11th Session LS

Notes: Substantive and Procedural due process –

a) Legality of the ground as provided under Art. 282;
b) Legality of the manner of dismissal – observance of the procedural
requirements. (due process).
(Aurelio vs. NLRC, 221 SCRA 432 [1993]); Shoemart, vs. NLRC 176 SCRA
385 [1989])

Post-Wenphil cases. – (Wenphil Corp. Vs. NLRC – G. R. No. 80587, Feb. 8, 1989.
Reversed old doctrine that although dismissal is for just cause or authorized cause,
failure to comply with the twin notice requirement would make dismissal illegal.

In Wenphhil – this was abandoned. The dismissal was declared valid but the
employer was imposed a sanction like payment of amount equivalent to one month
salary of employee.

Facts: Roberto Mallari was hired by petitioner on 18 January 1984 as a crew

member ot its Cubao Branch. At around 2:30 P.M. May 20, 1985 Mallari had an
altercation with Job. Barrameda. Both were suspended the following morning. In the
afternoon of the same day the operations manager issued a memorandum
dismissing Mallari in accordance with the company’s personnel manual.
Memorandum was served on Mallari on 25 May 1985.

Private respondent filed a complaint for unfair labor practice, illegal suspension, and
illegal dismissal. On Dec. 3, 1986, the labor arbiter dismissed the case.

Petitioner appealed to the NLRC. On October 16, 1987 NLRC set aside decision of
labor arbiter and ordered reinstatement of complainant to former position without
loss of seniority and other related benefits and one year backwages without
qualification and deduction.

Employer filed petition for certiorari with preliminary injunction/restraining order.

Dec. 2, 1987 – Court issued restraining order after requiring employer to post a
bond in the amount of PhP 20,000.00.

The main thrust of the petition is that under the Personnel Manual of petitioner which had been read
and understood by private respondent, private respondent waived his right to the investigation. It is
provided therein that -

INVESTIGATION

If the offense is punishable with a penalty higher than suspension for fifteen (15)
days, upon the request of the erring employee, there shall be convened an
investigation board composed of the following

1. The Parlor Manager or Supervisor on duty when the incident occurred.

2. The General Manager or the Assistant Manager.

1
 The investigation board shall discuss the merits of the case and shall issue a ruling,
which shall be final and conclusive. (p. 3, Personnel Manual: Emphasis supplied).

xxx

The Court holds that the policy of ordering the reinstatement to the service of an employee without
loss of seniority and the payment of his wages during the period of his separation until his actual
reinstatement but not exceeding three (3) years without qualification or deduction, when it appears
he was not afforded due process, although his dismissal was found to be for just and authorized
cause in an appropriate proceeding in the Ministry of Labor and Employment, should be re-
examined. It will be highly prejudicial to the interests of the employer to impose on him the services
of an employee who has been shown to be guilty of the charges that warranted his dismissal from
employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable,
remains in the service.

Xxx

However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due
process. 5 Petitioner committed an infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an investigation as required by law before
dismissing petitioner from employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.

WHEREFORE, the petition is GRANTED. The questioned decision of the public respondent NLRC
dated October 16, 1987 for the reinstatement with back wages of private respondent is REVERSED
AND SET ASIDE, and the decision of the labor arbiter dated December 3, 1986 dismissing the
complaint is revived and affirmed, but with the modification that petitioner is ordered to indemnify
private respondent in the amount of P1,000.00. The restraining order issued by this Court on
December 2, 1987 is hereby made permanent and the bond posted by petitioner is cancelled. This
decision is immediately executory.

SO ORDERED.

Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Sarmiento, Griño-Aquino,
Medialdea and Regalado, JJ., concur.

Separate Opinions

MELENCIO-HERRERA, J., concurring and dissenting:

I, too, share the majority view that private respondent is not entitled to reinstatement and backwages
for having been terminated for cause.

Like Justice Cortes, however, it is my view that private respondent-employee has not been denied
due process. But even if petitioner-employer had failed to comply with the requirements of
investigation and hearing, I believe with Justice Padilla that it is not an indemnity that petitioner

2
should be made to pay but rather separation pay in such amount as may be justified under the
circumstances of the case, not out of right, but to cushion the impact of his loss of employment. in
fact, this is the practice presently being followed by the National Labor Relations Commission.

