CALALANG VS. WILLIAMS 1.

Whether the rules and regulations promulgated by economic stability of all the competent elements of
G.R. No. 47800 December 2, 1940 the respondents pursuant to the provisions of society, through the maintenance of a proper
Petitioner: Maximo Calalang Respondents: A.D. Williams, Et al. Commonwealth Act NO. 548 constitute an unlawful economic and social equilibrium in the interrelations
Ponente: Laurel,J: inference with legitimate business or trade and of the members of the community, constitutionally,
Facts: abridged the right to personal liberty and freedom through the adoption of measures legally justifiable,
of locomotion? or extra-constitutionally, through the exercise of
Maximo Calalang in his capacity as a private citizen and a
2. Whether the rules and regulations complained of powers underlying the existence of all governments
taxpayer of Manila filed a petition for a writ of prohibition
infringe upon the constitutional precept regarding on the time-honored principles of salus populi
against the respondents. It is alleged in the petition that the
the promotion of social justice to insure the well- estsuprema lex.
National Traffic Commission, in its resolution of July 17, 1940,
being and economic security of all the people? Social justice must be founded on the recognition of
resolved to recommend to the Director of the Public Works
and to the Secretary of Public Works and Communications Held: the necessity of interdependence among divers and
that animal-drawn vehicles be prohibited from passing along 1. No. The promulgation of the Act aims to promote diverse units of a society and of the protection that
Rosario Street extending from Plaza Calderon de la Barca to safe transit upon and avoid obstructions on national should be equally and evenly extended to all groups
Dasmariñas Street from 7:30Am to 12:30 pm and from 1:30 roads in the interest and convenience of the public. as a combined force in our social and economic life,
pm to 530 pm; and along Rizal Avenue extending from the In enacting said law, the National Assembly was consistent with the fundamental and paramount
railroad crossing at Antipolo Street to Echague Street from 7 prompted by considerations of public convenience objective of the state of promoting health, comfort
am to 11pm for a period of one year from the date of the and welfare. It was inspired by the desire to relieve and quiet of all persons, and of bringing about “the
opening of the Colgante Bridge to traffic. The Chairman of the congestion of traffic, which is a menace to the public greatest good to the greatest number.”
National Traffic Commission on July 18, 1940 recommended safety. THE PETITION IS DENIED WITH COSTS AGAINST THE
to the Director of Public Works with the approval of the Public welfare lies at the bottom of the promulgation PETITIONER.
Secretary of Public Works the adoption of the measure of the said law and the state in order to promote the
proposed in the resolution aforementioned in pursuance of general welfare may interfere with personal liberty,
the provisions of the Commonwealth Act No. 548 which with property, and with business and occupations.
authorizes said Director with the approval from the Secretary Persons and property may be subject to all kinds of
of the Public Works and Communication to promulgate rules restraints and burdens in order to secure the general
and regulations to regulate and control the use of and traffic comfort, health, and prosperity of the State. To this
on national roads. On August 2, 1940, the Director fundamental aims of the government, the rights of
recommended to the Secretary the approval of the the individual are subordinated.
recommendations made by the Chairman of the National Liberty is a blessing which should not be made to
Traffic Commission with modifications. The Secretary of Public prevail over authority because society will fall into
Works approved the recommendations on August 10, 1940. anarchy. Neither should authority be made to prevail
The Mayor of Manila and the Acting Chief of Police of Manila over liberty because then the individual will fall into
have enforced and caused to be enforced the rules and slavery.
regulation. As a consequence, all animal-drawn vehicles are The paradox lies in the fact that the apparent
not allowed to pass and pick up passengers in the places curtailment of liberty is precisely the very means of
above mentioned to the detriment not only of their owners insuring its preserving.
but of the riding public as well. 2. No. Social justice means the promotion of the
Issue: welfare of all the people, the adoption by the
Government of measures calculated to insure ALALAYAN VS NATIONAL POWER CORP

Page 1 of 20
24 SCRA 172 claims: the challenged provision is a violation of the The liberty relied upon is not freedom of the mind not
constitutional requirement that a bill cannot embrace more freedom of the person but the liberty to contract, associated
FACTS: than one subject to be expressed in its title. with business activities, which may be subjected in the interest
NPC was given the power (pursuant to Sec 3, RA 3043, of general welfare under the police power, to restrictions valid
approved June 17, 1961, entitled: An act to further amend ISSUE: in character and wide ranging in scope as long as due process
Commonwealth Act No 120, as amended by RA2641) to W/N PETITIONER ALALAYAN IS DEPRIVED OF THE LIBERTY is observed. There is no controlling and precise definition of
require franchise holders the conditions that:1. They shall not TOCONTRACT WITHOUT DUE PROCESS OF LAW due process. It furnishes though a standard to which
realize a net profit of more than 12% annually of its governmental action should conform in order that deprivation
investments plus two-month operating expenses2. NPC can of life, liberty, or property, in each appropriate case, be valid.
HELD:
renew all existing contracts with franchise holders for the Standard of due process: responsiveness to the supremacy of
The amendment does not constitute a rider problem. The rider
supply of electric power and energy NPC has for some years reason and obedience to the dictates of justice.
provision is aimed against the evils of so-called omnibus bills
now been supplying, distributing, servicing and selling electric as logrolling legislation as well as surreptitious or
power and energy at fixed rate schedules to the latter who unconsidered enactments. Where the subject of a bill is
have for some years now been and still are, legally engaged in limited to a particular matter, the lawmakers along with the
re-supplying, redistributing, re-servicing and reselling the said people should be informed of the subject of proposed
electric power and energy to individual customers within the legislative measures. This constitutional provision thus
coverage of their respective franchises. Reference was made precludes the insertion of riders in legislation, a rider being a
to the particular contracts petitioners entered into with provision not germane to the subject matter of the bill which
respondent NPC, the contracts to continue indefinitely unless is not the case here. Petitioner Alalayan is not deprived of the
and until either party would give to the other 2 years previous liberty to contract without due process of the law. For in the
notice in writing of its intention to terminate the same. On face of a constitutional provision that allows deprivation of
June 18, 1960, an act authorizing the increase of the capital liberty, including liberty of contract, as long as due process is
stock of NPC to P100Mtook effect. On June 17, 1961, it was observed, the alleged nullity of a legislative act of this
alleged that the challenged legislation became a law, character can only be shown if in fact there is such a denial.
purportedly to increase further the authorized capital stock, The Constitution, in view of its commitment to the claims of
but including the alleged rider provision. NPC approved a rate property, would not be able to cope effectively with the
of at least 17.5% the effectivity of which, was at first deferred problems of poverty and misery that unfortunately afflict so
to Nov 1, 1962, then subsequently to Jan 15, 1963, with the many of our people, is not susceptible to the indictment that
threat that in case petitioners would fail to sign the revised the government is impotent to take the necessary remedial
contract proving for the increased rate, NPC would then cease measures.
to supply, distribute and service electric power and energy to There is the clause on the promotion of social justice to ensure
them. On Mar 21, 1963, the lower court, considering that there the wellbeing and economic security of all people, as well as
was no sufficient ground for the issuance of the writ of the pledge of protection to labor with the specific authority to
preliminary injunction the petitioner claims, dismissed the regulate the relations between landowners and tenants,
same. It was alleged in the facts that Alalayan did purchase between labor and capital. The police power as an attribute to VIRGILIO AGABON, et al. v. NLRC
and take power and energy as follows: 60 kilowatts and of not promote the common welfare would be diluted considerably
less than 140,000 kilowatt-hours in any contract year at the [G.R. No. 158693 November 17, 2004]
of its reach and effectiveness if on the mere plea that the
rate of P120 per kilowatt per year, payable in 12 equal monthly FACTS
liberty to contract would be restricted, the statute complained
installments plus an energy charge of P0.013 per kilowatt Virgilio and Jenny Agabon worked for respondent Riviera
of may be characterized as a denial of due process.
hour, payable on the basis of monthly delivery. Petitioner Home Improvements, Inc. as gypsum and cornice installers
Page 2 of 20
from January 1992 until Feb 1999. Their employment was a. Serious misconduct or willful disobedience of the and present evidence or rebut the evidence
terminated when they were dismissed for allegedly lawful orders of the employer or his duly authorized presented against him (if he so requests).
abandoning their work. Petitioners Agabon then filed a case representative in connection with the employee’s c. A written notice of termination indicating that
of illegal dismissal. The LA ruled in favor of the spouses and work grounds have been established to justify his
ordered Riviera to pay them their money claims. The NLRC b. Gross and habitual neglect of the by the employee termination upon due consideration of all
reversed the LA, finding that the Agabons were indeed guilty of his duties (includes abandonment) circumstances. In this case, Riviera failed to notify
of abandonment. The CA modified the LA by ruling that there c. Fraud or willful breach of the trust reposed by the the Agabons of their termination to their last known
was abandonment but ordering Riviera to pay the Agabons’ employer or his duly authorized representative to addresses. Hence, they violated the procedural
money claims. The arguments of both parties are as follows: the employee. requirement laid down by the law in the termination
The Agabons claim, among others that Riviera violated the d. Commission of a crime or offense by the employee of employees.
requirements of notice and hearing when the latter did not against the person of the employer or any member 3. No. Constitutional due process is that provided under
send written letters of termination to their addresses. Riviera of his immediate family or his duly authorized the Constitution, which involves the protection of the
admitted to not sending the Agabons letters of termination to representative. individual against governmental oppression and the
their last known addresses because the same would be futile, e. Any other causes analogous to the foregoing. assurance of his rights In civil, criminal and administrative
as the Agabons do not reside there anymore. However, it also proceedings; statutory due process is that found in the
claims that the Agabons abandoned their work. More than To establish abandonment, two elements must be present: Labor Code and its Implementing Rules and protects the
once, they subcontracted installation works for other a. The unjustified failure of the employee to report individual from being unjustly terminated without just or
companies. They already were warned of termination if the for work. authorized cause after notice and hearing. The two are
same act was repeated, still, they disregarded the warning. b. A clear intention to sever e-e relationship, similar in that they both have two aspects: substantive
manifested by overt acts. due process and procedural due process. However, they
ISSUES differ in that under the Labor Code, the first one refers to
1. Whether the Agabons were illegally dismissed. Here, the Agabons were frequently absent from work for the valid and authorized causes of employment
2. Whether Riviera violated the requirements of notice and having performed installation work for another company, termination, while the second one refers to the manner
hearing. despite prior warning given by Riviera. This clearly establishes of dismissal. A denial of statutory due process is not the
3. Is the violation of the procedural requirements of notice an intention to sever the e-e relationship between them, and same as a denial of Constitutional due process for
and hearing for termination of employees a violation of which constitutes abandonment. reasons enunciated in Serrano v. NLRC.
the Constitutional due process? 4. The dismissal is valid, but Riviera should pay nominal
4. What are the consequences of violating the procedural damages to the Agabons in vindication of the latter for
2. Yes. While the employer has the right to expect good
requirements of termination? violating their right to notice and hearing. The penalty is
performance, diligence, good conduct and loyalty from
in the nature of a penalty or indemnification, the amount
its employees, it also has the duty to provide just
dependent on the facts of each case, including the nature
compensation to his employees and to observe the
of gravity of offense of the employer. In this case, the
procedural requirements of notice and hearing in the
Serrano doctrine was re-examined. First, in the Serrano
RULING: termination of his employees. Procedure of termination
case, the dismissal was upheld, but it was held to be
Valid dismissal but violation of statutory due process = (Omnibus Rules Implementing the Labor Code):
ineffectual (without legal effect). Hence, Serrano was still
payment of nominal damages (P30, 000) & balance of 13th a. A written notice to the employee specifying the
entitled to the payment of his back wages from the time
Month pay, etc. grounds for termination and giving the employee
of dismissal until the promulgation of the court of the
1. No. There was just cause for their dismissal, i.e., reasonable opportunity to be heard.
existence of an authorized cause. Further, he was entitled
abandonment. Art. 282specifies the grounds for just b. A hearing where the employee is given the
to his separation pay as mandated under Art.283.
dismissal, to wit: opportunity to respond to the charges against him

