide as follows: ART. 250. Concept of unfair labor practice.-The concept of unfair labor practice is hereby modified. Henceforth, it shall be considered merely as an administrative offense rather than a criminal offense. Unfair labor practice complaints shall, therefore, be processed like any ordinary labor disputes. But unfair labor practices were declared to be crimes again by later amendments of the Labor Code effected by Batas Pambansa Blg. 70, approved on May 1, 1980. As thus amended, the Code now pertinently reads as follows: ART. 248. Concept of unfair labor practice and procedure for prosecution thereof. — Unfair labor practices violate the right of workers and employees to self organization, are inimical to the legitimate interests of both labor and management including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, and hinder the promotion of healthy and stable labor management relations. Consequently, unfair labor practices are not only violations of the civil rights of both labor and management but are also offenses against the State which shall be subject to prosecution and punishment as herein provided. xxx xxx xxx Recovery of civil liability in the administrative proceedings shall bar recovery under the Civil Code. No criminal prosecution under this title may be instituted without a final judgment, finding that an unfair labor practice was committed having been first obtained in the preceding paragraph. ... The decisive consideration is that at present, supervisors who were already members of a rank-and-file labor organization at the time of the effectivity of R.A. No. 6715, are authorized to "remain therein." It seems plain, in other words, that the maintenance by supervisors of membership in a rank-and-file labor organization even after the enactment of a statute imposing a prohibition on such membership, is not only not a crime, but is explicitly allowed, under present law. Now, in a case decided as early as 1935, People v. Tamayo, 53 where the appellants had appealed from a judgment convicting them of a violation of a municipal -ordinance, and while their appeal was pending, the ordinance was repealed such that the act complained of ceased to be a criminal act but became legal, this Court dismissed the criminal proceedings, pronouncing the effects of the repeal to be as follows: In the leading case of the United States vs. Cuna (12 Phil. 241), and Wing vs. United States (218 U.S. 272), the doctrine was clearly established that in the Philippines repeal of a criminal act by its reenactment, even without a saving clause would not destroy criminal liability. But not a single sentence in either derision indicates that there was any desire to hold that a person could be prosecuted convicted, and punished for acts no longer criminal. There is no question that at common law and in America a much more favorable attitude towards the accused exists relative to statutes that have been repealed than has been adopted here. Our rule is more in conformity with the Spanish doctrine, but even in Spain, where the offense ceased to be criminal, petition cannot be had (1 Pacheco, Commentaries, 296). The repeal here was absolute and not a reenactment and repeal by implication. Nor was there any saving clause. The legislative intent as shown by the action of the municipal is that such conduct, formerly denounced, is no longer deemed criminal, and it would be illogical for this court to attempt to sentence appellant for the offense that no longer exists. We are therefore of the opinion that the proceedings against appellant must be dismissed. To the same effect and in even more unmistakable language is People v. Almuete 54 where the defendants-appellees were charged under section 39 of Republic Act No. 1199, as amended (the Agricultural Land Tenancy Law of 1954) which penalized pre-threshing by either agricultural tenant or his landlord. They sought and secured a dismissal on the ground, among others, that there was no law punishing the act charged-a reference to the fact that Republic Act No. 1199 had already been superseded by the Agricultural Land Reform Code of 1963 which instituted the leasehold system and abolished share tenancy subject to certain conditions. On appeal by the Government, this Court upheld the dismissal, saying: The legislative intent not to punish anymore the tenant's act of pre-reaping and pre-threshing without notice to the landlord is inferable from the fact that, as already noted, the Code of Agrarian Reforms did not reenact section 39 of the Agricultural Tenancy Law and that it abolished share tenancy which is the basis for penalizing clandestine pre-reaping and pre-threshing. xxx xxx xxx As held in the Adillo case, 55 the act of pre-reaping and pre-threshing without notice to the landlord, which is an offense under the Agricultural Tenancy Law, had ceased to be an offense under the subsequent law, the Code of Agrarian Reforms. To prosecute it as an offense when the Code of Agrarian Reforms is already in force would be repugnant or abhorrent to the policy and spirit of that Code and would subvert the manifest legislative intent not to punish anymore pre-reaping and pre-threshing without notice to the landholder. xxx xxx xxx The repeal of a penal law deprives the courts of jurisdiction to punish persons charged with a violation of the old penal law prior to its repeal (People vs. Tamayo, 61 Phil. 225; People vs. Sindiong and Pastor, 77 Phil. 1000; People vs. Binuya, 61 Phil. 208; U.S. vs. Reyes, 10 Phil. 423; U.S. vs. Academia, 10 Phil. 431. See dissent in Lagrimas vs. Director of Prisons, 57 Phil. 247, 252, 254). The foregoing precedents dictate absolution of the appellants of the offenses imputed to them. WHEREFORE, the judgments of conviction in CA-G.R. No. 14724-CR and CA-G.R. No. 14856-CR, subject of the appeal, as well as those in Crim. Case No. 5275-R and Crim. Case No. 4130-R rendered by the Trial Court, are REVERSED and the accused-appellants ACQUITTED of the charges against them, with costs de officio. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 167622 June 29, 2010 GREGORIO V. TONGKO, Petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS,Respondents. RESOLUTION BRION, J.: This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found that an employer-employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered Manulife to pay Tongko backwages and separation pay for illegal dismissal. The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are repeated, simply for purposes of clarity. The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July 1, 1977, under a Career Agent’s Agreement (Agreement) that provided: It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or interpreted as creating an employer-employee relationship between the Company and the Agent. xxxx a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as evidenced by an Official Receipt issued by the Company directly to the policyholder. xxxx The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any previous failure to exercise its right under any provision of this Agreement. Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party fifteen (15) days notice in writing. 2 Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a standard of knowledge and competency in the sale of Manulife’s products, satisfactory to Manulife and sufficient to meet the volume of the new business, required by his Production Club membership.3 The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales Agency Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager.4 Tongko’s gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning, Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared his gross business income and deducted his business expenses to arrive at his taxable business income. Manulife withheld the corresponding 10% tax on Tongko’s earnings.5 In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up during the October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote: The first step to transforming Manulife into a big league player has been very clear – to increase the number of agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the organization. Since then, however, substantial changes have taken place in the organization, as these have been influenced by developments both from within and without the company. xxxx The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’ meeting earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine from our senior agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area. While discussions, in general, were positive other than for certain comments from your end which were perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it was not clear that we were proceeding in the same direction. Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no basis. With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your management team, including you, to clear the air, so to speak. This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting held at the 7/F Conference room last 18 October. xxxx Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents." This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table before the rest of your Region’s Sales Managers to verify its validity. As you must have noted, no Sales Manager came forward on their own to confirm your statement and it took you to name Malou Samson as a source of the same, an allegation that Malou herself denied at our meeting and in your very presence. This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency development objectives! Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less." xxxx All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about making "less money" did not refer to you but the way you argued this point had us almost believing that you were spouting the gospel of truth when you were not. x x x xxxx All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency growth. xxxx I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following changes in the interim: 1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you feel "may not be your cup of tea." You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above could solve this problem. xxxx 2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in autonomous fashion. x x x I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups. xxxx The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We are meeting tough challenges next year, and I would want everybody on board. Any resistance or holding back by anyone will be dealt with accordingly.6 Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s services: It would appear, however, that despite the series of meetings and communications, both oneon-one meetings between yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these efforts have failed in helping you align your directions with Management’s avowed agency growth policy. xxxx On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter. 7 Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration Branch. He essentially alleged – despite the clear terms of the letter terminating his Agency Agreement – that he was Manulife’s employee before he was illegally dismissed.8 Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question of illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily leads to the need to determine the validity of the termination of the relationship. A. Tongko’s Case for Employment Relationship Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00, regardless of production levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager, he was given a travel and entertainment allowance of P36,000.00 per year in addition to his overriding commissions; he was tasked with numerous administrative functions and supervisory authority over Manulife’s employees, aside from merely selling policies and recruiting agents for Manulife; and he recommended and recruited insurance agents subject to vetting and approval by Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he was not in the field – at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City – for which he never paid any rental. Manulife provided the office equipment he used, including tables, chairs, computers and printers (and even office stationery), and paid for the electricity, water and telephone bills. As Regional Sales Manager, Tongko additionally asserts that he was required to follow at least three codes of conduct. 9 B. Manulife’s Case – Agency Relationship with Tongko Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of varying amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained through an agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents under his unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all commissions Tongko received; Tongko even declared himself to be self-employed and consistently paid taxes as such—i.e., he availed of tax deductions such as ordinary and necessary trade, business and professional expenses to which a business is entitled. Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he was not its employee as characterized in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission.10 The Conflicting Rulings of the Lower Tribunals The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC reversed the labor arbiter’s decision on appeal; it found the existence of an employer-employee relationship and concluded that Tongko had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the appellate court found that the NLRC gravely abused its discretion in its ruling and reverted to the labor arbiter’s decision that no employer-employee relationship existed between Tongko and Manulife. Our Decision of November 7, 2008 In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed between Tongko and Manulife. We concluded that Tongko is Manulife’s employee for the following reasons: 1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming an employee of an insurance company; if evidence exists showing that the company promulgated rules or regulations that effectively controlled or restricted an insurance agent’s choice of methods or the methods themselves in selling insurance, an employer-employee relationship would be present. The determination of the existence of an employer-employee relationship is thus on a case-to-case basis depending on the evidence on record. 