PADILLA, J., concurring and dissenting:

I concur with the majority opinion that (1) the private respondent (employee) is not entitled to
reinstatement and backwages as it was clearly found by the Labor Arbiter that he was guilty of grave
misconduct and insubordination and (2) the petitioner (employer) failed to comply with the
requirements of administrative due process in not having given the employee, before his termination,
the notice and hearing required by law.

I am of the view, however, that for the employer's omission he should be made to pay the separated
employee a separation pay (instead of indemnity) in the amount of P1,000.00.

"Indemnity" may connote -

The obligation of a person to make good any loss or damage another has incurred or
may-incur by acting at his request or for his benefit.

That which is given to a person to prevent his suffering a damage. (Shurdut Mill
Supply Co. v. Central Azucarera del Danao, 44037-R, December 19, 1979; Cited in
Philippine Law Dictionary, 3rd Ed., F.B. Moreno, p. 463)

while "separation pay" is pay given to an employee on the occasion of his separation from
employment in order to assuage even a little the effects of loss of employment.

CORTES, J., concurring and dissenting opinion:

I concur with the majority that a case for illegal dismissal has not been established. However, my
reading of the case reveals no denial of due process, hence there is no basis for the award of ONE
THOUSAND PESOS (P1,000.00) as indemnity in favor of private respondent. On the other hand, if
the P1,000.00 is imposed as a sanction in the form of administrative penalty for failure of petitioner
to comply strictly with duly promulgated regulations implementing the Labor Code, the amount if
authorized, should form part of the public funds of the government.

Failure to qualify as regular employee –

a) International Catholic Migration Committee vs. NLRC, 169 SCRA 606

[1989])

Abandonment as ground for termination – to constitute a valid cause for termination

must be a deliberate unjustified refusal of the employee to resume his employment.
(Nueva Ecija Electric Cooperative vs. Minister of Labor, 184 SCRA 25 [1990]),
coupled with a clear absence of any intention of returning to his or her work (C.
Planas Commercial vs. NLRC, 303 SCRA 49 [1999]).

It is settled that while probationary employees do not enjoy permanent status, they are accorded the
constitutional protection of security of tenure. They may only be terminated for just cause or when
they fail to qualify as regular employees in accordance with reasonable standards made known to
them by the employer at the time of their engagement. 16 This constitutional protection, however,

3
ends upon the expiration of the period provided for in their probationary contract of employment.
Thereafter, the parties are free to renew the contract or not. 17

The petitioners themselves admit that upon their request the effective date of their separation was
deferred from 13 June 1992 to 20 June 1992. The latter date apparently coincided with the
expiration of the six-month probationary period. This development has rendered moot the question
of whether there was a just cause of the dismissal of the petitioners other than Perla Cumpay and
Virginia Etic.

A different conclusion would have to be reached with respect to Perla Cumpay and Virginia Etic.
They were dismissed on 4 May 1992 for having allegedly abandoned their work. It is settled that to
constitute abandonment, there must be a clear and deliberate intent to discontinue one’s
employment, without deliberate intent to discontinue one's employment, without any intention of
returning. 18 In this case, the private respondent not only failed to prove such intent, it as well violated
the due process rule in dismissal of employees. The requirements of lawful dismissal of an
employee by his employer are two-fold, viz., notice and hearing. 19 These requirements constitute the
essential elements of due process. 20 These requirements not having been met with respect to
Cumpay and Etic, their dismissal was, consequently, illegal.

It results, therefore, that only petitioners Perla Cumpay and Virginia Etic were entitled to
reinstatement and back wages. Nonetheless, considering that their probationary employment would
have similarly expired six months after commencement, reinstatement is no longer feasible.

WHEREFORE, the instant petition is partly GRANTED. The challenged resolutions of public
respondent National Labor Relations Commission (Fifth Division) of 2 August 1993 and 14 October
1993 in NLRC Case No. M-001378-93 are hereby MODIFIED; and as modified, private respondent
Super Mahogany Plywood Corporation is further ordered to pay petitioners Perla Cumpay and
Virginia Etic their backwages corresponding to the period from 4 May 1992 up to the expiration of
their probationary employment contracts.