Page 3 of 20
 The ruling is unfair to employers and has the danger of
the following consequences:

a. The encouragement of filing frivolous suits even by

notorious employees who were justly dismissed but
were deprived of statutory due process; they are
rewarded by invoking due process.
b. It would create absurd situations where there is just
or authorized cause but a procedural infirmity
invalidates the termination, i.e. an employee who
became a criminal and threatened his co-workers’
lives, who fled and could not be found.
c. It could discourage investments that would
generate employment in the economy.
Second, the payment of back wages is unjustified as only
illegal termination gives the employee the right to be paid full
back wages. When the dismissal is valid or upheld, the
employee has no right to back wages.
ADDITIONAL NOTES:
1. Dismissals based on just causes: acts or omissions
attributable to the employee; no right to claim back
wages or to pay separation pay (separation pay is
subject to exception, i.e. if termination is not based
on serious misconduct or a conduct reflecting the
moral depravity of a person, separation pay may be
granted by reason of social justice)
Dismissals based on authorized causes: involve grounds
provided under the Labor Code; employee (and DOLE) is
entitled the payment of separation pay (redundancy and
installation of labor-saving devices: 1 month pay or 1
month/yr. of service, whichever is higher; retrenchment and
closure or cessation of business: 1month pay or ½ month per
year of service, whichever is higher)
Illegal termination: employee is entitled to the payment of
full back wages as well as reinstatement without loss of
seniority rights and other privileges, inclusive of allowances
and other monetary claims from the time compensation was
withheld until reinstatement; if reinstatement is not possible,
separation pay shall be given.

Page 4 of 20
 YES. Employees have a right to participate in the deliberation to work, transfer employees from one department to another,
of matters which may affect their rights and the formulation to promote, demote, discipline, suspend or discharge
of policies relative thereto and one such matter is the employees for just cause; to lay-off employees for valid and
formulation of a code of discipline. It was only on March 2, legal causes, to introduce new or improved methods or
1989, with the approval of RA 6715, amending Art 211 of the facilities or to change existing methods or facilities and the
Labor Code, that the law explicitly considered it a State policy right to make and enforce Company rules and regulations to
PAL INC V. NLRC 225 SCRA 301 (1993)
"to ensure the participation of workers in decision and policy- carry out the functions of management. The exercise by
making processes affecting their rights, duties and welfare." management of its prerogative shall be done in a just,
FACTS:
However, even in the absence of said clear provision of law, reasonable, humane and/or lawful manner. Such provision in
On March 15, 1985, PAL completely revised its 1966 Code of
the exercise of management prerogatives was never the CBA may not be interpreted as cession of employees'
Discipline. The Code was circulated among the employees and
considered boundless. Thus, in Cruz vs. Medina, it was held rights to participate in the deliberation of matters which may
was immediately implemented, and some employees were
that management's prerogatives must be without abuse of affect their rights and the formulation of policies relative
subjected to the disciplinary measures. The Philippine Airlines
discretion. thereto. And one such matter is the formulation of a code of
Employees Association (PALEA) filed a complaint before the
discipline. Industrial peace cannot be achieved if the
NLRC contending that PAL, by its unilateral implementation of
In San Miguel Brewery Sales Force Union vs. Ople, we upheld employees are denied their just participation in the discussion
the Code, was guilty of unfair labor practice, specifically
the company's right to implement a new system of of matters affecting their rights.
Paragraphs E and G of Art 249 and Art 253 of the Labor Code.
distributing its products, but gave the following caveat: So Disposition Petition is DISMISSED.
PALEA alleged that copies of the Code had been circulated in
long as a company's management prerogatives are exercised
limited numbers; that being penal in nature the Code must
in good faith for the advancement the employer's interest and
conform to the requirements of sufficient publication, and
not for the purpose of defeating or circumventing the rights
that the Code was arbitrary, oppressive, and prejudicial to the
of the employee, under special laws or under valid
rights of the employees. It prayed that implementation of the
agreements, this Court will uphold them. All this points to the
Code be held in abeyance; that PAL should discuss the
conclusion that the exercise of managerial prerogatives is not
substance of the Code with PALEA; that employees dismissed
unlimited. It is circumscribed by limitations found in law, a
under the Code reinstated and their cases subjected to further
CBA, or the general principles of fair play and justice.
hearing; and that PAL be declared guilty of unfair labor
Moreover, it must be duly established that the prerogative
practice and be ordered to pay damages. PAL filed a Motion
being invoked is clearly a managerial one.
to Dismiss, asserting its prerogative as an employer to
prescribe rules and regulations regarding employees' conduct
in carrying out their duties and functions, and alleging that it Verily, a line must be drawn between management
had not violated the CBA or any provision of the Labor Code. prerogatives regarding business operations per se and those
which affect the rights of the employees. In treating the latter,
management should see to it that its employees are at least
ISSUE:
properly informed of its decisions or modes of action. PAL
WON the formulation of a Code of Discipline among
asserts that all its employees have been furnished copies of
employees is a shared responsibility of the employer and the
the Code, the LA and the NLRC found to the contrary, which
employees.
finding, is entitled to great respect. PALEA recognizes the right
of the Company to determine matters of management policy
HELD: and Company operations and to direct its manpower.
Management of the Company includes the right to organize,
plan, direct and control operations, to hire, assign employees
Page 5 of 20
 Loan to coops -denied granted
The issues raised in the motions for reconsideration had
GHSIP, HMP already been passed upon by the Court in the January 27,
and Housing loans -granted up to P60,000.00 granted 1999 decision. No new arguments were presented for
Signing bonus -denied granted consideration of the Court. Nonetheless, certain matters will
be considered herein, particularly those involving the amount
of wages and the retroactivity of the Collective Bargaining
[G.R. No. 127598. February 22, 2000] Union leave -40 days (typo error) 30 days
Agreement (CBA) arbitral awards.

MANILA ELECTRIC COMPANY vs. Hon. Secretary of Labor High voltage/pole -not apply to those who are members of a
Petitioner warns that if the wage increase of P2,200.00 per
Leonardo Quisumbing and Meralco Employees and team not exposed to the risk
month as ordered by the Secretary is allowed, it would simply
Workers Association (MEWA) Collectors -no need for cash bond, no need to reduce quota
pass the cost covering such increase to the consumers
and MAPL
through an increase in the rate of electricity. This is a non
YNARES_SANTIAGO, J.:
sequitur. The Court cannot be threatened with such a
CBU -exclude confidential employees include
misleading argument. An increase in the prices of electric
In the Decision promulgated on January 27, 1999, the Court current needs the approval of the appropriate regulatory
disposed of the case as follows: Union security -maintenance of membership closed shop government agency and does not automatically result from a
mere increase in the wages of petitioners’ employees. Besides,
"WHEREFORE, the petition is granted and the orders of public Contracting out -no need to consult union consult first this argument presupposes that petitioner is capable of
respondent Secretary of Labor dated August 19, 1996 and meeting a wage increase. The All Asia Capital report upon
December 28, 1996 are set aside to the extent set forth above. All benefits -existing terms and conditions all terms which the Union relies to support its position regarding the
The parties are directed to execute a Collective Bargaining wage issue cannot be an accurate basis and conclusive
Agreement incorporating the terms and conditions contained determinant of the rate of wage increase. Section 45 of Rule
Retroactivity -Dec 28, 1996-Dec 27, 199(9) from Dec 1, 1995
in the unaffected portions of the Secretary of Labors orders of 130 Rules of Evidence provides:
August 19, 1996 and December 28, 1996, and the
Dissatisfied with the Decision, some alleged members of
modifications set forth above. The retirement fund issue is "Commercial lists and the like. - Evidence of statements of
private respondent union (Union for brevity) filed a motion for
remanded to the Secretary of Labor for reception of evidence matters of interest to persons engaged in an occupation
intervention and a motion for reconsideration of the said
and determination of the legal personality of the Meralco contained in a list, register, periodical, or other published
Decision. A separate intervention was likewise made by the
retirement fund."[1] compilation is admissible as tending to prove the truth of any
supervisors union (FLAMES[2]) of petitioner corporation
alleging that it has bona fide legal interest in the outcome of relevant matter so stated if that compilation is published for
The modifications of the public respondent’s resolutions use by persons engaged in that occupation and is generally
the case.[3] The Court required the "proper parties" to file a
include the following: used and relied upon by them therein."
comment to the three motions for reconsideration but the
Solicitor-General asked that he be excused from filing the
January 27, 1999 decision Secretarys resolution comment because the "petition filed in the instant case was Under the afore-quoted rule, statement of matters contained
granted" by the Court.[4] Consequently, petitioner filed its in a periodical may be admitted only "if that compilation is
Wages -P1,900.00 for 1995-96 P2,200.00 own consolidated comment. An "Appeal Seeking Immediate published for use by persons engaged in that occupation and
Reconsideration" was also filed by the alleged newly elected is generally used and relied upon by them therein." As
Xmas bonus -modified to one month 2 months president of the Union.[5] Other subsequent pleadings were correctly held in our Decision dated January 27, 1999, the cited
Retirees -remanded to the Secretary granted filed by the parties and intervenors. report is a mere newspaper account and not even a