2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by the following indicators: 2.1 Tongko undertook to comply with Manulife’s rules, regulations and other requirements, i.e., the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Financial Code of Conduct Agreement; 2.2 The various affidavits of Manulife’s insurance agents and managers, who occupied similar positions as Tongko, showed that they performed administrative duties that established employment with Manulife; 12 and 2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios’ letter harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary means to sell more policies; Tongko’s alleged failure to follow this directive led to the termination of his employment with Manulife. The Motion for Reconsideration Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS: 1. The November 7[, 2008] Decision violates Manulife’s right to due process by: (a) confining the review only to the issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b) mischaracterizing the divergence of conclusions between the CA and the NLRC decisions as confined only to that on "control"; (c) grossly failing to consider the findings and conclusions of the CA on the majority of the material evidence, especially [Tongko’s] declaration in his income tax returns that he was a "business person" or "self-employed"; and (d) allowing [Tongko] to repudiate his sworn statement in a public document. 2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the legal relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and policy context of contract law vis-à-vis labor law. 3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test other than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and grossly misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of more material evidence to support its conclusion that there is "control." 4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the Civil Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and contravenes through judicial legislation, the constitutional prohibition against impairment of contracts under Article III, Section 10 of the Constitution. 5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee relationship, that Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent Manulife to pay Petitioner backwages, separation pay, nominal damages and attorney’s fees.13 THE COURT’S RULING A. The Insurance and the Civil Codes; the Parties’ Intent and Established Industry Practices We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were set in the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the insurance company and how they are governed by the Code and regulated by the Insurance Commission. The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter governed by the Civil Code. Thus, at the very least, three sets of laws – namely, the Insurance Code, the Labor Code and the Civil Code – have to be considered in looking at the present case. Not to be forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern their relationship for purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the present case and to add to the uncertainties that now exist in considering the legal relationship between the insurance company and its "agents." The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship. The Labor Code concept of "control" has to be compared and distinguished with the "control" that must necessarily exist in a principal-agent relationship. The principal cannot but also have his or her say in directing the course of the principal-agent relationship, especially in cases where the company-representative relationship in the insurance industry is an agency. a. The laws on insurance and agency The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in the insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct themselves in the insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among other provisions, provide: Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided. No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner x x x The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his discretion.1avvphi1.net Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject. The application for an insurance agent’s license requires a written examination, and the applicant must be of good moral character and must not have been convicted of a crime involving moral turpitude.14 The insurance agent who collects premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an insurance company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized the agent to receive payment on the company’s behalf. 15 Section 361 further prohibits the offer, negotiation, or collection of any amount other than that specified in the policy and this covers any rebate from the premium or any special favor or advantage in the dividends or benefit accruing from the policy. Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the parameters of the authority granted under the license and under the contract with the principal. Other than the need for a license, the agent is limited in the way he offers and negotiates for the sale of the company’s insurance products, in his collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g., the required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given to the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control specific to an insurance agency and should not and cannot be read as elements of control that attend an employment relationship governed by the Labor Code. On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter."16 While this is a very broad definition that on its face may even encompass an employment relationship, the distinctions between agency and employment are sufficiently established by law and jurisprudence. Generally, the determinative element is the control exercised over the one rendering service. The employer controls the employee both in the results and in the means and manner of achieving this result. The principal in an agency relationship, on the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned task based on the parameters outlined in the pertinent laws. Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license and for the designation by the insurance company. In the present case, the Agreement fully serves as grant of authority to Tongko as Manulife’s insurance agent.17 This agreement is supplemented by the company’s agency practices and usages, duly accepted by the agent in carrying out the agency. 18 By authority of the Insurance Code, an insurance agency is for compensation,19 a matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary.20 Other than the compensation, the principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for the execution of the agency.21 By implication at least under Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out the same assigned tasks, 22 based necessarily on the specific instructions and directives given to them. With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in accordance with the instructions of the principal." 23 This provision is pertinent for purposes of the necessary control that the principal exercises over the agent in undertaking the assigned task, and is an area where the instructions can intrude into the labor law concept of control so that minute consideration of the facts is necessary. A related article is Article 1891 of the Civil Code which binds the agent to render an account of his transactions to the principal. B. The Cited Case The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and regulations that an agent has to comply with are indicative of an employer-employee relationship.24 The Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v. National Labor Relations Commission (second Insular case)25 to support the view that Tongko is Manulife’s employee. On the other hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission (AFPMBAI case) 26 to support its allegation that Tongko was not its employee. A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all fours with the present case; the uniqueness of the factual situation of the present case prevents it from being directly and readily cast in the mold of the cited cases. These cited cases are themselves different from one another; this difference underscores the need to read and quote them in the context of their own factual situations. The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular Life cases. A critical difference, however, exists as these cited cases dealt with the proper legal characterization of a subsequent management contract that superseded the original agency contract between the insurance company and its agent. Carungcong dealt with a subsequent Agreement making Carungcong a New Business Manager that clearly superseded the Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to positions higher than their original position as insurance agents. Thus, after analyzing the duties and functions of the Ruiz brothers, as these were enumerated in their contracts, we concluded that the company practically dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally, the second Insular Life case dealt with the implications of de los Reyes’ appointment as acting unit manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was clearly defined under a subsequent contract. In all these cited cases, a determination of the presence of the Labor Code element of control was made on the basis of the stipulations of the subsequent contracts. In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document extant and submitted as evidence in the present case is the Agreement – a pure agency agreement in the Civil Code context similar to the original contract in the first Insular Life case and the contract in the AFPMBAI case. And while Tongko was later on designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding these undertakings appears in the records of the case. Any such contract or agreement, had there been any, could have at the very least provided the bases for properly ascertaining the juridical relationship established between the parties. These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases, should therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases. C. Analysis of the Evidence c.1. The Agreement The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties’ relations until the Agreement’s termination in 2001. This Agreement stood for more than two decades and, based on the records of the case, was never modified or novated. It assumes primacy because it directly dealt with the nature of the parties’ relationship up to the very end; moreover, both parties never disputed its authenticity or the accuracy of its terms. By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; as the dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is a matter of law that is for the courts to determine. At the same time, though, the characterization the parties gave to their relationship in the Agreement cannot simply be brushed aside because it embodies their intent at the time they entered the Agreement, and they were governed by this understanding throughout their relationship. At the very least, the provision on the absence of employeremployee relationship between the parties can be an aid in considering the Agreement and its implementation, and in appreciating the other evidence on record. The parties’ legal characterization of their intent, although not conclusive, is critical in this case because this intent is not illegal or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the provisions of the Insurance Code cannot be disregarded as this Code (as heretofore already noted) expressly envisions a principal-agent relationship between the insurance company and the insurance agent in the sale of insurance to the public.1awph!1 For this reason, we can take judicial notice that as a matter of Insurance Code-based business practice, an agency relationship prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its express terms, is in accordance with the Insurance Code model when it provided for a principal-agent relationship, and thus cannot lightly be set aside nor simply be considered as an agreement that does not reflect the parties’ true intent. This intent, incidentally, is reinforced by the system of compensation the Agreement provides, which likewise is in accordance with the production-based sales commissions the Insurance Code provides. Significantly, evidence shows that Tongko’s role as an insurance agent never changed during his relationship with Manulife. If changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko essentially remained an agent, but moved up in this role through Manulife’s recognition that he could use other agents approved by Manulife, but operating under his guidance and in whose commissions he had a share. For want of a better term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing other Manulife agents similarly tasked with the selling of Manulife insurance. Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if Tongko’s compensation scheme changed at all during his relationship with Manulife, the change was solely for purposes of crediting him with his share in the commissions the agents under his wing generated. As an agent who was recruiting and guiding other insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received greater reimbursements for his expenses and was even allowed to use Manulife facilities in his interactions with the agents, all of whom were, in the strict sense, Manulife agents approved and certified as such by Manulife with the Insurance Commission. That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that results from the reading of the Agreement (the only agreement on record in this case) and his continuing role thereunder as sales agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself attested to as his role as Regional Sales Manager. To be sure, this interpretation could have been contradicted if other agreements had been submitted as evidence of the relationship between Manulife and Tongko on the latter’s expanded undertakings. In the absence of any such evidence, however, this reading – based on the available evidence and the applicable insurance and civil law provisions – must stand, subject only to objective and evidentiary Labor Code tests on the existence of an employer-employee relationship. In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties’ relationship should be noted. From 1977 until the termination of the Agreement, Tongko’s occupation was to sell Manulife’s insurance policies and products. Both parties acquiesced with the terms and conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly the generous commissions. Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife insurance products since he invariably declared himself a business or self-employed person in his income tax returns. This consistency with, and action made pursuant to the Agreement were pieces of evidence that were never mentioned nor considered in our Decision of November 7, 2008. Had they been considered, they could, at the very least, serve as Tongko’s admissions against his interest. Strictly speaking, Tongko’s tax returns cannot but be legally significant because he certified under oath the amount he earned as gross business income, claimed business deductions, leading to his net taxable income. This should be evidence of the first order that cannot be brushed aside by a mere denial. Even on a layman’s view that is devoid of legal considerations, the extent of his annual income alone renders his claimed employment status doubtful. 27 Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel – a legal and equitable concept 28 – necessarily must come into play. Tongko’s previous admissions in several years of tax returns as an independent agent, as against his belated claim that he was all along an employee, are too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice Velasco’s dissenting opinion states that Tongko was forced to declare himself a business or self-employed person by Manulife’s persistent refusal to recognize him as its employee.29 Regrettably, the dissent has shown no basis for this conclusion, an understandable omission since no evidence in fact exists on this point in the records of the case. In fact, what the evidence shows is Tongko’s full conformity with, and action as, an independent agent until his relationship with Manulife took a bad turn. Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated any employment relationship between Tongko and Manulife so that the commissions he earned as a sales agent should not be considered in the determination of the backwages and separation pay that should be given to him. This part of the dissent is correct although it went on to twist this conclusion by asserting that Tongko had dual roles in his relationship with Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his capacity as a manager. Thus, the dissent concluded that Tongko’s backwages should only be with respect to his role as Manulife’s manager. The conclusion with respect to Tongko’s employment as a manager is, of course, unacceptable for the legal, factual and practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support of the conclusion that Manulife exercised control over Tongko in the sense understood in the Labor Code. The legal reason, partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and was thus its employee. The practical reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion would cause the insurance industry that, by the law’s own design, operated along the lines of principal-agent relationship in the sale of insurance. c.2. Other Evidence of Alleged Control A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983, Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on what this designation meant. This also holds true for Tongko’s appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The best evidence of control – the agreement or directive relating to Tongko’s duties and responsibilities – was never introduced as part of the records of the case. The reality is, prior to de Dios’ letter, Manulife had practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under his wing. As discussed below, the alleged directives covered by de Dios’ letter, heretofore quoted in full, were policy directions and targeted results that the company wanted Tongko and the other sales groups to realign with in their own selling activities. This is the reality that the parties’ presented evidence consistently tells us. What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in the sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per se indicative of labor law control as the law and jurisprudence teach us. As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the performance of their respective obligations under the Code, particularly on licenses and their renewals, on the representations to be made to potential customers, the collection of premiums, on the delivery of insurance policies, on the matter of compensation, and on measures to ensure ethical business practice in the industry. The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a manner consistent with an agency relationship. In this sense, these control measures cannot be read as indicative of labor law control. Foremost among these are the directives that the principal may impose on the agent to achieve the assigned tasks, to the extent that they do not involve the means and manner of undertaking these tasks. The law likewise obligates the agent to render an account; in this sense, the principal may impose on the agent specific instructions on how an account shall be made, particularly on the matter of expenses and reimbursements. To these extents, control can be imposed through rules and regulations without intruding into the labor law concept of control for purposes of employment. From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the rules and regulations of an insurance company does not ipso facto make the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely relate to the mutually desirable result intended by the contractual relationship; they must have the nature of dictating the means or methods to be employed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these means. In fact, results-wise, the principal can impose production quotas and can determine how many agents, with specific territories, ought to be employed to achieve the company’s objectives. These are management policy decisions that the labor law element of control cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s codes of conduct,30 all of which do not intrude into the insurance agents’ means and manner of conducting their sales and only control them as to the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife and Tongko. The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law control; thus, Tongko as manager, but not as insurance agent, became Manulife’s employee. It drew this conclusion from what the other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and managerial functions) and after comparing these statements with the managers in Grepalife. The dissent compared the control exercised by Manulife over its managers in the present case with the control the managers in the Grepalife case exercised over their employees by presenting the following matrix:31 Duties of Manulife’s Manager - to render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products and who will be part of my Unit - to coordinate activities of the agents under [the managers’] Unit in [the agents’] daily, weekly and monthly selling activities, making sure that their respective sales targets are met; - to conduct periodic training sessions for [the] agents to further enhance their sales skill; and Duties of Grepalife’s Managers/Supervisors - train understudies for the position of district manager - properly account, record and document the company’s funds, spot-check and audit the work of the zone supervisors, x x x follow up the submission of weekly remittance reports of the debit agents and zone supervisors - direct and supervise the sales activities of the debit agents under him, x x x undertake and - to assist [the] agents with their sales activities discharge the functions of absentee debit agents, spot-check the record of debit agents, and insure by way of joint fieldwork, consultations and proper documentation of sales and collections of one-on-one evaluation and analysis of debit agents. particular accounts Aside from these affidavits however, no other evidence exists regarding the effects of Tongko’s additional roles in Manulife’s sales operations on the contractual relationship between them. To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a substantive alteration of Manulife’s authority over Tongko and the performance of his end of the relationship with Manulife. We could not deny though that Tongko remained, first and foremost, an insurance agent, and that his additional role as Branch Manager did not lessen his main and dominant role as insurance agent; this role continued to dominate the relations between Tongko and Manulife even after Tongko assumed his leadership role among agents. This conclusion cannot be denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July 1, 1977 Agreement, a distinction the present case has with the contractual changes made in the second Insular Life case. Tongko’s results-based commissions, too, attest to the primacy he gave to his role as insurance sales agent. The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between: • • the Manulife managers’ role is to coordinate activities of the agents under the managers’ Unit in the agents’ daily, weekly, and monthly selling activities, making sure that their respective sales targets are met. the District Manager’s duty in Grepalife is to properly account, record, and document the company's funds, spot-check and audit the work of the zone supervisors, conserve the company's business in the district through "reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district managers, and maintain his quota of sales (the failure of which is a ground for termination). the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements," undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents. • These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and pre-determined; in the present case, the operative words are the "sales target," the methodology being left undefined except to the extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative of control; the standard only essentially describes what a Branch Manager is – the person in the lead who orchestrates activities within the group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control by Manulife; it is simply a statement of a branch manager’s role in relation with his agents from the point of view of Manulife whose business Tongko’s sales group carries. A disturbing note, with respect to the presented affidavits and Tongko’s alleged administrative functions, is the selective citation of the portions supportive of an employment relationship and the consequent omission of portions leading to the contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John Chua, with counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the other portions suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not brought out:32 1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the computed premiums paid in full on the policies obtained thereat; 1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and place I see fit; 1.c. I have my own assistant and messenger who handle my daily work load; 1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance; xxxx 6. I have my own staff that handles the day to day operations of my office; 7. My staff are my own employees and received salaries from me; xxxx 9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for professionals. These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko. Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into Tongko’s exercise of his role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives are merely operational guidelines on how Tongko could align his operations with Manulife’s re-directed goal of being a "big league player." The method is to expand coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-and-method control as it relates, more than anything else, and is directly relevant, to Manulife’s objective of expanded business operations through the use of a bigger sales force whose members are all on a principal-agent relationship. An important point to note here is that Tongko was not supervising regular full-time employees of Manulife engaged in the running of the insurance business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife through the same Agreement that he had with Manulife, all the while sharing in these agents’ commissions through his overrides. This is the lead agent concept mentioned above for want of a more appropriate term, since the title of Branch Manager used by the parties is really a misnomer given that what is involved is not a specific regular branch of the company but a corps of non-employed agents, defined in terms of covered territory, through which the company sells insurance. Still another point to consider is that Tongko was not even setting policies in the way a regular company manager does; company aims and objectives were simply relayed to him with suggestions on how these objectives can be reached through the expansion of a non-employee sales force. Interestingly, a large part of de Dios’ letter focused on income, which Manulife demonstrated, in Tongko’s case, to be unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is dependent on results, not on the means and manner of selling – a matter for Tongko and his agents to determine and an area into which Manulife had not waded. Undeniably, de Dios’ letter contained a directive to secure a competent assistant at Tongko’s own expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongko’s method of operating and supervising the group of agents within his delineated territory. More than anything else, the "directive" was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongko’s perceived weakness in delivering results could be remedied. It was a solution, with an eye on results, for a consistently underperforming group; its obvious intent was to save Tongko from the result that he then failed to grasp – that he could lose even his own status as an agent, as he in fact eventually did. The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-employee relationship in the management system established. These were: exclusivity of service, control of assignments and removal of agents under the private respondent’s unit, and furnishing of company facilities and materials as well as capital described as Unit Development Fund. All these are obviously absent in the present case. If there is a commonality in these cases, it is in the collection of premiums which is a basic authority that can be delegated to agents under the Insurance Code. As previously discussed, what simply happened in Tongko’s case was the grant of an expanded sales agency role that recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently resulted in the establishment of an employment relationship can be answered by concrete evidence that corresponds to the following questions: • • as lead agent, what were Tongko’s specific functions and the terms of his additional engagement; was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he received from the insurance sales he generated; what can be Manulife’s basis to terminate his status as lead agent; can Manulife terminate his role as lead agent separately from his agency contract; and to what extent does Manulife control the means and methods of Tongko’s role as lead agent? • • • The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above. But strictly speaking, the questions cannot definitively and concretely be answered through the evidence on record. The concrete evidence required to settle these questions is simply not there, since only the Agreement and the anecdotal affidavits have been marked and submitted as evidence. Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the existence of employer-employee relationship, the Court cannot conclusively find that the relationship exists in the present case, even if such relationship only refers to Tongko’s additional functions. While a rough deduction can be made, the answer will not be fully supported by the substantial evidence needed. Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulife’s control over Tongko’s contractual duties points to the absence of any employer-employee relationship between Tongko and Manulife. In the context of the established evidence, Tongko remained an agent all along; although his subsequent duties made him a lead agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-manner control. This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously assume conflicting dual personalities. But to set the record straight, the concept of a single person having the dual role of agent and employee while doing the same task is a novel one in our jurisprudence, which must be viewed with caution especially when it is devoid of any jurisprudential support or precedent. The quoted portions in Justice Carpio-Morales’ dissent,33 borrowed from both the Grepalife and the second Insular Life cases, to support the duality approach of the Decision of November 7, 2008, are regrettably far removed from their context – i.e., the cases’ factual situations, the issues they decided and the totality of the rulings in these cases – and cannot yield the conclusions that the dissenting opinions drew. The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment as zone supervisor and district manager made them employees of Grepalife. Indeed, because of the presence of the element of control in their contract of engagements, they were considered Grepalife’s employees. This did not mean, however, that they were simultaneously considered agents as well as employees of Grepalife; the Court’s ruling never implied that this situation existed insofar as the Ruiz brothers were concerned. The Court’s statement – the Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations – simply means that when an insurance company has exercised control over its agents so as to make them their employees, the relationship between the parties, which was otherwise one for agency governed by the Civil Code and the Insurance Code, will now be governed by the Labor Code. The reason for this is simple – the contract of agency has been transformed into an employer-employee relationship. The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an illegal termination dispute involving parties who had two contracts – first, an original contract (agency contract), which was undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit manager (a management contract). Both the Insular Life and the labor arbiter were one in the position that both were agency contracts. The Court disagreed with this conclusion and held that insofar as the management contract is concerned, the labor arbiter has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We never said in this case though that the insurance agent had effectively assumed dual personalities for the simple reason that the agency contract has been effectively superseded by the management contract. The management contract provided that if the appointment was terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and assigned to any unit. The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the existence of an employer-employee relationship should be resolved in favor of the existence of the relationship.34This observation, apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a doubt exists in the "implementation and application" of the Labor Code and its implementing rules; it does not apply where no doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment relationship by the quantum of evidence the Labor Code requires. On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to state that, as discussed above, the Decision was not supported by the evidence adduced and was not in accordance with controlling jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration. In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance, agency and contracts. WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANTManulife’s motion for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs. SO ORDERED. THIRD DIVISION CIRTEK EMPLOYEES LABOR UNIONFEDERATION OF FREE WORKERS, Petitioner, G.R. No. 190515 Present: CARPIO MORALES, J., Chairperson, DE-CASTRO,* BERSAMIN, VILLARAMA, JR., and SERENO, JJ. Promulgated: - versus - CIRTEK ELECTRONICS, INC., Respondent. November 15, 2010 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CARPIO MORALES, J.: Cirtek Electronics, Inc. (respondent), an electronics and semi-conductor firm situated inside the Laguna Technopark, had an existing Collective Bargaining Agreement (CBA) with Cirtek Employees Labor Union-Federation of Free Workers (petitioner) for the period January 1, 2001 up to December 31, 2005. Prior to the 3rd year of the CBA, the parties renegotiated its economic provisions but failed to reach a settlement, particularly on the issue of wage increases. Petitioner thereupon declared a bargaining deadlock and filed a Notice of Strike with the National Conciliation and Mediation Board-Regional Office No. IV (NCMB-RO IV) on April 26, 2004. Respondent, upon the other hand, filed a Notice of Lockout on June 16, 2004. While the conciliation proceedings were ongoing, respondent placed seven union officers including the President, a Vice President, the Secretary and the Chairman of the Board of Directors under preventive suspension for allegedly spearheading a boycott of overtime work. The officers were eventually dismissed from employment, prompting petitioner to file another Notice of Strike which was, after conciliation meetings, converted to a voluntary arbitration case. The dismissal of the officers was later found to be legal, hence, petitioner appealed. In the meantime, as amicable settlement of the CBA was deadlocked, petitioner went on strike on June 20, 2005. By Order[1] dated June 23, 2005, the Secretary of Labor assumed jurisdiction over the controversy and issued a Return to Work Order which was complied with. Before the Secretary of Labor could rule on the controversy, respondent created a Labor Management Council (LMC) through which it concluded with the remaining officers of petitioner a Memorandum of Agreement (MOA)[2] providing for daily wage increases of P6.00 per day effective January 1, 2004 and P9.00 per day effective January 1, 2005. Petitioner submitted the MOA via Motion and Manifestation [3] to the Secretary of Labor, alleging that the remaining officers signed the MOA under respondent’s assurance that should the Secretary order a higher award of wage increase, respondent would comply. By Order[4] dated March 16, 2006, the Secretary of Labor resolved the CBA deadlock by awarding a wage increase of from P6.00 toP10.00 per day effective January 1, 2004 and from P9.00 to P15.00 per day effective January 1, 2005, and adopting all other benefits as embodied in the MOA. Respondent moved for a reconsideration of the Decision as petitioner’s vice-president submitted a “Muling Pagpapatibay ng Pagsang-ayon sa Kasunduan na may Petsang ika-4 ng Agosto 2005,”[5] stating that the union members were waiving their rights and benefits under the Secretary’s Decision. Reconsideration of the Decision was denied by Resolution[6] of August 12, 2008, hence, respondent filed a petition for certiorari before the Court of Appeals. By Decision[7] of September 24, 2009, the appellate court ruled in favor of respondent and accordingly set aside the Decision of the Secretary of Labor. It held that the Secretary of Labor gravely abused his discretion in not respecting the MOA. It did not give credence to the minutes of the meeting[8] that attended the forging of the MOA as it was not verified, nor to the “Paliwanag”[9] submitted by respondent union members explaining why they signed the MOA as it was not notarized. Petitioner’s motion for reconsideration having been denied by Resolution [10] of December 2, 2009, the present petition was filed, maintaining that the Secretary of Labor’s award is in order, being in accord with the parties’ CBA history ─ respondent having already grantedP15.00 per day for 2001, P10.00 per day for 2002, and P10.00 per day for 2003, and that the Secretary has the power to grant awards higher than what are stated in the CBA. Respecting the MOA, petitioner posits that it was “surreptitiously entered into [in] bad faith,” it having been forged without the assistance of the Federation of Free Workers or counsel, adding that respondent could have waited for the Secretary’s resolution of the pending CBA deadlock or that the MOA could have been concluded before representatives of the Secretary of Labor. The relevant issues for resolution are 1) whether the Secretary of Labor is authorized to give an award higher than that agreed upon in the MOA, and 2) whether the MOA was entered into and ratified by the remaining officers of petitioner under the condition, which was not incorporated in the MOA, that respondent would honor the Secretary of Labor’s award in the event that it is higher. The Court resolves both issues in the affirmative. It is well-settled that the Secretary of Labor, in the exercise of his power to assume jurisdiction under Art. 263 (g)[11] of the Labor Code, may resolve all issues involved in the controversy including the award of wage increases and benefits. [12] While an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties because it requires the intervention and imposing power of the State thru the Secretary of Labor when he assumes jurisdiction, the arbitral award can be considered an approximation of a collective bargaining agreement which would otherwise have been entered into by the parties, hence, it has the force and effect of a valid contract obligation. [13] That the arbitral award was higher than that which was purportedly agreed upon in the MOA is of no moment. For the Secretary, in resolving the CBA deadlock, is not limited to considering the MOA as basis in computing the wage increases. He could, as he did, consider the financial documents[14] submitted by respondent as well as the parties’ bargaining history and respondent’s financial outlook and improvements as stated in its website.[15] It bears noting that since the filing and submission of the MOA did not have the effect of divesting the Secretary of his jurisdiction , or of automatically disposing the controversy, then neither should the provisions of the MOA restrict the Secretary’s leewayin deciding the matters before him. The appellate court’s brushing aside of the “ Paliwanag” and the minutes of the meeting that resulted in the conclusion of the MOA because they were not verified and notarized, thus violating, so the appellate court reasoned, the rules on parol evidence, does not lie. Like any other rule on evidence, parol evidence should not be strictly applied in labor cases. The reliance on the parol evidence rule is misplaced . In labor cases pending before the Commission or the Labor Arbiter, the rules of evidence prevailing in courts of law or equity are not controlling . Rules of procedure and evidence are not applied in a very rigid and technical sense in labor cases. Hence, the Labor Arbiter is not precluded from accepting and evaluating evidence other than, and even contrary to, what is stated in the CBA.[16] (emphasis supplied) While a contract constitutes the law between the parties, this is so in the present case with respect to the CBA, not to the MOA in which even the union’s signatories had expressed reservations thereto. But even assuming arguendo that the MOA is treated as a new CBA, since it is imbued with public interest, it must be construed liberally and yield to the common good. While the terms and conditions of a CBA constitute the law between the parties, it is not, however, an ordinary contract to which is applied the principles of law governing ordinary contracts . A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to the common good. As such, it must be construed liberally rather than narrowly and technically, and the courts must place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and purpose which it is intended to serve. [17] (emphasis and underscoring supplied) WHEREFORE, the petition is GRANTED. The Decision dated September 24, 2009 and the Resolution dated December 2, 2009 of the Court of Appeals are REVERSED and SET ASIDE and the Order dated March 16, 2006 and Resolution dated August 12, 2008 of the Secretary of Labor are REINSTATED. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 152123 June 21, 2005 ALADDIN TRANSIT CORPORATION, Petitioner, vs. THE HONORABLE COURT OF APPEALS (SPECIAL SIXTH DIVISION), AND RAFAEL ROXAS, Respondents. DECISION AZCUNA, J.: This is a petition for certiorari under Rule 45 of the Revised Rules of Court seeking to set aside and annul the Decision of the Court of Appeals 1 and the Resolution denying the Motion for Reconsideration dated December 20, 2001 in C.A.-G.R. SP No. 62302. The facts are not disputed. Petitioner Aladdin Transit Corporation, a public service entity engaged in transportation, hired respondent Rafael Rodriguez in February 1990 as an accounting clerk. Sometime thereafter, or on July 17, 1997, respondent employee alleged that his sister had a quarrel with their personnel manager. As a result thereof, he was barred from entering the company’s premises. He was then instructed to take a leave of absence for a month. He wrote a letter to the President of the company but he did not receive any reply. While he was on leave, he received a letter from their personnel manager asking him to shed light about the SSS contribution that he allegedly did not remit. Respondent merely said he tried to report to the office, but petitioner did not allow him. On August 11, 1997, respondent employee received another letter from the personnel department informing him of his preventive suspension for certain offenses. He alleged that he tried to answer the allegation and wrote a letter to the President of the company, but did not receive a reply. Thus, he filed a complaint with the Labor Arbiter. Petitioner, on its part, alleged that respondent employee violated the trust and confidence of petitioner when he used the company’s funds and lent them with interest to his co-employees for his personal gain. Petitioner added that an investigation they conducted showed that respondent employee and a co-employee, Divina David, had colluded in illegally making payroll salary deductions.lawphil.net Furthermore, petitioner alleged that respondent employee is guilty of using the company vehicle without authority and failed to remit the SSS contribution of his co-employees. Finding the arguments of petitioner deserving of credence, the Labor Arbiter ruled as follows: "WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter lack of merit with admonition that the filing of another baseless complaint shall be severely dealt[ ] with in the future."2 Subsequently, on April 27, 2000, respondent employee appealed to the National Labor Relations Commission (NLRC). On July 3, 2000, the NLRC denied his appeal, for lack of merit. Respondent employee thereupon appealed through a Petition for Certiorari to the Court of Appeals. The Court of Appeals in its Decision held, as follows: The issue before the Court, therefore, is whether petitioner was dismissed: 1) for just cause and 2) with the observance of due process. With regard the requirement of just cause, the Court finds in the affirmative. Both the Labor Arbiter and the NLRC have thoroughly discussed the reason why private respondent was justified in dismissing petitioner from the service. (pp. 123-124, 139-140, Rollo) However, with regard the second requirement, the Court notes that the Labor Arbiter and the NLRC failed to discuss and rule on the same. Nothing in the records show that private respondent gave petitioner the opportunity to be heard and to explain his side. It has been ruled by the Supreme Court that: The law requires the employer to give the worker to be dismissed two written notices before terminating his employment, namely: (1) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer’s decision to dismiss him. x x x ( Tingson, Jr. vs. NLRC, 185 SCRA 498 [1990]; National Service Corp. vs. NLRC, 168 SCRA 122 [1988]; Ruffy vs. NLRC, 182 SCRA 365 [1990]) The same is provided for in Section 2(a) Rule 1 of the Implementing Rules of Book VI which reads: "SEC. 2. Security of Tenure. – (a) In cases of regular employment, the employer shall not terminate the services of an employee except for just or authorized causes as provided by law, and subject to the requirements of due process." (Underscoring supplied) In the case at bar, it was not proven by private respondent that it gave petitioner notice informing him of the cause of his impending dismissal. It did not narrate that it heard petitioner’s side, nor did it show that petitioner was given notice of his dismissal. The Court recognizes the right of [the] employer to discipline its employees and not to continue in its employ those who are inimical to its business operation. However, it must be stressed that in the normal course of things, labor stands not on equal plane as the employer which has in its disposal all means to defend itself. Thus, laws must be read for the protection of labor. This reality is enunciated in Article 3 of the Labor Code in relation to Article 3 of the 1987 Constitution, when it provides: ART. 3. DECLARATION OF BASIC POLICY. – The State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work." As such, based on the ruling of the Supreme Court in the earlier quoted case of Serrano vs. NLRC, private respondent is directed to pay petitioner his backwages from the time he was dismissed up to the time the herein decision becomes final. WHEREFORE, based on the foregoing, the instant petition is hereby GRANTED in part. Private respondent is directed to pay petitioner his full backwages from the time the latter was dismissed until this decision becomes final. SO ORDERED.3 After the reconsideration was denied, as aforestated, petitioner appealed to this Court. Since there is no dispute that petitioner did not inform the respondent employee in dismissing him from the service, the whole issue to be resolved is whether the Court of Appeals correctly applied the ruling of this Court inSerrano v. NLRC,4 to the effect that in cases where there is a valid cause to dismiss the employee but the required notice of dismissal was not given, the dismissal is deemed ineffectual and the employee must be reinstated with full backwages. Recently, this Court has had occasion to revisit the Serrano doctrine and the present rule is set forth in theAgabon v. NLRC, et al.,5 namely, that where the dismissal is based on a just cause, the failure to give the required notice does not invalidate the same, but merely holds the employer liable for damages for violating said notice of requirement. The amount of damages was fixed at Thirty Thousand Pesos (P30,000) by way of nominal damages. WHEREFORE, the Petition is GRANTED and the Decision and Resolution of the Court of Appeals dated September 5, 2001 and December 20, 2001, respectively, in C.A.-G.R. SP No. 62302, are hereby MODIFIED, in that instead of requiring petitioner to reinstate respondent employee with full backwages, the petitioner isORDERED to pay respondent employee nominal damages in the amount of Thirty Thousand Pesos (P30,000). No costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-54285 December 8, 1988 CEBU STEVEDORING CO., INC., petitioner, vs. THE HONORABLE REGIONAL DIRECTOR/MINISTER OF LABOR, ARSENIO GELIG and MARIA LUZ QUIJANO,respondents. Valentin A. Zozobrado for petitioner. Silvino G. Maceren, Jr. for private respondents. Office of the Solicitor General for public respondent. REGALADO, J.: This is a petition for review on certiorari of the order, dated May 2, 1978, of the Regional Director of Labor Regional Office No. 7 in Cebu City, in an action for reinstatement with backwages, which order was affirmed on appeal by the then Ministry of Labor 1 and, subsequently, by the Office of the President, 2 and the dispositive portion whereof reads as follows: WHEREFORE, the respondent, Cebu Stevedoring Co., Inc., is hereby ordered to reinstate Arsenio Gelig and Maria Luz Quijano to their former positions within ten days from receipt to (sic) this order without loss of seniority rights and with full backwages from October 18, 1977 until the actual date of reinstatement. 3 Private respondents Arsenio Gelig and Maria Luz Quijano were former employees of the Cebu Customs Arrastre Service (hereinafter referred to as CCAS). On May 2, 1977, pursuant to Customs Administrative Order No. 21-77 of the Hon. Pio de Roda, Acting Commissioner of Customs and concurrently Acting Secretary of Finance, the CCAS was abolished "for the reason that the objectives for which it was created had already been attained". 4 As a consequence of such abolition, all the employees of CCAS, including herein respondents, were given their termination and/or separation pay by the Bureau of Customs, Cebu City, computed up to April 30, 1977. 5 Thereafter, on May 1, 1977, all the employees of CCAS including herein private respondents, were absorbed by petitioner Cebu Stevedoring Co. Inc. (CSCI for brevity), with the same positions that they held in the CCAS. Eventually, however, on October 17, 1977, private respondents were dismissed by petitioner 6 without prior clearance, allegedly for redundancy and other alleged ground hereinafter discussed . 7 A complaint for reinstatement with backwages was filed by private respondents before Regional Office No. 7 of the Ministry of Labor, which thereafter rendered the order containing the above-quoted portion under the following rationale: It is to be noted that the complainants were employed by the Cebu Customs Arrastre Service long time ago whose functions were carried over when they were absorbed by the herein respondent. In other words, there is no need to employ them as probationary considering that they are already well trained in their respective functions. They were not absorbed for a definite period but instead for an indefinite period. A probationary period of employment means that an employee is hired for training for a certain period in order to determine whether they qualify (sic) for the position or not. In this case, the complainants cannot be mistakenly considered as probationary viewed on the theory that they have been holding the same positions for a quite a long time at the Cebu Customs Arrastre Service before they were absorbed by the Cebu Stevedoring Co. Inc. with the same positions. 8 On appeal, the Minister of Labor affirmed the decision of the Labor Regional Director, stating that: ... complainants who were employed by Cebu Arrastre Service upon being absorbed by respondent for the same function and work need not undergo another probationary test in the same line of work where they have gained a latitude of expertise. 9 Petitioner thereafter elevated the case to the Office of the President which, through Presidential Executive Assistant Jacobo C. Clave, issued a resolution dismissing the appeal for the reason that "there is no law expressly recognizing the parties' right to appeal to this Office in cases of this nature and considering that it does not show any exceptionally meritorious cause for the exercise in this case of the constitutional power of review (control) of the President/Prime Minister as implemented by Executive Order No. 19, series of 1966, as amended, Section 1 of which pertinently provides that 'an appeal to the Office of the President ... is not a matter of right in the absence of statutory provision to that effect '" and further noting that the "case does not involve national interest." 10 A motion for reconsideration of the resolution was like-wise denied. 11 Petitioner's submissions in the present recourse may be synthesized into the following propositions: (1) There is a brazen disregard of the constitutional precept of "due process of law" prejudicing petitioner's rights; (2) As casuals, respondents Gelig and Quijano can be terminated within the 6-month period without need of clearance from the Ministry of Labor and neither is the employer obligated to pay them termination pay; (3) Redundancy is one of the grounds under the Labor Code justifying termination of employees; and (4) Retrenchment is another justifying circumstance for terminating the services of an employee. 1. Petitioner contends that it was denied procedural due process because no hearing was conducted before the Labor Regional Director and neither did private respondents Gelig and Quijano file their position papers as provided in the Labor Code; that upon the abolition of the CCAS, all its employees were given separation pay, and thus, when the employees, including herein private respondents, were absorbed by petitioner when it took over the arrastre operations on May 3, 1977, they were all employed as casuals; that when the company terminated the services of private respondents, together with 52 others, on October 18, 1977 they had served CSCI for barely 5-1/2 months and were still on probation, hence no clearance was required for their termination; that since the positions occupied by herein private respondents with the former CCAS are Identical with the positions already filled up and with the same functions being discharged in the main office of CSCI, private respondents may be terminated for redundancy; and that financial losses incurred by petitioner likewise justify the retrenchment of its employees. 