No pronouncements as to costs in this instance.

Filing of a complaint for illegal dismissal negates employer’s theory of

abandonment. – (Rizada vs. NLRC 315 SCRA 316 [1999])

We fully agree with the respondent court’s ratiocination on the illegality of Vigan’s dismissal, to wit:15

"The basic issue is whether Vigan’s employment was terminated by illegal dismissal or by
abandonment of work, and We hold that this was a case of illegal dismissal.

Shopworn is the rule on abandonment that the immediate filing of a case for illegal dismissal
negates the same. Mark that Vigan promptly filed this suit for illegal dismissal when her attempts to
enter the premises of her workplace became futile and the efforts to bar and eject her became
unmistakable. In the more recent case of Rizada vs. NLRC (G.R. No. 96982, September 21, 1999),
the Supreme Court reiterated anew the hoary rule that:

"To constitute abandonment two elements must concur (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-employee
relationship, with the second element as the more determinative factor and being manifested by
some overt acts. Abandoning one’s job means the deliberate, unjustified refusal of the employee to

4
resume his employment and the burden of proof is on the employer to show a clear and deliberate
intent on the part of the employee to discontinue employment.

Abandonment is a matter of intention and cannot be lightly inferred, much less legally presumed
from certain equivocal acts. (Shin Industrial v. National Labor Relations Commission, 164 SCRA 8).

An employee who forthwith took steps to protest his dismissal cannot be said to have abandoned his
work." (Toogue v. National Labor Relations Commission, 238 SCRA 241), as where the employee
immediately filed a complaint for illegal dismissal to seek reinstatement (Tolong Aqua Culture Corp.,
et al. V. National Labor Relations Commission, G.R. 122268, November 12, 1996) (emphasis
supplied).

Note that in the instant case Vigan was even pleading to be allowed to work but she was prevented
by the guards thereat upon the orders of Danilo Litonjua. These are disclosed by her letters
(Annexes "F", "G", "K", "Q", "R" and "U", pp. 82, 83, 87, 93, 94 & 97, rollo), the entries in her time
cards (Annexes "P", "S", "W" and "X", pp. 92, 95, 99 & 100, rollo) and her compliance when required
to see a psychiatrist (Annex "H", p. 84, rollo). On the other hand there is complete silence from the
Litonjuas on these matters, including on the collective manifesto of several employees against
Danilo Litonjua and his highhanded ways (Annex "I", p. 85). They chose to ignore material and
telling points. They even alleged that Vigan refused to comply with their request for her to have
medical examination (Comment, pp. 164-171, rollo and Memorandum for the Respondents, pp. 215-
222, rollo), an unmitigated falsity in the face of clear proofs that she complied with their directive and
was given a clean bill of mental health by a reputable psychiatrist of their choice.

For emphasis, We shall quote with seeming triteness the dictum laid down in Mendoza vs. NLRC
(supra) regarding the unflinching rule in illegal dismissal cases:

"that the employer bears the burden of proof. To establish a case of abandonment, the
employer must prove the employees deliberate and unjustified refusal to resume
employment without any intention of returning. . .

mere absence from work, especially where the employee has been verbally told not to
report, cannot by itself constitute abandonment. To repeat, the employer has the burden of
proving overt acts on the employee’s part which demonstrate a desire or intention to
abandon her work…"

The NLRC had erred in shifting the onus probandi to Vigan in the charge of abandonment against
her, while the Litonjuas failed to discharge their burden. Though they may not have verbally told
Vigan not to report for work but the act of ordering the guards not to let her in was just as clear a
notice. Vigan’s plight was akin to that of the truck helper in the case of Masagana Concrete
Products, et al. vs. NLRC (G.R. No. 106916, September 3, 1999) who was likewise prevented from
coming to work.