Page 6 of 20
commercial list. At most, it is but an analysis or opinion which determination" because collective bargaining disputes On the other hand, the Union argues that the award should
carries no persuasive weight for purposes of this case as no particularly those affecting the national interest and public retroact to such time granted by the Secretary, citing the 1993
sufficient figures to support it were presented. Neither did service "requires due consideration and proper balancing of decision of St Lukes.[16]
anybody testify to its accuracy. It cannot be said that the interests of the parties to the dispute and of those who
businessmen generally rely on news items such as this in their might be affected by the dispute."[10] The Court takes judicial "Finally, the effectivity of the Order of January 28, 1991, must
occupation. Besides, no evidence was presented that the notice that the new amounts granted herein are significantly retroact to the date of the expiration of the previous CBA,
publication was regularly prepared by a person in touch with higher than the weighted average salary currently enjoyed by contrary to the position of petitioner. Under the circumstances
the market and that it is generally regarded as trustworthy and other rank-and-file employees within the community. It of the case, Article 253-A cannot be properly applied to herein
reliable. Absent extrinsic proof of their accuracy, these reports should be noted that the relations between labor and capital case. As correctly stated by public respondent in his assailed
are not admissible.[6] In the same manner, newspapers is impressed with public interest which must yield to the Order of April 12, 1991 dismissing petitioners Motion for
containing stock quotations are not admissible in evidence common good.[11] Neither party should act oppressively Reconsideration---
when the source of the reports is available.[7] With more against the other or impair the interest or convenience of the
reason, mere analyses or projections of such reports cannot public.[12] Besides, matters of salary increases are part of Anent the alleged lack of basis for the retroactivity provisions
be admitted. In particular, the source of the report in this case management prerogative.[13] awarded, we would stress that the provision of law invoked by
can be easily made available considering that the same is the Hospital, Article 253-A of the Labor Code, speaks of
necessary for compliance with certain governmental On the retroactivity of the CBA arbitral award, it is well to recall agreements by and between the parties, and not arbitral
requirements. that this petition had its origin in the renegotiation of the awards . . .
parties 1992-1997 CBA insofar as the last two-year period
Nonetheless, by petitioners own allegations, its actual total thereof is concerned. When the Secretary of Labor assumed "Therefore, in the absence of a specific provision of law
net income for 1996 was P5.1 billion.[8] An estimate by the All jurisdiction and granted the arbitral awards, there was no prohibiting retroactivity of the effectivity of arbitral awards
Asia financial analyst stated that petitioners net operating question that these arbitral awards were to be given issued by the Secretary of Labor pursuant to Article 263(g) of
income for the same year was about P5.7 billion, a figure retroactive effect. However, the parties dispute the reckoning the Labor Code, such as herein involved, public respondent is
which the Union relies on to support its claim. Assuming period when retroaction shall commence. Petitioner claims deemed vested with plenary and discretionary powers to
without admitting the truth thereof, the figure is higher than that the award should retroact only from such time that the determine the effectivity thereof."
the P4.171 billion allegedly suggested by petitioner as its Secretary of Labor rendered the award, invoking the 1995
projected net operating income. The P5.7 billion which was decision in Pier 8 case[14] where the Court, citing Union of
In the 1997 case of Mindanao Terminal,[17] the Court applied
the Secretarys basis for granting the P2,200.00 is higher than Filipino Employees v. NLRC,[15] said:
the St. Lukes doctrine and ruled that:
the actual net income of P5.1 billion admitted by petitioner. It
would be proper then to increase this Courts award of "The assailed resolution which incorporated the CBA to be
"In St. Lukes Medical Center v. Torres, a deadlock also
P1,900.00 to P2,000.00 for the two years of the CBA award. For signed by the parties was promulgated on June 5, 1989, the
developed during the CBA negotiations between
1992, the agreed CBA wage increase for rank-and-file was expiry date of the past CBA. Based on the provision of Section
management and the union. The Secretary of Labor assumed
P1,400.00 and was reduced to P1,350.00, for 1993; further 253-A, its retroactivity should be agreed upon by the parties.
jurisdiction and ordered the retroaction of the CBA to the date
reduced to P1,150.00 for 1994. For supervisory employees, the But since no agreement to that effect was made, public
of expiration of the previous CBA. As in this case, it was alleged
agreed wage increase for the years 1992-1994 are P1,742.50, respondent did not abuse its discretion in giving the said CBA
that the Secretary of Labor gravely abused its discretion in
P1,682.50 and P1,442.50, respectively. Based on the foregoing a prospective effect. The action of the public respondent is
making his award retroactive. In dismissing this contention
figures, the P2,000.00 increase for the two-year period within the ambit of its authority vested by existing law."
this Court held:
awarded to the rank-and-file is much higher than the highest
increase granted to supervisory employees.[9] As mentioned
in the January 27, 1999 Decision, the Court does "not seek to "Therefore, in the absence of a specific provision of law
enumerate in this decision the factors that should affect wage prohibiting retroactive of the effectivity of arbitral awards
Page 7 of 20
issued by the Secretary of Labor pursuant to Article 263(g) of 253-A: "(I)f any such agreement is entered into beyond six Anent the 40-day union leave, the Court finds that the same
the Labor Code, such as herein involved, public respondent is months, the parties shal! agree on the duration of retroactivity is a typographical error. In order to avoid any confusion, it is
deemed vested with plenary and discretionary powers to thereof." In other words, the law contemplates retroactivity herein declared that the union leave is only thirty (30) days as
determine the effectivity thereof." whether the agreement be entered into before or after the granted by the Secretary of Labor and affirmed in the Decision
said six-month period. The agreement of the parties need not of this Court.
The Court in the January 27, 1999 Decision, stated that the be categorically stated for their acts may be considered in
CBA shall be "effective for a period of 2 years counted from determining the duration of retroactivity. In this connection, The added requirement of consultation imposed by the
December 28, 1996 up to December 27, 1999." Parenthetically, the Court considers the letter of petitioners Chairman of the Secretary in cases of contracting out for six (6) months or more
this actually covers a three-year period. Labor laws are silent Board and its President addressed to their stockholders, which has been rejected by the Court. Suffice it to say that the
as to when an arbitral award in a labor dispute where the states that the CBA "for the rank-and-file employees covering employer is allowed to contract out services for six months or
Secretary had assumed jurisdiction by virtue of Article 263 (g) the period December 1, 1995 to November 30, 1997 is still more. However, a line must be drawn between management
of the Labor Code shall retroact. In general, a CBA negotiated with the Supreme Court,"[20] as indicative of petitioners prerogatives regarding business operations per se and those
within six months after the expiration of the existing CBA recognition that the CBA award covers the said period. Earlier, which affect the rights of employees, and in treating the latter,
retroacts to the day immediately following such date and if petitioners negotiating panel transmitted to the Union a copy the employer should see to it that its employees are at least
agreed thereafter, the effectivity depends on the agreement of its proposed CBA covering the same period inclusive.[21] In properly informed of its decision or modes of action in order
of the parties.[18] On the other hand, the law is silent as to the addition, petitioner does not dispute the allegation that in the to attain a harmonious labor-management relationship and
retroactivity of a CBA arbitral award or that granted not by past CBA arbitral awards, the Secretary granted retroactivity enlighten the workers concerning their rights.[23] Hiring of
virtue of the mutual agreement of the parties but by commencing from the period immediately following the last workers is within the employers inherent freedom to regulate
intervention of the government. Despite the silence of the law, day of the expired CBA. Thus, by petitioners own actions, the and is a valid exercise of its management prerogative subject
the Court rules herein that CBA arbitral awards granted after Court sees no reason to retroact the subject CBA awards to a only to special laws and agreements on the matter and the fair
six months from the expiration of the last CBA shall retroact different date. The period is herein set at two (2) years from standards of justice.[24] The management cannot be denied
to such time agreed upon by both employer and the December 1, 1995 to November 30, 1997. the faculty of promoting efficiency and attaining economy by
employees or their union. Absent such an agreement as to a study of what units are essential for its operation. It has the
retroactivity, the award shall retroact to the first day after the On the allegation concerning the grant of loan to a ultimate determination of whether services should be
six-month period following the expiration of the last day of cooperative, there is no merit in the unions claim that it is no performed by its personnel or contracted to outside agencies.
the CBA should there be one. In the absence of a CBA, the different from housing loans granted by the employer. The While there should be mutual consultation, eventually
Secretarys determination of the date of retroactivity as part of award of loans for housing is justified because it pertains to a deference is to be paid to what management decides.[25]
his discretionary powers over arbitral awards shall control. basic necessity of life. It is part of a privilege recognized by the Contracting out of services is an exercise of business
employer and allowed by law. In contrast, providing seed judgment or management prerogative.[26] Absent proof that
It is true that an arbitral award cannot per se be categorized money for the establishment of the employees cooperative is management acted in a malicious or arbitrary manner, the
as an agreement voluntarily entered into by the parties a matter in which the employer has no business interest or Court will not interfere with the exercise of judgment by an
because it requires the interference and imposing power of legal obligation. Courts should not be utilized as a tool to employer.[27] As mentioned in the January 27, 1999 Decision,
the State thru the Secretary of Labor when he assumes compel any person to grant loans to another nor to force the law already sufficiently regulates this matter.[28]
jurisdiction. However, the arbitral award can be considered as parties to undertake an obligation without justification. On the Jurisprudence also provides adequate limitations, such that
an approximation of a collective bargaining agreement which contrary, it is the government that has the obligation to render the employer must be motivated by good faith and the
would otherwise have been entered into by the parties.[19] financial assistance to cooperatives and the Cooperative Code contracting out should not be resorted to circumvent the law
The terms or periods set forth in Article 253-A pertains does not make it an obligation of the employer or any private or must not have been the result of malicious or arbitrary
explicitly to a CBA. But there is nothing that would prevent its individual.[22] actions.[29] These are matters that may be categorically
application by analogy to an arbitral award by the Secretary determined only when an actual suit on the matter arises.
considering the absence of an applicable law. Under Article
Page 8 of 20
WHEREFORE, the motion for reconsideration is partially The contracting out business or services is an exercise of Ruling:
granted and the assailed Decision is modified as follows: (1) business judgment if it is for the promotion of efficiency and The Supreme Court ruled that the respondent is entitled to an
the arbitral award shall retroact from December 1, 1995 to attainment of economy. Management must be motivated by overtime pay. The contention of the petitioner that since the
November 30, 1997; and (2) the award of wage is increased good faith and contracting out should not be done to respondent’s monthly salary is higher than the minimum
from the original amount of One Thousand Nine Hundred circumvent the law. Provided there was no malice or that it wage, it is already commensurate of the 4 hours excess of
Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the was not done arbitrarily, the courts will not interfere with the work rendered by the respondent. The Supreme Court held
years 1995 and 1996. This Resolution is subject to the exercise of this judgment. that the fact that one’s salary is higher than the minimum
monetary advances granted by petitioner to its rank-and-file wage does not in any way offset the other benefits that are
employees during the pendency of this case assuming such due to the employees, in the absence of an agreement to the
advances had actually been distributed to them. The assailed PAL Employees Savings and Loan Association, Inc. vs. contrary.
Decision is AFFIRMED in all other respects. NLRC To consider the overtime pay of the respondent included in
August 22, 1996 G.R. No. 105963 his monthly salary would be in contravention of the rule
SO ORDERED. Panganiban, J. against non-diminution of benefits and a violation of the
Labor Code since it prescribes a certain manner on how
DIGEST overtime pay is included. Moreover, the Supreme Court found
Facts:
Manila Electric v. Quisumbing that contrary to what the petitioner aver, as shown in the
The respondent used to be a security guard under the employ
G.R. No. 127598 February 22, 2000 computation of the petitioner itself, the monthly salary of the
of the petitioner company. He works for 12 hours a day and is
respondent is only a basic salary which is exclusive of all the
receiving a monthly salary. He was then dismissed by the
other benefits that the respondent is to receive.
Facts: petitioner company. Because of this, the respondent filed a
With regard to the petitioner’s second contention that
Members of the Private respondent union were dissatisfied complaint with the Labor Arbiter for the payment of his
overtime pay. The Labor Arbiter ruled that the respondent is there is already a perfected contract, hence the terms and
with the terms of a CBA with petitioner. The parties in this case
entitled to an overtime pay. The NLRC affirmed the decision conditions imposed therein binds the parties to the contract,
were ordered by the Sec. of Labor to execute a collective
of the Labor Arbiter. Hence, the current petition. The the Supreme Court held that while such contention has the
bargaining agreement (CBA) wherein. The CBA allowed for the
petitioner contends that the fact that the monthly salary of the weight and force of law, it is still subject to certain exception.
increase in the wages of the employees concerned. The
petitioner is higher than the minimum wage provided by law The general right to contract is subject to a limitation that such
petitioner argues that if such increase were allowed, it would
is already compensatory of the excess of 4 hours of work terms and conditions must not be contrary to law, public
pass off such to the consumers.
rendered by the said employee. It argues that the salary of the order, public policy, morals and good customs. Employment
petitioner already includes the payment for the excess of 4 contracts are imbued with public interest and are therefore
Issue: W/N matters of salary are part of management
hours of work rendered by the respondent. It also contends subject to the police power of the state. The subject contract
prerogative
that since there is a meeting of the minds between the in the case at bar is contrary to labor laws. Therefore, not
respondent and the petitioner, there is already a perfected binding to the parties of the case.
RULING: Yes. There is no need to consult the Secretary of
contract which means that the parties are bound by their
Labor in cases involving contracting out for 6 months or more
agreements.
as it is part of management prerogative. However, a line must
be drawn with respect to management prerogatives on
business operations per se and those which affect the rights Issue:
of the workers. Employers must see to it that that employees Whether or not the respondent is entitled to an overtime pay.
are properly informed of its decisions to attain harmonious
labor relations and enlighten the worker as to their rights.