12 Public respondent, in its Comment, 13 points out that although private respondents failed to submit their position paper, they substantiated their complaint in a hearing before the labor arbiter on April 5, 1978; that although petitioner, through an error in the subpoena but also with its contributory fault, was deprived of the opportunity to appear at the scheduled hearing of April 5, 1978, it does not mean an outright denial of due process considering that petitioner availed of the remedy of appeal to the Ministry of Labor and the Office of the President; that the dismissal of private respondents is without just cause; and that the present petition raises mainly questions of fact. We find this petition devoid of merit; the writ prayed for cannot be granted. Petitioner's proposition that the lack of hearing before the Labor Regional Director and private respondents' failure to file their respective position papers constitute a denial of due process, deserves meagre consideration. We agree that no rule is better established, under the due process clause of the Constitution, than that which requires notice and the opportunity to be heard before any person can be lawfully deprived of his rights. 14 The right to be heard, as a preliminary step essential to the rendition of an enforceable judgment, constitutes a basic element of the constitutional requirement of due process of law. 15 However, while in this case petitioner was not afforded an opportunity to be heard by oral argument on its position paper due to its absence at the scheduled hearing, as already explained, it is likewise true that it was required to, as in fact it actually did, submit a position paper which, together with the evidence presented during the hearing, became the basis of the questioned order of the Regional Director. From this order, to repeat, petitioner appealed to the Labor Minister, and then to the Office of the President. It is, therefore, apparent that petitioner was not denied adequate remedies from the alleged procedural infirmities imputed to the rendition of the Regional Director's order. The entire record of the case was reviewed and duly considered on appeal to the Labor Minister, which appellate proceeding remedied any inadequacy in the procedural due process with which the trial proceedings are being faulted. Thus, We have consistently adhered to the decisional rule that appellate review is curative in character on the issue of an alleged denial of due process for lack of a hearing in the case. 16 This Court has never lost sight of the fact that one of the most important and significant State policies, enshrined in the present Constitution as it was in its two predecessors, is the promotion of social justice in all phases of national development, specifically the protection of the rights of workers and the promotion of their welfare. 17 It was in the light of this concern in the fundamental law and the jurisprudence thereon that the Labor Code was enacted, with a specific declaration of its basic policy thatThe State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and human conditions of work. 18 2. With these in mind, We approach the next issue for resolution, that is, whether herein private respondents were validly dismissed. Petitioner submits that private respondents were merely casuals and could, therefore, be terminated even without prior clearance from the then Ministry of Labor and without entitlement to separation pay. This contention is not well-taken. We agree with the Regional Director that private respondents could not be considered probationary employees because they were already well-trained in their respective functions. This conclusion is further bolstered by the factual findings of the Labor Minister that said order of the Director was supported by substantial evidence. As stressed by the Solicitor General, while private respondents were still with the CCAS they were already clerks. Respondent Gelig had been a clerk for CCAS for more than ten (10) years, while respondent Quijano had slightly less than ten (10) years of service. They were, therefore, not novices in their jobs but experienced workers. 19 On this particular issue, it is perhaps timely to consider well settled principles involving decisions of administrative agencies. Findings of quasi-judicial agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but, at times, even finality where such findings are supported by substantial evidence, 20 and judicial review by Us is limited to issues of jurisdiction or grave abuse of discretion. 21 As regular employees, therefore, private respondents may not be dismissed and petitioner cannot terminate their services except for a just or authorized cause provided by law and with scrupulous observance of due process requirements. 22 3. It is true that Article 283 of the Labor Code provides that an "employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking." However, the records fail to establish clearly and convincingly that the positions occupied by private respondents are Identical with those presently existing in petitioner's office. Furthermore, petitioner kept private respondents in its employ for almost six months without raising this issue. It does not mention which positions are allegedly duplicated by the positions held by private respondents. It does not even explain why the private respondents should be the ones to be terminated, without regard to the comparative lengths of service, qualifications and performance of all employees concerned. 4. Petitioner's submission that it is suffering financial losses is untenable since it appears that it absorbed and employed for almost six months, without any intimation of supposed financial distress, the majority of the former employees of CCAS. It never advised private respondents of a company retrenchment program; the first time this supposed program was mentioned was when petitioner was trying to justify the dismissal of the private respondents before the labor arbiter. In a futile attempt to extricate itself from liability, petitioner presented a so-called Statement of Operations, 23 which, however, remains an uncorroborated and self-serving piece of evidence. The constitutional duty of the State to protect the right of laborers to security of tenure demands that an employer may be permitted to terminate the services of an employee only under conditions allowed by and with due process of law. Under the circumstances obtaining in this case, the irresistible conclusion is that the termination of private respondents' services was unjust and illegal, as to justify their reinstatement and entitlement to backwages for three years. WHEREFORE, this petition is hereby DISMISSED and petitioner is ordered to reinstate private respondents to their former positions at the time of their dismissal, or if such reinstatement is not possible, to substantially equivalent positions, without loss of seniority rights and other privileges appertaining thereto; and to pay private respondents three (3) years backwards, from October 18, 1977 without qualification or deduction. In the event that reinstatement is not possible due to the supervenience of events which prevent the same, petitioner is ordered to further pay private respondents, more as a vindication of a right and less as indemnification of a loss, separation pay equivalent to one (1) month's salary based on their monthly salaries as of October 17, 1977. SO ORDERED. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 87700 June 13, 1990 SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES, MARCELA PURIFICACION, ET AL., petitioners, vs. HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, and SAN MIGUEL CORPORATION, respondents. Romeo C. Lagman for petitioners. Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents. MELENCIO-HERRERA, J.: Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil action for certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March 1989 in Civil Case No. 57055 of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als." Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig. for short), for its part, defends the Writ on the ground of absence of any employer-employee relationship between it and the contractual workers employed by the companies Lipercon Services, Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of personality to represent said workers for purposes of collective bargaining. The Solicitor General agrees with the position of SanMig. The antecedents of the controversy reveal that: Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are independent contractors duly licensed by the Department of Labor and Employment (DOLE). SanMig entered into those contracts to maintain its competitive position and in keeping with the imperatives of efficiency, business expansion and diversity of its operation. In said contracts, it was expressly understood and agreed that the workers employed by the contractors were to be paid by the latter and that none of them were to be deemed employees or agents of SanMig. There was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and SanMig on the other. Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized representative of the monthly paid rank-and-file employees of SanMig with whom the latter executed a Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary, probationary, or contract employees and workers are excluded from the bargaining unit and, therefore, outside the scope of this Agreement." In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and D'Rite workers had signed up for union membership and sought the regularization of their employment with SMC. The Union alleged that this group of employees, while appearing to be contractual workers supposedly independent contractors, have been continuously working for SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither casual nor seasonal as they are performing work or activities necessary or desirable in the usual business or trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting situation. It was then demanded that the employment status of these workers be regularized. On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex D, Petition). On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F, Petition). As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2) notices of strike were consolidated and several conciliation conferences were held to settle the dispute before the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G, Petition). Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers in various SMC plants and offices. On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to enjoin the Union from: a. representing and/or acting for and in behalf of the employees of LIPERCON and/or D'RITE for the purposes of collective bargaining; b. calling for and holding a strike vote, to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; c. inciting, instigating and/or inducing the employees or workers of LIPERCON and D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the bargaining unit referred to in the CBA,...; d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; e. using the employees or workers of LIPERCON AND D'RITE to man the strike area and/or picket lines and/or barricades which the defendants may set up at the plants and offices of plaintiff within the bargaining unit referred to in the CBA ...; f. intimidating, threatening with bodily harm and/or molesting the other employees and/or contract workers of plaintiff, as well as those persons lawfully transacting business with plaintiff at the work places within the bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and egress from, the work places within the bargaining unit referred to in the CBA .., to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex H, Petition) Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining Order for the purpose of maintaining the status quo, and set the application for Injunction for hearing. In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of lack of jurisdiction over the case/nature of the action, which motion was opposed by SanMig. That Motion was denied by respondent Judge in an Order dated 11 April 1989. After several hearings on SanMig's application for injunctive relief, where the parties presented both testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned Order (Annex A, Petition) granting the application and enjoining the Union from Committing the acts complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer for whatever damages petitioners may sustain by reason thereof. In issuing the Injunction, respondent Court rationalized: The absence of employer-employee relationship negates the existence of labor dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance. The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What could be discerned is that there is no employer-employee relationship between plaintiff and the contractual workers employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding the question of the existence of employer-employee relationship has already been made. To finally resolve this dispute, the court must extensively consider and delve into the manner of selection and engagement of the putative employee; the mode of payment of wages; the presence or absence of a power of dismissal; and the Presence or absence of a power to control the putative employee's conduct. This necessitates a full-blown trial. If the acts complained of are not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the other hand, a writ of injunction does not necessarily expose defendants to irreparable damages. Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo) Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the implementation of the Injunction issued by respondent Court. The Union construed this to mean that "we can now strike," which it superimposed on the Order and widely circulated to entice the Union membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo). In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's plants and offices. On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and discussion on their other demands, such as wage distortion and appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement between SanMig and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be recalled effective 8 May 1989 to their former jobs or equivalent positions under the same terms and conditions prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return to work. After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required the parties to submit their memoranda simultaneously, the last of which was filed on 9 January 1990. The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the present controversy and properly issued the Writ of Preliminary Injunction to the resolution of that question, is the matter of whether, or not the case at bar involves, or is in connection with, or relates to a labor dispute. An affirmative answer would bring the case within the original and exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts. Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose out of a labor dispute and is directly connected or interwoven with the cases pending with the NCMB-DOLE, and is thus beyond the ambit of the public respondent's jurisdiction. That the acts complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the private respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo). On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of any labor dispute between itself and the Union. SanMig submits, in particular, that "respondent Court is vested with jurisdiction and judicial competence to enjoin the specific type of strike staged by petitioner union and its officers herein complained of," for the reasons that: A. The exclusive bargaining representative of an employer unit cannot strike to compel the employer to hire and thereby create an employment relationship with contractual workers, especially were the contractual workers were recognized by the union, under the governing collective bargaining agreement, as excluded from, and therefore strangers to, the bargaining unit. B. A strike is a coercive economic weapon granted the bargaining representative only in the event of a deadlock in a labor dispute over 'wages, hours of work and all other and of the employment' of the employees in the unit. The union leaders cannot instigate a strike to compel the employer, especially on the eve of certification elections, to hire strangers or workers outside the unit, in the hope the latter will help re-elect them. C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does not arise out of a labor dispute, is an abuse of right, and violates the employer's constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476, Rollo). We find the Petition of a meritorious character. A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning terms and conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee." While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless of whether the disputants stand in the proximate relationship of employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among others, the terms and conditions of employment or a "change" or "arrangement" thereof (ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of employer and employee. That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the working unit of SanMig. This matter definitely dwells on the working relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their employment and the arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute. Further, the Union also seeks to represent those workers, who have signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part, resists that Union demand on the ground that there is no employer-employee relationship between it and those workers and because the demand violates the terms of their CBA. Obvious then is that representation and association, for the purpose of negotiating the conditions of employment are also involved. In fact, the injunction sought by SanMig was precisely also to prevent such representation. Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied that the controversy below is directly connected with the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83). Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; — those are issues the resolution of which call for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably linked with those issues. The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not controlling as in that case there was no controversy over terms, tenure or conditions, of employment or the representation of employees that called for the application of labor laws. In that case, what the petitioning union demanded was not a change in working terms and conditions, or the representation of the employees, but that its members be hired as stevedores in the place of the members of a rival union, which petitioners wanted discharged notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis of those facts unique to that case, that such a demand could hardly be considered a labor dispute. As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the suit below was instituted on 6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear and decide the following cases involving all workers including "1. unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other terms and conditions of employment; ... and 5. cases arising from any violation of Article 265 of this Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the plain command of the law. The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not suffice to keep the case within the jurisdictional boundaries of regular Courts. That claim for damages is interwoven with a labor dispute existing between the parties and would have to be ventilated before the administrative machinery established for the expeditious settlement of those disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice (Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321). We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to determine whether it should contract out the performance of some of its work to independent contractors. However, 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 (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be placed in proper perspective and equilibrium. WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from taking any further action in Civil Case No. 57055 except for the purpose of dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor and Employment, docketed as NCMB-NCR-NS-0102189 and NCMB-NCR-NS-01-093-83. No costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 83207 August 5, 1991 MARCOPPER MINING CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, NATIONAL MINES & ALLIED WORKERS UNION, and HEIRS OF CALIXTO C. GAMBOA, PETRONIO Q. ROBLES, and ALFREDO B. RANCES, respondents. Gozon, Fernandez, Defensor & Associates for petitioner. Cesar M. Angeles for private respondents. CRUZ, J.:p The issue before us is the correct interpretation of the following provision in Article XII of the collective bargaining agreement between petitioner Marcopper Mining Corporation and private respondent National Mines and Allied Workers Union (NAMAWU): Section 1. The COMPANY agrees to grant a severance pay equivalent to twenty (20) days of base wage for every year of service to regular employees covered by this Agreement who leave the COMPANY other than for cause before qualifying for early retirement under the Retirement Plan as provided hereunder, provided, however, that an employee who voluntarily resigns from the COMPANY shall not be entitled to the benefits herein unless he has completed at least ten (10) years of services. Any dismissal on ground of illness shall be treated in accordance with the provisions of the Labor Code as amended and its implementing rules and regulations except that where an employee who has rendered ten (10) or more years of service to the COMPANY shall be entitled to the above benefit in lieu of what is provided for under the Labor Code. This case arose when three employees of the petitioner company, namely, Calixto Gamboa, Petronio Robles and Alfredo Rances, died after serving therein for 17, 12, and 18 years respectively. Pursuant to the CBA, the petitioner paid the heirs of the deceased employees the proceeds of the group life insurance plan and the cash value of their unused vacation and sick leaves, besides waiving certain amounts owing to it by Rances and Robles. The payments are itemized as follows. 1 ALFREDO B. RANCES (Group Life Insurance Proceeds) P45,700.00 (Vacation & Sick Leave Balances) 1,830.65 TOTAL P47,530.65 [The amount of 47,530.00 excludes the amount of P33,594.68 which represents share in medical expenses, Loyola Memorial Chapel charges and various cash advances which were written off and/or waived by Marcopper in favor of the heirs of the deceased]. PEDRONIO Q. ROBLES (Group Life Insurance Proceeds) -P37,400.00 (Vacation & Sick Leave Balances) -3,156.55 TOTAL -P46,556.55 [The amount of P40,556.55 excludes the amount of P15,739.55 representing various accounts of the deceased with Petitioner which was written off and/or waived by Marcopper in favor of the heirs of the Deceased]. CALIXTO C. GAMBOA (Group Life Insurance Proceeds) P44,600.00 (Vacation & Sick Leave Balances) 1,485.90 TOTAL P46,085.90 After receipt of the foregoing payments, the heirs executed separate quitclaims -releases in favor of the petitioner.2 Subsequently, NAMAWU demanded from the petitioner severance pay for the said deceased employees on the basis of the above-cited Article XII, Section 1, of the CBA. The demand was rejected and the union thereupon filed a complaint on behalf of the heirs for the recovery of the said claim. After considering the position papers of the parties, Labor Arbiter Cornelio Linsangan rendered a decision 3 on February 13, 1987, disposing as follows: WHEREFORE, judgment is hereby rendered ordering the respondent to pay the heirs of Calixto Gamboa, Alfredo Rances and Petronio Robles, all represented by herein complainant union, separation pay equivalent to twenty (20) days salary for every year of service. The rationale of the decision was explained thus: There is an apparent doubt on how Section I is to be interpreted. However, in consonance with Article 4, Preliminary Title, Labor Code, aforesaid provision should be interpreted in favor of Labor. Statutes granting rights to laborers are liberally construed. (Union Trust Co. vs. State, 24 LRA NS 111). But even in the absence of Article 4 of the Labor Code, which provides Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations shall be resolved in favor of labor. It would still appear that the claim of complainant union is founded on cogent logic. The granting by the company of severance pay to its employees who leave other than for cause is, in effect, a recognition of their services worthy of a reward. It can be easily discussed from subject provision the rationale and purpose for the granting of severance pay. The provision aims and intends to provide to the employee and his family financial security, at least during the period immediately following his leaving the company. It will, therefore, be absurd and self-defeating if subject CBA provision will be interpreted otherwise as it is precisely in case of death of the employee that his family needs most the severance benefit or assistance contemplated in the provision under consideration. Needless to state that by reason of death of Calixto Gamboa, Alfredo Rances and Petronio Robles the source of livelihood of their heirs was extinguished. It is only fitting that they should be rewarded in consideration of their length of service, which reward should be extended to their heirs in the form of severance pay. Anent the contention of respondent that the heirs have already received certain fringe benefits, it should be remembered those were proceeds emanating from insurance contracts. The severance pay being claimed does not spring from said insurance contract but by virtue of a separate provision of the CBA. Marcopper appealed to the NLRC, which affirmed the decision on October 8, 1987, and denied the motion for reconsideration on January 4, 1988. This petition for certiorari was then filed on the grounds that the NLRC committed grave abuse of discretion in its interpretation of the questioned CBA provision; in not taking into account the various amounts due to Marcopper from the deceased employees which it had written off as an act of compassion and in recognition of the deceased employees' non-entitlement to separation pay; and in disregarding the affidavits of release and quitclaim executed by the heirs of the deceased employees. The petitioner contends that the clause "who leave the company other than for cause" is clear and unambiguous, leaving no room for interpretation and calling for the application of Article 1370 of the Civil Code viz.: Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. xxxxxxxxx "Leave" should be given a literal or dictionary interpretation as signifying "willful departure with intent to remain away and not temporary absence with intention of returning." 