While there was no formal termination of his services, Mariñas, was constructively dismissed when
he was accused of tampering the "vale sheet" and prevented from returning to work. Constructive
dismissal does not always involve forthright dismissal or diminution in rank, compensation, benefit
and privileges. For an act of clear discrimination insensibility or disdain by an employer may become
so unbearable on the part of the employee that it could foreclose any choice by him except to forego
his continued employment. In this case, Mariñas had to resign from his job because he was
prevented from returning back to work unless he admitted his mistake in writing and he was not
given any opportunity to contest the charge against him. It is a rule often repeated that
unsubstantiated accusation without anything more are not synonymous with guilt and unless a clear,

5
valid, just or authorized ground for dismissing an employee is established by the employer the
dismissal shall be considered unfounded.

xxx

An employee entitled to immediate reinstatement per Labor Arbiter’s order but

refuses the reinstatement, not deemed to have abandoned job. – (Jardin Davis vs.
NLRC, 225 SCRA 757 [1993])

When JDI filed its first petition for certiorari (in G.R. No. 103720) with this Court on 14 February
1992, assailing the 17 October 1991 decision of NLRC, it also raised, as an added argument on the
alleged abandonment of work by Salutin, the fact that he was gainfully employed
elsewhere. 13 Considering that this matter was thus already taken up by the petitioner in its first
petition for certiorari, which this Court dismissed with finality, the petitioner should really now be
barred from invoking anew that issue in this present (second) petition.

Be that as it may, the same fate of dismissal is still inevitable. Although this Court is not a trier of
facts, it may still wade through the records of a case if only to prevent any possible misgiving in its
ultimate disposition. 14 The petitioner's evidence to establish Salutin's supposed abandonment of
work is the certification of employment issued by King's Enterprises at the request of herein
petitioner to the effect that Salutin had indeed been employed by Monsato Philippines, Inc., during
the period from 01 September to 31 December 1991. Is this enough? What we have heretofore said
is this —

For abandonment to constitute a valid cause for termination of employment, there must
be a deliberate unjustified refusal of the employee to resume his employment. This
refusal must be clearly shown. Mere absence is not sufficient; it must be accompanied by
overt acts pointing to the fact that the employee simply does not want to work anymore. 15

Abandonment of position is a matter of intention expressed in clearly certain and unequivocal acts.
In this instance, however, certain uncontroverted facts show just exactly the opposite. Hence, Salutin
did report, as directed, on 24 September 1991, but that he could not stay long because he was ailing
at that time; he, although perhaps belatedly made, did seek medical consultation on 7 November
1991, at the Corazon Locsin Montelibano Memorial Regional Hospital, for "peptic ulcer"; and on 11
December 1991, he did, in fact, manifest his desire to assume his work with the petitioner.

This Court's resolution of 26 February 1992, denying the petition in G.R. No. 103720, became final
and executory on 19 June 1992. Respondent Salutin's interim employment, stressed by the
petitioner, did not stain the picture at all. Here, we second the well-considered view of NLRC, thus —

The order of immediate reinstatement pending appeal, in cases of illegal dismissal is

an ancillary relief under R.A. 6715 granted to a dismissed employee to cushion him
and his family against the impact of economic dislocation or abrupt loss of earnings.
If the employee chooses not to report for work pending resolution of the case appeal,
he foregoes such a temporary relief and is not paid of his salary. The final
determination of the rights and obligations respectively of the parties is the ultimate
and final resolution of this Commission.

WHEREFORE, the petition is hereby DISMISSED. The questioned resolutions of the National Labor
Relations Commission are AFFIRMED, and the temporary restraining order issued by this Court is
hereby LIFTED.

6
SO ORDERED.

Feliciano, Bidin, Romero and Melo, JJ., concur.

xxx

When closure is due to serious business losses or financial reverses, financial

bankruptcy, not obliged to pay separation pay. (North Davao Mining & Development
Corporation vs. NLRC, 254 SCRA 721 [1996])

G.R. Nos. 178222-23 September 29, 2010

MANILA MINING CORP. EMPLOYEES ASSOCIATION-FEDERATION OF FREE WORKERS

CHAPTER, SAMUEL G. ZUÑIGA, in his capacity as President, Petitioners,
vs.
MANILA MINING CORP. and/or ARTEMIO F. DISINI, President, RENE F. CHANYUNGCO, (SVP-
Treasurer), RODOLFO S. MIRANDA, (VP-Controller), VIRGILIO MEDINA (VP), ATTY.
CRISANTO MARTINEZ (HRD), NIGEL TAMLYN (Resident Manager), BRYAN YAP (VP), FELIPE
YAP (Chairman of the Board), and the NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION), Respondents.