Page 9 of 20
G.R. No. 162839; OCTOBER 12, 2006; PANAGANIBAN, CJ; regular and not on a fixed term basis, as the job in the tenure.) According to Innodata, the present employment
INNODATA PHILIPPINES, INC., Petitioner, vs JOCELYN L. company is necessary and desirable to the usual business of contracts no longer contain the so-called “double-bladed”
QUEJADA-LOPEZ and ESTELLA G. NATIVIDAD-PASCUAL, the corporation. provisions previously found objectionable by the Court.
Respondents
SC: The Court has recognized the validity of fixed-term
Topics: (1) Right to Security of Tenure; (2) Relations between The petitioners alleged that like in the ruling in “Brent School” employment contracts in a number of cases, it has consistently
labor and capital, not merely contractual/ impressed with the respondents’ period of employment has already expired emphasized that when the circumstances of a case show that
public interest so their employment was also terminated. (Their contracts the periods were imposed to block the acquisition of security
Doctrines in Panganiban’s words: (1) A contract that misuses were only for a period of one year. of tenure, they should be struck down for being contrary to
a purported fixed-term employment to block the acquisition Labor Arbiter: Respondents were illegally dismissed. Petitioner law, morals, good customs, public order or public policy.
of tenure by the employees deserves to be struck down for to reinstate them to their firmer position without loss of
being contrary to law, morals, good customs, public order and seniority rights, or to a substantially equivalent position, and But Sec. 7.4 of the present employment contract clearly shows
public policy. (2) A contract of employment is impressed with to pay them jointly and severally, back wages computed from an intent to circumvent the security of tenure. Said section
public interest. For this reason, provisions of applicable the time they were illegally dismissed up to the date of this provides: “the EMPLOYER is hereby granted the right to pre-
statutes are deemed written into the contract. Hence, the decision in the amount of P112, 535.28 each. Further, terminate this Contract within the first three (3) months of its
“parties are not at liberty to insulate themselves and their [petitioners] are ordered to pay, jointly and severally, duration upon failure of the EMPLOYEE to meet and pass the
relationships from the impact of labor laws and regulations by [respondents] attorney’s fees in the amount equivalent to 10% qualifications and standards set by the EMPLOYER and made
simply contracting with each other.” Moreover, in case of of their respective awards; and all other claims were dismissed known to the EMPLOYEE prior to execution hereof. Failure of
doubt, the terms of a contract should be construed in favor of for lack of merit. NLRC: Reversed. Complaint Dismissed for the EMPLOYER to exercise its right hereunder shall be without
labor. lack of merit. There was a fixed term in the contract they prejudice to the automatic termination of the EMPLOYEE’s
agreed upon therefore, their dismissal at the end of it was employment upon the expiration of this Contract or
FACTS: valid. CA: Reversed NLRC. The fixed-term contract prepared cancellation thereof for other causes provided herein and by
Innodata Philippines, Inc., is engaged in the encoding/data by the petitioner was a crude attempt to circumvent law.” It is evident that his paragraph actually refers to a
conversion business. It employs encoders, indexers, respondents’ right to security of tenure. probationary period. This shows the intent of the employer to
formatters, programmers, quality/quantity staff, and others, to ISSUE: WON the alleged fixed-term employment contracts avoid the regularization of the employees
maintain its business and do the job orders of its clients. entered into by petitioner and respondents are valid?
Respondents Estrella G. Natividad and Jocelyn L. Quejada (TOPIC 2)
were employed as formatters by the petitioner from March 4, HELD: NO. The petition lacks merit. In the interpretation of contracts, obscure words and
1997, until their separation on March 3, 1998. provisions shall not favor the party that caused the obscurity.
RATIO:
Respondents claim that that their job was necessary and (TOPIC 1) “Art. 1700. The relations between capital and labor are not
desirable to the usual business of the company which is data Petitioner: The regularity of the employment of respondents merely contractual. They are so impressed with public interest
processing/conversion and that their employment is regular does not depend on whether their task may be necessary or that labor contracts must yield to the common good.
pursuant to Article 280 of the Labor Code, [respondents] filed desirable in the usual business of the employer. It argues that Therefore, such contracts are subject to the special laws on
a complaint for illegal dismissal and for damages as well as for the use of fixed-term employment contracts has long been labor unions, collective bargaining, strikes and lockouts,
attorney’s fees against Innodata Phils., Incorporated, Innodata recognized by this Court. Villanueva v NLRC and Servidad v closed shop, wages, working conditions, hours of labor and
Processing Corporation and Todd Solomon. They also invoked NLRC are not applicable to this case.(In these 2 cases, the similar subjects.”
the doctrine in Villanueva v NLRC where the nature of Court struck down the employment contracts served by
employment at Petitioner Corporation was already ruled to be Innodata for circumventing the employee’s right to security of
Page 10 of 20
 The SC cited Pakistan Airlines v Ople: “Indeed, a contract of CIRTEK EMPLOYEES LABOR UNION-FEDERATION OF FREE its motion for reconsideration, the Court resolved to give it
employment is impressed with public interest. For this reason, WORKERS - versus - CIRTEK ELECTRONICS, INC., due course. As Almelor v. RTC of Las Pias, et al. [2] restates:
provisions of applicable statues are deemed written into the G.R. No. 190515
contract. Hence, the “parties are not at liberty to insulate June 6, 2011
themselves and their relationships from the impact of labor RESOLUTION
laws and regulations by simply contracting with each other.” Generally, an appeal taken either to the Supreme Court or the
And Phil Federation Cooperatives v NLRC: Moreover, in case CA by the wrong or inappropriate mode shall be dismissed.
CARPIO MORALES, J.:
of doubt, the terms of a contract should be construed in favor This is to prevent the party from benefiting from ones neglect
of labor. and mistakes. However, like most rules, it carries certain
This resolves the motion for reconsideration and
supplemental motion for reconsideration filed by respondent, exceptions. After all, the ultimate purpose of all rules of
The claims of petitioner that the nature of its business (service procedures is to achieve substantial justice as expeditiously as
Cirtek Electronics, Inc., of the Courts Decision dated
contractor so it relies on availability of job orders from its possible. (emphasis and underscoring supplied)
November 15, 2010. Respondent-movant avers that
clients) limits it to enter into fixed-term employment contracts
petitioner, in filing the petition for certiorari under Rule 65,
is untenable. The SC says that: “By their very nature, businesses Respecting the attribution of error to the Court in ruling on a
availed of the wrong remedy, hence, the Court should have
exist and thrive depending on the continued patronage of question of fact, it bears recalling that a QUESTION OF FACT
dismissed the petition outright. It goes on to aver that the
their clients. Thus, to some degree, they are subject to the arises when the doubt or difference arises as to the truth or
Court erred in resolving a factual issue whether the August 24,
whims of clients who may decide to discontinue patronizing falsehood of alleged facts,[3] while a QUESTION OF LAW exists
2005 Memorandum of Agreement (MOA) was validly entered
their products or services for a variety of reasons. Being when the doubt or difference arises as to what the law is on a
into, which is not the office of a petition for certiorari.
inherent in any enterprise, this entrepreneurial risk may not be certain set of facts.
Respondent-movant further avers that the MOA[1] signed by
used as an excuse to circumvent labor laws; otherwise, no
the remaining officers of petitioner Union and allegedly The present case presents the primordial issue of whether the
worker could ever attain regular employment status.
ratified by its members should have been given credence by Secretary of Labor is empowered to give arbitral awards in the
the Court. exercise of his authority to assume jurisdiction over labor
WHEREFORE, the Petition is DENIED, and the assailed Decision disputes.
Furthermore, respondent-movant maintains that the
and Resolution are AFFIRMED. Costs against petitioner. Ineluctably, the issue involves a determination and application
Secretary of Labor cannot insist on a ruling beyond the
compromise agreement entered into by the parties; and that, of existing law, the provisions of the Labor Code, and
as early as February 5, 2010, petitioner Union had already filed prevailing jurisprudence. Intertwined with the issue, however,
with the Department of Labor and Employment (DOLE) a is the question of validity of the MOA and its ratification which,
resolution of disaffiliation from the Federation of Free as movant correctly points out, is a question of fact and one
Workers resulting in the latters lack of personality to represent which is not appropriate for a petition for review on certiorari
the workers in the present case. under Rule 45. The rule, however, is not without exceptions,
The motion is bereft of merit. viz:
Respondent indeed availed of the wrong remedy of certiorari This rule provides that the parties may raise only questions of
under Rule 65. Due, however, to the nature of the case, one law, because the Supreme Court is not a trier of facts.
involving workers wages and benefits, and the fact that Generally, we are not duty-bound to analyze again and weigh
whether the petition was filed under Rule 65 or appeal by the evidence introduced in and considered by the tribunals
certiorari under Rule 45 it was filed within 15 days (the below. When supported by substantial evidence, the findings
reglementary period under Rule 45) from petitioners receipt of fact of the CA are conclusive and binding on the parties and
of the resolution of the Court of Appeals Resolution denying are not reviewable by this Court, unless the case falls under
any of the following recognized exceptions:

Page 11 of 20
(1) When the conclusion is a finding grounded entirely on to the rule that only questions of law may be dealt with in an applied in a very rigid and technical sense in labor cases.
speculation, surmises and conjectures; appeal by certiorari under Rule 45. Hence, the Labor Arbiter is not precluded from accepting and
(2) When the inference made is manifestly mistaken, absurd As discussed in the Decision under reconsideration, the then evaluating evidence other than, and even contrary to, what is
or impossible; Acting Secretary of Labor Manuel G. Imson acted well within stated in the CBA. (emphasis and underscoring supplied)
(3) Where there is a grave abuse of discretion; his jurisdiction in ruling that the wage increases to be given On the contention that the MOA should have been given
(4) When the judgment is based on a misapprehension of are P10 per day effective January 1, 2004 and P15 per day credence because it was validly entered into by the parties,
facts; effective January 1, 2005, pursuant to his power to assume the Court notes that even those who signed it expressed
(5) When the findings of fact are conflicting; jurisdiction under Art. 263 (g)[4] of the Labor Code. reservations thereto. A CBA (assuming in this case that the
(6) When the Court of Appeals, in making its findings, went MOA can be treated as one) is a contract imbued with public
beyond the issues of the case and the same is contrary to the interest. It must thus be given a liberal, practical and realistic,
admissions of both appellant and appellee; rather than a narrow and technical construction, with due
While an arbitral award cannot per se be categorized as an consideration to the context in which it is negotiated and the
(7) When the findings are contrary to those of the trial court;
agreement voluntarily entered into by the parties because it purpose for which it is intended.[9]
(8) When the findings of fact are conclusions without citation
requires the interference and imposing power of the State As for the contention that the alleged disaffiliation of the
of specific evidence on which they are based;
thru the Secretary of Labor when he assumes jurisdiction, the Union from the FFW during the pendency of the case resulted
(9) When the facts set forth in the petition as well as in the
award can be considered as an approximation of a collective in the FFW losing its personality to represent the Union, the
petitioners' main and reply briefs are not disputed by the
bargaining agreement which would otherwise have been same does not affect the Courts upholding of the authority of
respondents; and
entered into by the parties. Hence, it has the force and effect the Secretary of Labor to impose arbitral awards higher than
(10) When the findings of fact of the Court of Appeals are
of a valid contract obligation between the parties.[5] what was supposedly agreed upon in the MOA. Contrary to
premised on the supposed absence of evidence and
respondents assertion, the unavoidable issue of disaffiliation
contradicted by the evidence on record. (emphasis and
bears no significant legal repercussions to warrant the reversal
underscoring supplied) In determining arbitral awards then, aside from the MOA,
of the Courts Decision.
courts considered other factors and documents including, as
in this case, the financial documents[6] submitted by En passant, whether there was a valid disaffiliation is a factual
In the present case, the findings of the Secretary of Labor and
respondent as well as its previous bargaining history and issue. Besides, the alleged disaffiliation of the Union from the
the appellate court on whether the MOA is valid and binding
financial outlook and improvements as stated in its own FFW was by virtue of a Resolution signed on February 23, 2010
are conflicting, the former giving scant consideration thereon,
website.[7] and submitted to the DOLE Laguna Field Office on March 5,
and the latter affording it more weight.
2010 two months after the present petition was filed on
As found by the Secretary of Labor, the MOA came about as a December 22, 2009, hence, it did not affect FFW and its Legal
result of the constitution, at respondents behest, of the Labor- The appellate courts ruling that giving credence to the
Centers standing to file the petition nor this Courts jurisdiction
Management Council (LMC) which, he reminded the parties, Pahayag and the minutes of the meeting which were not
to resolve the same.
should not be used as an avenue for bargaining but for the verified and notarized would violate the rule on parol evidence
purpose of affording workers to participate in policy and is erroneous. The parol evidence rule, like other rules on
evidence, should not be strictly applied in labor cases. At all events, the issue of disaffiliation is an intra-union dispute
decision-making. Hence, the agreements embodied in the
Interphil Laboratories Employees Union-FFW v. Interphil which must be resolved in a different forum in an action at the
MOA were not the proper subject of the LMC deliberation or
Laboratories, Inc. [8] teaches: instance of either or both the FFW and the Union or a rival
procedure but of CBA negotiations and, therefore, deserving
labor organization, not the employer.
little weight.
The appellate court, held, however, that the Secretary did not [R]eliance on the parol evidence rule is misplaced. In labor
cases pending before the Commission or the Labor Arbiter, An intra-union dispute refers to any conflict between and
have the authority to give an arbitral award higher than what
the rules of evidence prevailing in courts of law or equity are among union members, including grievances arising from any
was stated in the MOA. The conflicting views drew the Court
not controlling. Rules of procedure and evidence are not violation of the rights and conditions of membership, violation
to re-evaluate the facts as borne by the records, an exception
Page 12 of 20
of or disagreement over any provision of the unions (m) violations of the rights of legitimate labor organizations, the Court, nor for respondent to determine, but for the Union
constitution and by-laws, or disputes arising from chartering except interpretation of collective bargaining agreements; and FFW to resolve on their own pursuant to their principal-
or disaffiliation of the union. Sections 1 and 2, Rule XI of (n) Such other disputes or conflicts involving the rights to agent relationship.
Department Order No. 40-03, Series of 2003 of the DOLE self-organization, union membership and collective WHEREFORE, the motion for reconsideration of this Courts
enumerate the following circumstances as inter/intra-union bargaining Decision of November 15, 2010 is DENIED.
disputes, viz: (1) Between and among legitimate labor organizations;
(2) Between and among members of a union or workers CIRTEK EMPLOYEES LABOR UNION V. CIRTEK
RULE XI association. ELECTRONICS,
G.R. NO. 190515 | NOVEMBER 15, 2010
INTER/INTRA-UNION DISPUTES AND SECTION 2. Coverage. Other related labor relations disputes
TOPIC: COLLECTIVE BARGAINING
shall include any conflict between a labor union and the
PONENTE: CARPIO MORALES
OTHER RELATED LABOR RELATIONS DISPUTES employer or any individual, entity or group that is not a labor
organization or workers association. This includes: (1)
cancellation of registration of unions and workers CASE LAW/ DOCTRINE:
SECTION 1. Coverage. - Inter/intra-union disputes shall
include: associations; and (2) a petition for interpleader.[10] (emphasis
supplied) EMERGENCY RECIT:

(a) cancellation of registration of a labor organization filed

by its members or by another labor organization; Indeed, as respondent-movant itself argues, a local union may FACTS:
(b) conduct of election of union and workers association disaffiliate at any time from its mother federation, absent any 1. Respondent, an electronics firm in Laguna
officers/nullification of election of union and workers showing that the same is prohibited under its constitution or Technopark, had a CBA with Union petitioner from Jan 1 2001-
association officers; rule. Such, however, does not result in it losing its legal Dec 31 2005.
personality altogether. Verily, Anglo-KMU v. Samahan Ng 2. Prior to the 3rd year of the CBA, parties renegotiated
(c) audit/accounts examination of union or workers
Mga Manggagawang Nagkakaisa Sa Manila Bay Spinning its economic provisions but failed to settle (on wage increase).
association funds;
Mills At J.P. Coats[11] enlightens: 3. Union declared the bargaining deadlock and filed a
(d) deregistration of collective bargaining agreements;
A local labor union is a separate and distinct unit primarily Notice of Strike with the NCMB while (2) Company filed a
(e) validity/invalidity of union affiliation or disaffiliation;
designed to secure and maintain an equality of bargaining Notice of Lockout
(f) validity/invalidity of acceptance/non-acceptance for
power between the employer and their employee-members. 4. During conciliation proceedings, Company placed
union membership;
A local union does not owe its existence to the federation with several union officers (prex, VO, Sec, Chair of BoD) under
(g) validity/invalidity of impeachment/expulsion of union
which it is affiliated. It is a separate and distinct voluntary preventive suspension for allegedly spearheading a boycott of
and workers association officers and members;
association owing its creation to the will of its members. The overtime work
(h) validity/invalidity of voluntary recognition; mere act of affiliation does not divest the local union of its 5. Officers were dismissed propting Union to file
(i) opposition to application for union and CBA registration; own personality, neither does it give the mother federation another Notice of Strike which was after conciliation meetings
(j) violations of or disagreements over any provision in a the license to act independently of the local union. It only CONVERTED TO VOLUNTARY ARBITRATION.
union or workers association constitution and by-laws; gives rise to a contract of agency where the former acts in 6. Dismissal of officers =legal; Union appeal
(k) disagreements over chartering or registration of labor representation of the latter. (emphasis and underscoring
7. Settlement of the CBA was on deadlock, UNION went
organizations and collective bargaining agreements; supplied)
on STRIKE on June 20 2005.
(l) violations of the rights and conditions of union or Whether then, as respondent claims, FFW went against the will
8. June 23: By ORDER, Sec of Labor assumed
workers association membership; and wishes of its principal (the member-employees) by
JURISDICTION over controversy and issued a RETURN TO
pursuing the case despite the signing of the MOA, is not for
WORK ORDER which was complied with.
Page 13 of 20
9. Before the Sec of Labor could rule, COMPANY deadlock or that the MOA could have been concluded before CA in brushing aside of the "Paliwanag" and the minutes of
created a Labor Management Council (LMC) through which it representatives of the Secretary of Labor. the meeting that resulted in the conclusion of the MOA
concluded with the remaining officers of petitioner a MOA because they were not verified and notarized, thus violating,
providing for daily wage increases of ₱6.00 per day effective ISSUE(S): so the CA reasoned, THE RULES ON PAROL EVIDENCE, DOES
Jan 1, 2004 and ₱9.00 per day effective Jan 1, 2005. 1. W/N Sec of Labor is authorized to give an award NOT LIE. Like any other rule on evidence, parol evidence
10. Union submitted the MOA via Motion and higher than that agreed upon in the MOA should NOT BE STRICTLY APPLIED in labor cases. Reliance on
Manifestation to the Sec of Labor, alleging that the remaining 2. W/N the MOA was entered into and ratified by the the parol evidence rule is MISPLACED.
officers signed the MOA under respondent’s assurance that remaining officers of petitioner under the condition, which In labor cases pending before the Commission or the LA: Rules
should the Sec order a higher award of wage increase, was not incorporated in the MOA, that respondent would of Evidence
Comapny would comply. honor the Secretary of Labor’s award in the event that it is • Not controlling
11. By Order, Sec of Labor resolved the CBA deadlock by higher. • Not Applied in a very rigid and technical sense
awarding a wage increase of from ₱6.00 to ₱10.00 per day
effective Jan 1, 2004 and from ₱9.00 to ₱15.00 per day HELD: BOTH YES Hence LA is NOT precluded from accepting and evaluating
effective Jan 1, 2005, and adopting all other benefits as evidence other than what is stated in the CBA
Sec of Labor, in the exercise of his power to assume
embodied in the MOA.
jurisdiction under LC Art. 263 (g)11, may resolve all issues
12. Company filed an MR as Union’s VP submitted a involved in the controversy including the award of wage A Contract constitutes the law between the parties . Applied
"Muling Pagpapatibay ng Pagsang-ayon sa Kasunduan na increases and benefits. to the CBA of the parties, NOT to the MOA in which even the
may Petsang ika-4 ng Agosto 2005," union’s signatories had expressed reservations thereto. But
Arbitral award cannot per se be categorized as an agreement
a. Stating that the union members were waiving their voluntarily entered into by the parties because it requires the even assuming arguendo that the MOA is treated as a new
rights and benefits under the Secretary’s Decision. intervention and imposing power of the State thru the Sec of CBA, since it is imbued with public interest, it must be
13. MR Denied. Company filed a petition for certiorari Labor when he assumes jurisdiction, the arbitral award can be construed liberally and yield to the common good.
before the CA considered an approximation of a CBA which would otherwise Terms and Conditions of the CBA constitute the law between
14. CA: favor of Company; Sec of Labor = GAD in NOT have been entered into by the parties, hence, has the force the parties but IS NOT AN ORDINARY CONTACT (Laws on
respecting the MOA. It did not give credence to the minutes and effect of a valid contract obligation. Ordinary Contacts cannot be applied)
of the meeting that attended the forging of the MOA as it was Arbitral award was HIGHER than agreed upon in the MOA is A CBA, as a labor contract within the contemplation of Article
not verified, nor to the "Paliwanag" submitted by respondent of no moment. 1700 of the Civil Code which governs the relations between
union members explaining why they signed the MOA as it was The Sec, in resolving the CBA deadlock, is not limited to labor and capital, is NOT MERELY CONTRACTUAL IN NATURE
not notarized. considering the MOA as basis in computing the wage BUT IMPRESSED WITH PUBLIC INTEREST, thus, it must yield to
15. Union’s MR DENIED; Present petition was filed’ Dec increases. He could consider the (1) financial documents the common good.
of Labor’s award is in order, being in accord with the parties’ submitted by Company, (2) bargaining history and (3) Construed liberally rather than narrowly and technically, and
CBA history ─ Company having already granted ₱15.00 per Company’s financial outlook and improvements as stated in the courts must place a practical and realistic construction
day for 2001, ₱10.00 per day for 2002, and ₱10.00 per day for its website. upon it, giving due consideration to the context in which it is
2003, and that the Secretary has the power to grant awards It bears noting that since the filing and submission of the MOA negotiated and purpose which it is intended to serve.
higher than what are stated in the CBA. did not have the effect of divesting the Secretary of his Petition is GRANTED. CA Reversed.
PETIONER: Respecting the MOA, petitioner posits that it was jurisdiction, or of automatically disposing the controversy,
"surreptitiously entered into [in] bad faith," it having been then neither should the provisions of the MOA restrict the
forged without the assistance of the Federation of Free Secretary’s leeway in deciding the matters before him.
Workers or counsel, adding that respondent could have RULES OF EVIDENCE
waited for the Secretary’s resolution of the pending CBA

Page 14 of 20
[G.R. NO. 175170 - September 5, 2012] MORESCO II in Balingasag, Misamis Oriental (Balingasag sub-
office).10ςrνll In a Memorandum11ςrνll dated May 9, 2002, Cagalawan eventually stopped reporting for work. On July 1,
MISAMIS ORIENTAL II ELECTRIC SERVICE COOPERATIVE MORESCO II General Manager Amado B. Ke-e (Ke-e) 2002, he filed a Complaint for constructive dismissal before
(MORESCO II), Petitioner, v. VIRGILIO M. CAGALAWAN, transferred Cagalawan to Area I sub-office in Gingoog City, the Arbitration branch of the NLRC against MORESCO II and
Respondent. Misamis Oriental (Gingoog sub-office) as a member of the its officers, Ke-e and Danilo Subrado (Subrado), in their
disconnection crew. Said memorandum stated that the capacities as General Manager and Board Chairman,
DECISION transfer was done "in the exigency of the service." respectively.