4 The word should be understood as referring to a positive and voluntary act of departure and does not include death, which is involuntary. In fact, the Pilipino equivalent of the word "leave" as used in the official translation of the CBA, is "aalis." Assuming arguendo that the provision is not really clear, Article 4 of the Labor Code should not have been resorted to as this applies only in case of doubt in the interpretation and implementation of the provisions of the Labor Code and its implementing rules and regulations. The CBA being a contract, the rules embodied in the Civil Code on interpretation of contracts should govern. The intent of the parties should be ascertained by considering relevant provisions of the CBA on the retirement plan, the group life insurance, and bereavement assistance together with Section 1 in the light of Article 1374 of the Civil Code. 5 The petitioner further points out that aside from dismissal for cause, there are only three modes by which an employer-employee relationship is terminated, to wit, voluntary resignation, retirement and death of the employee. The Labor Code does not require separation pay in these instances, but the CBA corrects the omission by providing for these contingencies. Thus, death benefits consisting of bereavement assistance under Section 5 6and insurance proceeds are made available under the group life insurance plan 7 resignation benefits under Section 1, 8 and retirement benefits under Section 2, 9 of the CBA. The phrase "other than for cause" in reference to "early retirement taken in conjunction with "leave" connotes a voluntary, willful and intentional act of separation other than by retirement. If "other than for cause" were construed to include even death, which is involuntary, the reference to early retirement would be meaningless. The petitioner adds that insurance proceeds are given in case of death to help the family of the deceased. The grant of severance pay in case of death would extend the scope of the benefit beyond its purpose and defeat the intent behind the grant of funeral benefits, retirement benefits and severance coverage in the CBA. At any rate, it also maintains, the heirs of the deceased have executed quitclaims/releases which now bar them from demanding severance pay. For their part, the respondents argue that while resignation is a voluntary mode of separation, dismissal on the ground of illness is also provided for in the same Section 1 of Article XII although it is an involuntary mode of separation. Obviously, the word "leave" is used in its generic sense. To grant severance pay to an employee who is dismissed on the ground of illness and to exclude one who dies is to them "a myopic and constricted view". The provision should be interpreted under the spirit that gives life and not the letter that killeth. The respondents see no reason why the deceased employees should be placed at a disadvantage merely because they did not resign or were dismissed on the ground of illness after having served the company for more than 10 years. If a worker who willingly leaves the company is entitled to severance pay under the CBA, the same benefit should not be denied one, who, through no choice of his own, is separated from employment by reason of death. They also contend that the NLRC correctly applied not only Article 4 of the Labor Code but also Article 1702 of the Civil Code, which applies not only to labor legislation but also to labor contracts, thus: Article 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 private respondents point out that there is nothing in the CBA which states that insurance benefits and severance pay are mutually exclusive, unlike retirement and severance pay under Section 2, Article XII. Furthermore, it is the insurance company that pays the insurance benefits while it is the company or employer that is liable for severance benefits. Since the primary purpose of the CBA is to provide more benefits to workers, the contract would be rendered more effectual if the heirs were awarded both insurance benefits and severance pay. The Solicitor General takes the side of the respondents. He maintains that the clause "who leave the company other than for cause" literally includes death as a manner of leaving the company because death terminates an existing employer-employee relationship. It cannot be validly argued that the leave-taking mentioned in the phrase refers exclusively to voluntary resignation because the very same article is made applicable also to any employee who is dismissed on the ground of illness. As long as he has rendered at least 10 years of service, the employee shall also be entitled to the benefits therein provided although his separation is not voluntary. If the parties to the CBA had really intended a restrictive interpretation of the provision in question, they would have so provided clearly and placed the word voluntarily before the word "leave." These are the arguments of the parties. Now for the opinion of the Court. The title of Article XII is SEVERANCE, RETIREMENT AND LIFE INSURANCE. Severance is "the termination of contractual association (as employment)." 10 Severance pay is defined as "an allowance usually based on length of service that is payable to an employee on severance except usually in case of disciplinary discharge" 11 or as "compensation due an employee upon the severance of his employment status with the employer. 12 The word leave is defined in Black's Law Dictionary as "Willful departure with intent to remain away" and in Webster's as to "desert, abandon, forsake, to terminate association with, quit the service of " Given these definitions, the petitioner argues that death should not be included in the term as this is an involuntary mode of separation that is covered by another provision of the CBA. This is a correct conclusion insofar as the word is used in the basic rule embodied in Section 1 of Article XII of the CBA declaring that those entitled to severance pay are regular employees "who leave" the COMPANY other than for cause before qualifying for early retirement under the Retirement Plan as provided hereunder, provided, however, that an employee who voluntarily resigns from the COMPANY shall not be entitled to the benefits herein unless he has completed at least ten (10) years of service. The trouble with the petitioner's contention is that it is a generalization that does not take into account the specific exception thereto that in fact has been clearly expressed also in the same provision of the CBA. The last part of the section reads as follows: ... Any dismissal on ground of illness shall be treated in accordance with the provisions of the Labor Code as amended and its implementing rules and regulations except that where an employee who has rendered ten (10) or more years of service to the COMPANY shall be entitled to the above benefit in lieu of what is provided for under the Labor Code. It would really seem strange, as the private respondent muses, that while an employee who is dismissed for illness may be entitled to severance pay under this exception, he will not be similarly benefited if he dies of that illness during his employment. Death, to be sure, is an involuntary mode of separation. We agree with NAMAWU however, that it is covered by the situation contemplated in the above-cited exception, which, if it is to be reasonably interpreted, should include the aggravation of illness. The exception, as we understand it, is intended to provide some measure of relief to the dismissed employee, on the justification that it is not his fault that he is ill and he needs some financial assistance for his cure and treatment. As it is clearly not the worker's fault either if he should die in the course of his employment, nor can it be suggested that he needs in this case less financial assistance, we see no reason why he should be treated differently. This interpretation need not be based on the rule that doubts on the meaning of labor contracts should be resolved in favor of labor. It is dictated, as we see it, by ordinary logic and by the obvious intendment behind the above-quoted exception. The Court will concede that without this exception, the general rule preceding it would have defeated the private respondents' claim for severance pay. But as the petitioner itself correctly contends, the section must be read in its entirety and, indeed, in relation to the rest of the CBA. It is also our belief, and we so hold, that the quitclaims/releases, while concededly made voluntarily, did not constitute a knowing waiver of the severance pay because the heirs of the deceased employees were not aware at that time that they were entitled to such pay. We are not persuaded that the insurance benefits should be discounted because they do not come from the insurance company and not the petitioner itself. On the contrary, the private respondents should be properly grateful therefor because these would not have been available at all if the petitioner had not paid the premiums on the group insurance of its employees, who have not contributed a single centavo for such payment. Nevertheless, we agree that the insurance benefits do not exclude the severance pay as there is no clear agreement on that point nor has the petitioner pointed to any law or rule clearly providing for such exclusion. The Court is convinced that the petitioner has acted in complete good faith in this case and that its position is based on a sincere and even reasonable interpretation of the section in question. To repeat, it should have operated in its favor were it not for the exception embodied therein as we now interpret it. We must add that Marcopper should be commended for its treatment of the heirs of the deceased employees, particularly Rances and Robles, whose respective accountabilities in the amounts of P33,594.68 and P15,739.55 it voluntarily and graciously wrote off as a gesture of good will and generosity. This speaks well of its attitude toward its loyal employees, who for their part appear to be appreciative enough albeit they cannot yield on this question before us. That is their right, of course. At any rate, the Court is gratified over the intelligent and respectful debate of the parties in their pleadings which it found especially noteworthy for the lack of acrimony and bellicoseness that usually taint adversarial discussions, particularly in labor disputes. We rule for the private respondents, but not completely. The Court feels that if the private respondents are to be given severance pay, as we here hold, it is only fair that the amounts earlier condoned by the petitioner be also taken into account in the final disposition of the conflicting claims. Thus, even as we disregard the quitclaims of the private respondents on the ground that these did not cover the severance pay, so too must we in fairness deduct such severance pay from the amounts the petitioner has waived in good faith. The record shows that Robles is entitled to severance pay of P11,508.00 for 12 years service and Rances to P21,096,00 for 18 years service, and that they had outstanding liabilities of P15,739.55 and P33,594.68, respectively, that were condoned by the petitioner. Their severance pay should now be charged against their indebtedness, leaving a balance of P4,231.55 against Robles and P12,498.68, respectively, still due to the petitioner. These are the amounts only that are deemed waived by the petitioner after full settlement of the severance pay of the deceased employees. WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED, but with the modification that the severance pay due to private respondents is deemed paid and covered by the amounts previously condoned by the petitioner. The severance pay owing to Calixto Gamboa shall be paid in full. No costs. SO ORDERED. Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 120319 October 6, 1995 LUZON DEVELOPMENT BANK, petitioner, vs. ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR, respondents. ROMERO, J.: From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank Employees (ALDBE) arose an arbitration case to resolve the following issue: Whether or not the company has violated the Collective Bargaining Agreement provision and the Memorandum of Agreement dated April 1994, on promotion. At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB. On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows: WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement provision nor the Memorandum of Agreement on promotion. Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same. In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the arbitrator as final and binding. Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary. Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party. 1The essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by the government. Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution. 2Ideally, arbitration awards are supposed to be complied with by both parties without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de bound by said arbitrator's decision. In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the CBA or company personnel policies. 3 For this purpose, parties to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the National Conciliation and Mediation Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other labor disputes. On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated cases: . . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. xxx xxx xxx It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National Labor Relations Commission (NLRC) for that matter. 4 The state of our present law relating to voluntary arbitration provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders." 6 Hence, while there is an express mode of appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision of a voluntary arbitrator. Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme Court itself on a petition for certiorari, 7 in effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it. In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasijudicial agency but independent of, and apart from, the NLRC since his decisions are not appealable to the latter. 10 Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise: xxx xxx xxx (B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. xxx xxx xxx Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry Arbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-quoted provision. An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or "instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act or function is performed. 13 The word "instrumentality," with respect to a state, contemplates an authority to which the state delegates governmental power for the performance of a state function. 14 An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the court,16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17 The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that, although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129. A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein. This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities 18 not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter. In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none be specified, the Regional Trial Court for the province or city in which one of the parties resides or is doing business, or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made, apply to the court having jurisdiction for an order confirming the award and the court must grant such order unless the award is vacated, modified or corrected. 19 In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the Court of Appeals petitions of this nature for proper disposition. ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals. SO ORDERED.