ARTICLE 283. Closure of establishment and reduction of personnel. - The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at
least one (1) month before the intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

Said provision is emphatic that an employee, who was dismissed due to cessation of business
operation, is entitled to the separation pay equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. And it is jurisprudential that separation pay
should also be paid to employees even if the closure or cessation of operations is not due to
losses.25
ten.lihpwal

The Court is not impressed with the claim that actual severe financial losses exempt MMC from
paying separation benefits to complainants. In the first place, MMC did not appeal the decision of the
Court of Appeals which affirmed the NLRC’s award of separation pay to complainants. MMC’s failure
had the effect of making the awards final so that MMC could no longer seek any other affirmative
relief. In the second place, the non-issuance of a permit forced MMC to permanently cease its
business operations, as confirmed by the Court of Appeals. Under Article 283, the employer can
lawfully close shop anytime as long as cessation of or withdrawal from business operations is bona
fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of
employees, and as long as he pays his employees their termination pay in the amount
corresponding to their length of service.26The cessation of operations, in the case at bar is of such

7
nature. It was proven that MMC stopped its operations precisely due to failure to secure permit to
operate a tailings pond. Separation pay must nonetheless be given to the separated employees.

Finding no cogent reason to disturb its ruling, we affirm the Decision of the Court of Appeals.

BASED ON THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals
is AFFIRMED. No costs.

xxx

Burden of proof upon employer to show compliance with the twin requirements of
notices and hearing. (Viola Cruz vs. NLRC, 324 SCRA770 [2000]) Farrol v. Court of
Appeals, 325 SCRA 331 [2000]}; Savellana vs. I.T. [International] Corporation, 356
SCRA 451 [2001]

G.R. No. 110017 January 2, 1997 - RODOLFO FUENTES, et al., vs. NATIONAL LABOR
RELATIONS COMMISSION, 5TH DIVISION, CAGAYAN DE ORO CITY, AGUSAN PLANTATION
INC., AND/OR CHANG CHEE KONG, respondents.

BELLOSILLO, J.:

The State is bound under the Constitution to afford full protection to labor and when
conflicting interests of labor and capital are to be weighed on the scales of social
justice the heavier influence of the latter should be counterbalanced with the
sympathy and compassion the law accords the less privileged workingman. This is
only fair if the worker is to be given the opportunity and the right to assert and
defend his cause not as a subordinate but as part of management with which he
can negotiate on even plane. Thus labor is not a mere employee of capital but its
active and equal partner. 1

xxx

On 31 October 1990 petitioners filed with the DOLE office in Cagayan de Oro City a complaint for
illegal dismissal with prayer for reinstatement, backwages and damages against private respondent
Agusan Plantation, Inc., and/or Chang Chee Kong. In their answer respondents denied the
allegations of petitioners and contended that upon receipt of instructions from the head office in
Singapore to implement retrenchment, private respondents conducted grievance conferences or
meetings with petitioners' representative labor organization, the Association of Trade Unions through
its national president Jorge Alegarbes, its local president and its board of directors. Private
respondents also contended that the 30-day notices of termination were duly sent to petitioners.

We sustain petitioners. The ruling of the Labor Arbiter that there was no valid retrenchment is
correct. Article 283 of the Labor Code clearly states:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of the title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the worker affected

8
 thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in case of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

Under Art. 283 therefore retrenchment may be valid only when the following requisites are met: (a) it
is to prevent losses; (b) written notices were served on the workers and the Department of Labor
and Employment (DOLE) at least one (1) month before the effective date of retrenchment; and, (c)
separation pay is paid to the affected workers.