DEL CASTILLO, J.: In a letter12ςrνll dated May 15, 2002, Cagalawan assailed his Proceedings before the Labor Arbiter
transfer claiming he was effectively demoted from his position
as head of the disconnection crew to a mere member thereof. When the Labor Arbiter, in an Order18ςrνll dated September
In labor cases, strict adherence with the technical rules is not
He also averred that his transfer to the Gingoog sub-office is 13, 2002, directed the parties to submit their respective
required.1ςrνll This literal policy, however, should still conform
inconvenient and prejudicial to him as it would entail verified position papers, only Cagalawan complied.19ςrνll He
with the rudiments of equitable principles of law. For instance,
additional travel expenses to and from work. He likewise alleged that his transfer was unnecessary and was made only
belated submission of evidence may only be allowed if the
sought clarification on what kind of exigency exists as to justify in retaliation for his having executed an affidavit in favor of a
delay is adequately justified and the evidence is clearly
his transfer and why he was the one chosen to be transferred. co-worker and against MORESCO II. In support of his
material to establish the party's cause.2ςrνllςrνll
contention, Cagalawan submitted a certification20ςrνll
In a Memorandum13ςrνll dated May 16, 2002, Ke-e explained executed by the Head of the disconnection crew of the
By this Petition for Review on Certiorari,3ςrνll petitioner
that Cagalawan s transfer was not a demotion since he was Gingoog sub-office, Teodoro Ortiz (Ortiz), attesting that the
Misamis Oriental II Electric Service Cooperative (MORESCO II)
holding the position of Disconnection Head only by mere said sub-office was not undermanned. In fact, when
assails the Decision4ςrνll dated July 26, 2005 of the Court of
designation and not by appointment. Ke-e did not, however, Cagalawan stopped working, no other employee was
Appeals (CA) in CA-G.R. SP No. 84991, which reversed and set
state the basis of the transfer but instead advised Cagalawan transferred or hired in his stead, a proof that there were
aside the Resolutions dated February 27, 20045ςrνll and April
to just comply with the order and not to question enough disconnection crew members in Gingoog sub-office
26, 20046ςrνll of the National Labor Relations Commission
management s legitimate prerogative to reassign him. who can very well handle the assigned tasks. Moreover,
(NLRC), and thereby reinstated the Labor Arbiter s
Cagalawan claimed that his transfer constituted a demotion
Decision7ςrνll dated September 30, 2003 pronouncing
In reply, Cagalawan claimed that he was transferred because from his position as Acting Head of the disconnection crew
respondent Virgilio M. Cagalawan (Cagalawan) to have been
he executed an Affidavit14ςrνll in support of his co-employee which he had occupied for almost 10 months. As such, he
constructively dismissed from employment. Also assailed is
Jessie Rances, who filed an illegal dismissal case against should be considered regular in that position and entitled to
the CA Resolution8ςrνll dated September 6, 2006 which
MORESCO II.15ςrνll He emphasized though that his action its corresponding salary.
denied MORESCO II s Motion for Reconsideration and granted
Cagalawan s Partial Motion for Reconsideration. was not an act of disloyalty to MORESCO II, contrary to what
was being accused of him. Nonetheless, Cagalawan still Cagalawan further alleged that his transfer from Balingasag to
reported for work at Gingoog sub-office on May 27, 2002 but Gingoog sub-office was tantamount to illegal constructive
Factual Antecedents
reserved his right to contest the legality of such dismissal for being prejudicial and inconvenient as he had to
transfer.16ςrνllςrνll spend an additional amount of P 197.0021ςrνll a day, leaving
On September 1, 1993, MORESCO II, a rural electric
him nothing of his salary. He therefore had no choice but to
cooperative, hired Cagalawan as a Disconnection Lineman on
Meanwhile and in view of Cagalawan s transfer, Ke-e issued stop working.
a probationary basis. On March 1, 1994 Cagalawan was
an order17ςrνll recalling the former s previous designation as
appointed to the same post this time on a permanent
Acting Head of the disconnection crew of the Balingasag sub- Aside from reinstatement and backwages, Cagalawan sought
basis.9ςrνll On July 17, 2001, he was designated as Acting
office. to recover damages and attorney s fees because to him, his
Head of the disconnection crew in Area III sub-office of
Page 15 of 20
transfer was effected in a wanton, fraudulent, oppressive or With respect to damages, the Labor Arbiter found Ke-e to certification issued by Ortiz should be considered as
malevolent manner. Apart from MORESCO II, he averred that have acted capriciously in effecting the transfer, hence, he incompetent since the latter is a mere disconnection crew.
Ke-e and Subrado should also be held personally liable for awarded moral and exemplary damages to Cagalawan.
damages since the two were guilty of bad faith in effecting his Attorney s fees was likewise adjudged in his favor. Moreover, Cagalawan s claim of additional expenses brought
transfer. He believed that Subrado had a hand in his arbitrary about by his transfer, specifically for meal and transportation,
transfer considering that he is the son-in-law of Subrado s The dispositive portion of the Decision reads:ςrαlαω deserves no appreciation at all since he would still incur these
opponent in the recent election for directorship in the electric expenses regardless of his place of assignment and also
cooperative. In fact, Subrado even asked a certain Cleopatra WHEREFORE, premises considered, judgment is rendered considering that he was provided with a rented motorcycle
Moreno Manuel to file a baseless complaint against him as declaring the transfer of complainant as tantamount to with fuel and oil allowance.
borne out by the declaration of Bob Abao in an constructive dismissal and ordering respondents to reinstate
affidavit.22ςrνllςrνll complainant to his position as collector in Balingasag, Misamis Also, MORESCO II intimated that it has no intention of
Oriental without loss of seniority rights and to pay removing Cagalawan from its employ especially since his
In view of MORESCO II s failure to file a position paper, complainant the following: father-in-law was its previous Board Member. In fact, it was
Cagalawan filed a Motion23ςrνll for the issuance of an order Cagalawan himself who committed an act of insubordination
to declare the case submitted for decision. This was granted 1. Backwages - P 189,096.00 when he abandoned his job.
in an Order24ςrνll dated March 14, 2003.
2. Exemplary damages - P 10,000.00
3. Moral damages - P 20,000.00 In his Reply29ςrνll to MORESCO II s Memorandum of Appeal,
On September 30, 2003, the Labor Arbiter rendered a Cagalawan averred that the latter cannot present any
4. Attorney's fee 10% - P 21,909.60
Decision25ςrνll declaring that Cagalawan s transfer evidence for the first time on appeal without giving any valid
GRAND TOTAL AWARD P 241,005.60
constituted illegal constructive dismissal. Aside from finding reason for its failure to submit its evidence before the Labor
SO ORDERED.
merit in Cagalawan s uncontroverted allegation that the Arbiter as provided under the NLRC rules. Further, the
transfer became grossly inconvenient for him, the Labor evidence sought to be presented by MORESCO II is not newly
Arbiter found no sufficient reason for his transfer and that the Proceedings before the National Labor Relations Commission
discovered evidence as to warrant its admission on appeal. In
same was calculated to rid him of his employment, impelled particular, he claimed that the May 8, 2002 letter of Engr.
by a vindictive motive after he executed an Affidavit in favor MORESCO II and Cagalawan both appealed the Labor Arbiter Canada should have been submitted at the earliest
of a colleague and against MORESCO II. s Decision. opportunity, that is, before the Labor Arbiter. MORESCO II s
In its Memorandum on Appeal,27ςrνll MORESCO II invoked failure to present the same at such time thus raises suspicion
Thus, the Labor Arbiter ordered Cagalawan s reinstatement to the liberal application of the rules and prayed for the NLRC to that the document was merely fabricated for the purpose of
the position of Collector and awarded him backwages from admit its evidence on appeal. MORESCO II denied that appeal. Moreover, Cagalawan claimed that if there was indeed
the date of his transfer on May 16, 2002 up to his actual Cagalawan s transfer was done in retaliation for executing an a request from the Area Manager of Gingoog sub-office for
reinstatement. However, the Labor Arbiter denied his prayer affidavit in favor of a co-worker. MORESCO II explained that additional personnel as required by the exigency of the
for regularization as head of the disconnection crew since the the transfer was in response to the request of the area service, such reason should have been mentioned in Ke-e s
period of six months which he claimed as sufficient to acquire manager in Gingoog sub-office for additional personnel in his May 16, 2002 Memorandum. In this way, the transfer would
regular status applies only to probationary employment. assigned area. To substantiate this, it submitted a letter28ςrνll appear to have a reasonable basis at the outset. However, no
Hence, the fact that he was acting as head of the dated May 8, 2002 from Gingoog sub-office Area Manager, such mention was made precisely because the transfer was
disconnection crew for 10 months did not entitle him to such Engr. Ronel B. Canada (Engr. Canada), addressed to Ke-e. In without any valid reason.
position on a permanent basis. Moreover, the decision to said letter, Engr. Canada requested for two additional
promote him to the said position should only come from the disconnection linemen in order to attain the collection quota
management. allocated in his area. MORESCO II then averred that as against
this letter of Engr. Canada who is a managerial employee, the
Page 16 of 20
Anent Cagalawan s partial appeal,30ςrνll he prayed that the Lineman in Balingasag, Misamis Oriental with further
decision be modified in that he should be reinstated as IN VIEW THEREOF, the petition is GRANTED. The Decision of modification that if reinstatement of petitioner is not feasible,
Disconnection Lineman and not as Collector. the Labor Arbiter is reinstated with the modification that if he should be paid separation pay in accordance with
reinstatement of petitioner is not feasible, he should be paid law.41ςrνll (Emphasis in the original.)
The NLRC, through a Resolution31ςrνll dated February 27, separation pay in accordance with law.
2004, set aside and vacated the Decision of the Labor Arbiter Issues
and dismissed Cagalawan s complaint against MORESCO II. SO ORDERED.
The NLRC admitted MORESCO II s evidence even if submitted MORESCO II thus filed this petition raising the following issues:
only on appeal in the interest of substantial justice. It then MORESCO II filed a Motion for Reconsideration38ςrνll (1) Was the respondent constructively dismissed by the
found said evidence credible in showing that Cagalawan s insisting that it may present evidence for the first time on petitioner?
transfer to Gingoog sub-office was required in the exigency of appeal as the NLRC is not precluded from admitting the same (2) Did the Court of Appeals err in reversing the NLRC?
the cooperative s business interest. It also ruled that the because technical rules are not binding in labor cases. Besides,
transfer did not entail a demotion in rank and diminution of of paramount importance is the opportunity of the other party MORESCO II insists that Cagalawan s transfer was necessary in
pay as to constitute constructive dismissal and thus upheld to rebut or comment on the appeal, which in this case, was order to attain the collection quota of the Gingoog sub-office.
the right of MORESCO II to transfer Cagalawan in the exercise afforded to Cagalawan. It contests the credibility of Ortiz s certification which stated
of its sound business judgment.
that there was no need for additional personnel in the
Cagalawan, for his part, filed a Partial Motion for Gingoog sub-office. According to it, Ortiz is not a managerial
Cagalawan filed a Motion for Reconsideration32ςrνll but the Reconsideration,39ςrνll seeking modification of the Decision employee but merely a disconnection crew who is not
same was denied by the NLRC in a Resolution33ςrνll dated by ordering his reinstatement to the position of Disconnection competent to make declarations in relation to MORESCO II s
April 26, 2004. Lineman instead of Collector. business needs. It likewise refutes Cagalawan s claim of
incurring additional expenses due to his transfer which caused
Proceedings before the Court of Appeals In a Resolution40ςrνll dated September 6, 2006, the CA him inconvenience. In sum, it claims that Cagalawan was not
maintained its ruling that MORESCO II s unexplained failure to constructively dismissed but instead had voluntarily
Cagalawan thus filed a Petition for Certiorari34ςrνll with the present evidence or submit a position paper before the Labor abandoned his job.
CA. In a Decision35ςrνll dated July 26, 2005, the CA found the Arbiter for almost 12 months from receipt of Cagalawan s
NLRC to have gravely abused its discretion in admitting position paper is intolerable and cannot be permitted. Hence, MORESCO II avers that the CA s ruling is not in accordance
MORESCO II s evidence, citing Section 3, Rule V of the NLRC it denied its Motion for Reconsideration. With respect to with jurisprudence on the matter of admitting evidence on
Rules of Procedure36ςrνll which prohibits the parties from Cagalawan s motion, the same was granted by the CA, viz: appeal in labor cases. It submits that the NLRC is correct in
making new allegations or cause of action not included in the accepting its evidence submitted for the first time on appeal
complaint or position paper, affidavits and other documents. Anent petitioner s Partial Motion for Reconsideration, We find in line with the basic precepts of equity and fairness. The NLRC
It held that what MORESCO II presented on appeal was not the same meritorious. The records of this case reveal that prior also correctly ruled in its favor after properly appreciating its
just an additional evidence but its entire evidence after the to his constructive dismissal, petitioner was a Disconnection evidence which had been rebutted and contradicted by
Labor Arbiter rendered a Decision adverse to it. To the CA, Lineman, not a Collector, assigned at Balingasag, Misamis Cagalawan.
MORESCO II s belated submission of evidence despite the Oriental. Hence, We modify the dispositive portion of Our July
opportunities given it cannot be countenanced as such 26, 2005 Decision, to read: Our Ruling
practice "defeats speedy administration of justice" and
The petition has no merit.
"smacks of unfairness."
IN VIEW THEREOF, the petition is GRANTED. The Decision of MORESCO II s belated submission of evidence cannot be
the Labor Arbiter is reinstated with modification that permitted.
The dispositive portion of the CA Decision reads:ςrαlαω petitioner be reinstated to his position as Disconnection
Page 17 of 20
Labor tribunals, such as the NLRC, are not precluded from The rule is that it is within the ambit of the employer s has not been met or could not be reached. It should have also
receiving evidence submitted on appeal as technical rules are prerogative to transfer an employee for valid reasons and submitted such other documents which would show the lack
not binding in cases submitted before them.43ςrνll However, according to the requirement of its business, provided that the of sufficient personnel in the area. Unfortunately, the area
any delay in the submission of evidence should be adequately transfer does not result in demotion in rank or diminution of manager s letter provides no more than bare allegations
explained and should adequately prove the allegations sought salary, benefits and other privileges.45ςrνll This Court has which deserve not even the slightest credit.
to be proven. always considered the management s prerogative to transfer
its employees in pursuit of its legitimate interests. But this When there is doubt between the evidence submitted by the
In the present case, MORESCO II did not cite any reason why prerogative should be exercised without grave abuse of employer and that submitted by the employee, the scales of
it had failed to file its position paper or present its cause discretion and with due regard to the basic elements of justice justice must be tilted in favor of the employee.47ςrνll This is
before the Labor Arbiter despite sufficient notice and time and fair play, such that if there is a showing that the transfer consistent with the rule that an employer s cause could only
given to do so. Only after an adverse decision was rendered was unnecessary or inconvenient and prejudicial to the succeed on the strength of its own evidence and not on the
did it present its defense and rebut the evidence of Cagalawan employee, it cannot be upheld. weakness of the employee s evidence.48ςrνll Thus, MORESCO
by alleging that his transfer was made in response to the II cannot rely on the weakness of Ortiz s certification in order
letter-request of the area manager of the Gingoog sub-office Here, while we find that the transfer of Cagalawan neither to give more credit to its own evidence. Self-serving and
asking for additional personnel to meet its collection quota. entails any demotion in rank since he did not have tenurial unsubstantiated declarations are not sufficient where the
To our mind, however, the belated submission of the said security over the position of head of the disconnection crew, quantum of evidence required to establish a fact is substantial
letter-request without any valid explanation casts doubt on its nor result to diminution in pay as this was not sufficiently evidence, described as more than a mere scintilla.49ςrνll "The
credibility, specially so when the same is not a newly proven by him, MORESCO II s evidence is nevertheless not evidence must be real and substantial, and not merely
discovered evidence. For one, the letter-request was dated enough to show that said transfer was required by the apparent." MORESCO II has miserably failed to discharge the
May 8, 2002 or a day before the memorandum for Cagalawan exigency of the electric cooperative s business interest. Simply onus of proving the validity of Cagalawan s transfer.
s transfer was issued. MORESCO II could have easily presented stated, the evidence sought to be admitted by MORESCO II is
the letter in the proceedings before the Labor Arbiter for not substantial to prove that there was a genuine business Clearly, not only was the delay in the submission of MORESCO
serious examination. Why it was not presented at the earliest urgency that necessitated the transfer. II s evidence not explained, there was also failure on its part to
opportunity is a serious question which lends credence to sufficiently support its allegation that the transfer of
Cagalawan s theory that it may have just been fabricated for Notably, the only evidence adduced by MORESCO II to Cagalawan was for a legitimate purpose. This being the case,
the purpose of appeal. support the legitimacy of the transfer was the letter-request MORESCO II s plea that its evidence be admitted in the
of Engr. Canada. However, this piece of evidence cannot in interest of justice does not deserve any merit.
It should also be recalled that after Cagalawan received the itself sufficiently establish that the Gingoog sub-office was
memorandum for his transfer to the Gingoog sub-office, he indeed suffering from losses due to collection deficiency so as Ke-e and Subrado, as corporate officers,
immediately questioned the basis thereof through a letter to justify the assignment of additional personnel in the area. could not be held personally liable for
addressed to Ke-e. If at that time there was already a letter- Engr. Canada s letter is nothing more than a mere request for Cagalawan s monetary awards.
request from the Gingoog area manager, Ke-e could have additional personnel to augment the number of
easily referred to or specified this in his subsequent disconnection crew assigned in the area. While it mentioned
In the Decision of the Labor Arbiter, the manager of
memorandum of May 16, 2002 which served as his response that the area s collection efficiency should be improved and
MORESCO II was held to have acted in an arbitrary manner in
to Cagalawan s queries about the transfer. However, the said that there is a shortage of personnel therein, it is, standing
effecting Cagalawan s transfer such that moral and exemplary
memorandum was silent in this respect. Nevertheless, alone, self-serving and thus cannot be considered as
damages were awarded in the latter s favor. However, the said
Cagalawan, for his part, faithfully complied with the transfer competent evidence to prove the accuracy of the allegations
Decision did not touch on the issue of bad faith on the part of
order but with the reservation to contest its validity precisely therein. MORESCO II could have at least presented financial
MORESCO II s officers, namely, Ke-e and Subrado.
because he was not adequately informed of its real basis. documents or any other concrete documentary evidence
Consequently, no pronouncement was made as to whether
showing that the collection quota of the Gingoog sub-office
Page 18 of 20
the two are also personally liable for Cagalawan s money G.R. No. L-45748 April 5, 1939 SECTION 1. It shall be unlawful for any person, firm or
claims arising from his constructive dismissal. corporation engaged in any business or enterprise in the
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant, Philippine Islands in any manner to force, compel, or oblige
Still, we hold that Ke-e and Subrado cannot be held personally vs. FRANCO VERA REYES, defendant-appellee. any laborer or employee employed by him to purchase
liable for Cagalawan s money claims. directly or indirectly merchandise, commodities or personal
property of any kind or nature from such person, firm or
Office of the Solicitor-General Tuason for appellant.
"Bad faith does not simply connote bad judgment or corporation, or to pay or cause to be paid the wages due to a
Benedicto M. Javier and Rivera and Valentin for appellee.
negligence; it imputes a dishonest purpose or some moral laborer or employee before and after pay day or part of said
obliquity and conscious doing of a wrong; a breach of sworn wages by means of tokens, tickets, chits or objects other than
IMPERIAL, J.:
duty through some motive or intent or ill will; it partakes of the legal tender currency of the Philippine Islands; or to
the nature of fraud."51ςrνll Here, although we agree with the negotiate directly or indirectly with the laborers or employees
The defendant was charged in the Court of First Instance of or with other persons, firms or corporations by means of chits,
Labor Arbiter that Ke-e acted in an arbitrary manner in
Manila by the assistant city fiscal with a violation of Act No. tickets or other objects which may present sums of money
effecting Cagalawan s transfer, the same, absent any showing
2549, as amended by Acts Nos. 3085 and 3958 The paid in advance to the former for wages that are not yet due
of some dishonest or wrongful purpose, does not amount to
information alleged that from September 9 to October 28, at the time of the issuance of such chits or tickets: Provided,
bad faith.
1936, and for the some time after, the accused, in his capacity That any contract between employer and laborer by virtue of
as president and general manager of the Consolidated Mines, which the latter binds himself to accept payment or any part
Suffice it to say that bad faith must be established clearly and having engaged the services of Severa Velasco de Vera as thereof in tokens, tickets or other objects and any other
convincingly as the same is never presumed.52ςrνll Similarly, stenographer, at an agreed salary of P35 a month willfully and contract between them, the direct or indirect purpose of
no bad faith can be presumed from the fact that Subrado was illegally refused to pay the salary of said stenographer which shall be to defeat the purposes of this Act. shall be null
the opponent of Cagalawan s father-in-law in the election for corresponding to the above-mentioned period of time, which and void: Provided, further, That the employer shall pay the
directorship in the cooperative. Cagalawan's claim that this was long due and payable, in spite of her repeated demands. salary of his laborers or employees on the fifteenth or last day
was one of the reasons why he was transferred is a mere The accused interposed a demurrer on the ground that the of every month, or on Saturday of every week with only two
allegation without proof. Neither does Subrado 's alleged facts alleged in the information do not constitute any offense, days extension, and the nonpayment of the salary within said
instruction to file a complaint against Cagalawan bolster the and that even if they did, the laws penalizing it are period shall constitute a violation of this Act, unless
Iatter's claim that the former had malicious intention against unconstitutional. After the hearing, the court sustained the satisfactorily proven that it was impossible to make such
him. As the Chairman of the Board of Directors of MORESCO demurrer, declaring unconstitutional the last part of section 1 payment.
II, Subrado has the duty and obligation to act upon complaints of Act No. 2549 as last amended by Act No. 3958, which
of its clients. On the contrary, the Court finds that Subrado considers as an offense the facts alleged in the information,
had no participation whatsoever in Cagalawan's illegal Section 2 of Act No. 2549, as amended by section 3 of Act No.
for the reason that it violates the constitutional prohibition
dismissal; hence. the imputation of bad faith against him is 3085, reads as follows:
against imprisonment for debt, and dismissed the case, with
untenable. costs de oficio. The fiscal appealed from said order.
SEC. 2 Every person violating the provisions of this Act and
WHEREFORE, the petition is DENIED. The Decision dated July every member of a firm, and every director or officer of a
In this appeal the Solicitor-General contends that the court
26, 2005 or the Court of Appeals in CA-G.R. SP No. 84991 and corporation, who knowingly consents to any violation of this
erred in declaring Act No. 3958 unconstitutional, and in
its Resolution dated September 6, 2006, are AFFIRMED. Act or directs the same, shall, for each offense, be punished
dismissing the cause.
by a fine of not less than one hundred pesos nor more than
one thousand pesos, or by imprisonment for a period of not
SO ORDERED. Section 1 of Act No. 2549, as last amended by section 1 of Act less than one month nor more than one year, or by both such
No. 3958, reads as follows: fine and imprisonment, in the discretion of the court.