The closure of a business establishment is a ground for the termination of the services of an
employee unless the closing is for the purpose of circumventing pertinent provisions of the Labor
Code. But while business reverses can be a just cause for terminating employees, they must be
sufficiently proved by the employer. 2

In the case before us, private respondents merely alleged in their answer and position paper that
after their officials from the head office had visited the plantation respondent manager Chang Chee
Kong received a letter from the head office directing him to proceed immediately with the termination
of redundant workers and staff, and change the operations to contract system against direct
employment. They also alleged that after five (5) years of operations, the return of investments of
respondent company was meager; that the coup attempt in August 1987 as well as that of
December 1989 aggravated the floundering financial state of respondent company; that the financial
losses due to lack of capital funding resulted in the non-payment of long-overdue accounts; that the
untimely cut in the supply of fertilizers and manuring materials and equipment parts delayed the
payment of salaries and the implementation of weekly job rotations by the workers. Except for these
allegations, private respondents did not present any other documentary proof of their alleged losses
which could have been easily proven in the financial statements which unfortunately were not
shown.

There is no question that an employer may reduce its work force to prevent losses. However, these
losses must be serious, actual and real. 3 Otherwise, this ground for termination of employment
would be susceptible to abuse by scheming employers who might be merely feigning losses in their
business ventures in order to ease out employees. 4

Indeed, private respondents failed to prove their claim of business losses. What they submitted to
the Labor Arbiter were mere self-serving documents and allegations. Private respondents never
adduced evidence which would show clearly the extent of losses they suffered as a result of lack of
capital funding, which failure is fatal to their cause.

As regards the requirement of notices of termination to the employees, it is undisputed that the
Notice of Retrenchment was submitted to the Department of Labor and Employment on 12
September 1990.

Xxx

Culled from the above data, the termination of petitioners could not have validly taken effect either
on 25 or 30 September 1990. The one-month notice of retrenchment filed with the DOLE and served
on the workers before the intended date thereof is mandatory. Private respondents failed to comply
with this requisite. The earliest possible date of termination should be 12 October 1990 or one (1)

9
month after notice was sent to DOLE unless the notice of termination was sent to the workers later
than the notice to DOLE on 12 September 1990, in which case, the date of termination should be at
least one (1) month from the date of notice to the workers. Petitioners were terminated less than a
month after notice was sent to DOLE and to each of the workers.

We agree with the conclusion of the Labor Arbiter that the termination of the services of petitioners
was illegal as there was no valid retrenchment. Respondent NLRC committed grave abuse of
discretion in reversing the findings of the Labor Arbiter and ruling that there was substantial
compliance with the law. This Court firmly holds that measures should be strictly implemented to
ensure that such constitutional mandate on protection to labor is not rendered meaningless by an
erroneous interpretation of applicable laws.

We uphold the monetary award of the Labor Arbiter for: (a) the balance of the separation pay
benefits of petitioners equivalent to fifteen (15) days for every year of service after finding that
reinstatement is no longer feasible under the circumstances, and (b) the salary differentials for
complainants who were relieved during the pendency of the case before the Labor Arbiter and full
back wages for the rest of the complainants. This is in accord with Art. 279 of the Labor Code as
amended by R.A. 6715 under which petitioners who were unjustly dismissed from work shall be
entitled to full back wages inclusive of allowances and other benefits or their monetary equivalent
computed from the time their compensation was withheld up to the date of this decision.

WHEREFORE, the Petition is GRANTED. The decision of the Labor Arbiter of 27 March 1992
granting petitioners their claim for the balance of their separation pay benefits equivalent to fifteen
(15) days for every year of service, and salary differentials for complainants who were relieved
during the pendency of the case before the Labor Arbiter, and full back wages for the rest of the
complainants is REINSTATED. Consequently, the decision of the National Labor Relations
Commission dated 27 September 1992 is REVERSED and SET ASIDE.

SO ORDERED.

xxx

C. PLANAS COMMERCIAL, a business entity engaged in merchandising and retailing of plastic

products and fruits, was charged by respondent Ramil de los Reyes with illegal dismissal and non-
payment of basic wages and certain monetary benefits. 1 De los Reyes claimed that he started
working as deliveryman of PLANAS in August 1988 and later tasked with selling fruits until 4 June
1993 when he was allegedly dismissed.

On 15 April 1994 the Labor Arbiter found petitioners C. Planas Commercial (PLANAS hereon) and
Marcial Cohu, its manager, to have illegally dismissed Ramil de los Reyes. Consequently, petitioners
were ordered to reinstate him with back wages and to pay him salary differentials, 13th month pay
and service incentive pay. 2

Xxx

10
On appeal public respondent National Labor Relations Commission reversed and set aside the
decision of the Labor Arbiter which declared the dismissal of de los Reyes illegal as well as the grant
to him of back wages and other monetary benefits, except salary differentials in the amount of
P36,342.80 which NLRC sustained. 3 Since their motion for reconsideration was denied, 4 petitioners
filed on 18 December 1995 the instant petition forcertiorari with prayer for preliminary injunction.

xxx

Responding to private respondent's claim, petitioners alleged that they did not dismiss Ramil de los
Reyes who was only their helper assigned to sell fruits in front of their stall in Divisoria; on the
contrary, they claimed he abandoned his work after PLANAS' manager, petitioner Marcial Cohu,
confronted him regarding reports that whenever the former was not around he would sell the fruits at
their stall at a higher price then pocket the difference. According to Cohu, private respondent
admitted that the reports about his overpricing were true and that after his admission he did not
report for work anymore; instead, he tended the fruit stall of another employer. 8 Private respondent
de los Reyes, in his Reply, 10 insisted that he was dismissed without any notice after he complained
about his low salary. In fact, according to him, this practice of petitioners resulted in the filing of eight
(8) labor cases against them by his co-employees. 11 Moreover, de los Reyes maintained that
petitioners employed around thirty (30) persons in their wholesale/retail business.

To fortify their claim that de los Reyes abandoned his job and thus was not terminated, petitioners
attached six (6) pictures to their Rejoinder 12 showing private respondent at work in the stall of one
Aling Conchita Paredes located at C. Planas, Divisoria, occupied by his new employer, a certain
Jimmy Chua a.k.a. Sionga, a fruit dealer.

Xxx

Exemption from minimum wage law.

Petitioners claim exemption under the aforestated law. However, the best proof that they could have
adduced was their approved application for exemption in accordance with applicable guidelines
issued by the Commission. Section 4, subpar. (c) of RA 6727 categorically provides:

Retail/service establish establishments regularly employing not more than ten (10)
workers may be exempted from the applicability of this Act upon application with and
as determined by the appropriate Regional Board in accordance with the applicable
rules and regulations issued by the Commission.Whenever an application for
exemption has been duly filed with the appropriate Regional Board, action on any
complaint for alleged non-compliance with this Act shall be deferred pending
resolution of the application for exemption by the appropriate Regional Board. In the
event that applications for exemptions are not granted, employees shall receive the
appropriate compensation due them as provided for by this Act plus interest of one
percent (1%) per month retroactive to the effectivity of this Act (emphasis supplied).

Extant in the records is the fact that petitioners had persistently raised the matter of their exemption
from any liability for underpayment without substantiating it by showing compliance with the
aforecited provision of law. It bears stressing that the NLRC affirmed the Labor Arbiter's award of
salary differentials due to underpayment on the ground that de los Reyes' claim therefor was not
even denied or rebutted by petitioners. 31

xxx

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Somehow, the NLRC abused its discretion in holding that private respondent simply abandoned his
work after he was confronted by his employer through its manager with the reported overpricing of
the fruits that he sold and his pocketing of the difference. The NLRC considered the pictures of de
los Reyes while at work under a new employment as sufficient proof to substantiate petitioners'
defense of abandonment.

We are more inclined to uphold the Labor Arbiter's findings on this issue of illegal dismissal. From
the NLRC's point of view, it would seem that the abandonment was triggered by the employer's
charges of overpricing and the unlawful taking of the excess amounts. However, apart from Cohu's
plain allegation that he confronted de los Reyes regarding these charges, there is no evidence on
record to prove the veracity of Cohu's claim. It is more likely that after de los Reyes complained
about his low salary, he was no longer allowed to report for work, hence, was dismissed without
cause and without the requisite written notice. Under the circumstances, it is more logical to suppose
that de los Reyes never abandoned his job. In fact, he even presented his case before the Labor
Arbiter where he sought reinstatement. Our ruling in Sentinel Security Agency, Inc. v. NLRC 36 is
relevant —

Abandonment, as a just and valid cause for termination, requires a deliberate and
unjustified refusal of an employee to resume his work, coupled with a clear absence
of any intention of returning to his or her work (cited cases omitted; emphasis
supplied).