Page 19 of 20
The last part of section 1 considers as illegal the refusal of an cost them more than that which they would receive in case of
employer to pay, when he can do so, the salaries of his a decision in their favor.
employees or laborers on the fifteenth or last day of every
month or on Saturday of every week, with only two days We hold that the last part of section 1 of Act No. 2549, as last
extension, and the nonpayment of the salary within the amended by section 1 of Act No. 3958, is valid, and we reverse
periods specified is considered as a violation of the law. The the appealed order with instructions to the lower court to
same Act exempts from criminal responsibility the employer proceed with the trial of the criminal case until it is terminated,
who, having failed to pay the salary, should prove satisfactorily without special pronouncement as to costs in this instance. So
that it was impossible to make such payment. The court held ordered.
that this provision is null because it violates the provision of
section 1 (12), Article III, of the Constitution, which provides Avanceña, C. J., Villa-Real, Diaz, Laurel, Concepcion, and
that no person shall be imprisoned for debt. We do not Moran, JJ., concur.
believe that this constitutional provision has been correctly
applied in this case. A close perusal of the last part of section
1 of Act No. 2549, as amended by section 1 of Act No. 3958,
will show that its language refers only to the employer who,
being able to make payment, shall abstain or refuse to do so,
without justification and to the prejudice of the laborer or
employee. An employer so circumstanced is not unlike a
person who defrauds another, by refusing to pay his just debt.
In both cases the deceit or fraud is the essential element
constituting the offense. The first case is a violation of Act No.
3958, and the second is estafa punished by the Revised Penal
Code. In either case the offender cannot certainly invoke the
constitutional prohibition against imprisonment for debt.

Police power is the power inherent in a government to enact

laws, within constitutional limits, to promote the order, safety,
health, morals, and general welfare of society. (12 C. J., p. 904.)
In the exercise of this power the Legislature has ample
authority to approve the disputed portion of Act No. 3958
which punishes the employer who, being able to do so,
refuses to pay the salaries of his laborers or employers in the
specified periods of time. Undoubtedly, one of the purposes
of the law is to suppress possible abuses on the part of
employers who hire laborers or employees without paying
them the salaries agreed upon for their services, thus causing
them financial difficulties. Without this law, the laborers and
employees who earn meager salaries would be compelled to
institute civil actions which, in the majority of cases, would
Page 20 of 20