Thus, we sustain the Labor Arbiter's grant of back wages and order of reinstatement in favor of de
los Reyes. Since de los Reyes was illegally dismissed on 4 June 1993 after the effectivity of RA No.
6715 on 21 March 1989, he is entitled to full back wages, inclusive of allowances and other benefits
computed from the date of his dismissal until he is actually reinstated. If reinstatement shall no
longer be feasible, he shall be entitled to separation pay in accordance with law.

Xxx

Abandonment and liability of principal/contractor.

G.R. No. 114316 January 26, 200 SECURITY AND CREDIT INVESTIGATION, INC. and VICENTE REYES,
JR.., petitioners, vs.THE NATIONAL LABOR RELATIONS COMMISSION (First Division), FELICIANO MERCADO,
EDGAR SOMOSOT and DANTE OLIVER and the COMMISSION ON HUMAN RIGHTS,

Private respondents Mercado, Somosot and Oliver were employed as security guards by petitioner and assigned to
the CHR which was petitioner's client.
1âwphi1.nêt

Sometime in February 1990, about eighteen (18) of petitioner's security guards detailed at the CHR, including
Mercado, Somosot and Oliver, filed a complaint for money claims against petitioner. However, upon petitioner's
request that the security guards withdraw the complaint, each of the complainants, except for Mercado, Somosot and
Oliver, signed a Release and Quitclaim in favor of petitioner.

Mercado averred that he was being pressured by petitioner to sign a Release and Quitclaim, so he went on leave
from work on March 22, 1990. When he called petitioner's office on the afternoon of the same day to inquire about his
work assignment, petitioner's officer-in-charge, Rogelio Vecido, informed him that he was not assigned anywhere
because he was suspended from work.

Somosot likewise claimed that on March 22, 1990, Mr. Igmedio Tomenio, petitioner's shift-in-charge at the CHR, tried
to pressure him to sign a Release and Quitclaim but he refused. That afternoon, Somosot learned that he had been
suspended from work. When he attempted to report for work the next day, he was informed verbally that his
employment was already terminated.

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The next day, March 23, 1990, Mercado and Somosot filed a complaint for illegal dismissal and underpayment of
wages, overtime pay, legal holiday pay, premium pay for holiday and rest day, 13th month pay, service incentive
leave benefits and night differential against petitioner. The case was docketed as NLRC-NCR Case No. 00-03-01791-
90.

Like Mercado and Somosot, respondent Oliver asseverated that on March 27, 1990 he went to petitioner's office to
reiterate his money claims and was forced by Mr. Reynaldo Dino, petitioner's operations manager, to sign a Release
and Quitclaim. Because of his refusal to sign the same, he was not given any new assignment by petitioner. He was
thus surprised to receive on March 29, 1990 a telegram from petitioner requiring him to explain his absence from
work without leave from March 27, 1990. Subsequently, Oliver filed a complaint for illegal dismissal and
underpayment of backwages against petitioner, which case was docketed as NLRC-NCR Case No. 00-03-01886-90.

Upon motion of petitioner, the two cases were consolidated.

Meanwhile, on February 18, 1991, petitioner filed a third-party complaint against the CHR, claiming that its failure to
effect the increase in the minimum wage of respondent security guards from July 1, 1989 to March 31, 1990, was due
to the failure of the CHR to promptly pay the increases in the wage rates of said guards pursuant to Section 6 of
Republic Act No. 67271 (R.A. 6727). The CHR approved payment of increased wage rates only from April 16, 1990.
Petitioner claimed that under R.A. 6727, the CHR was mandated to pay increased wages to the security guards
commencing from July 1, 1989.

The CHR denied that it was obliged to pay the increase in the wage rates of the respondent guards. It averred that
R.A. 6727 is not applicable to it, because it had already been paying the respondent security guards more than
P100.00 a day even before the effectivity of said law. Its decision to increase the salaries of respondent guards
effective August 16, 1990 was due only to humanitarian reasons.

In his Decision dated November 18, 1991,2 the Labor Arbiter found that there was neither dismissal by petitioner of
the respondent security guards nor abandonment of employment by the latter, and that the controversy resulted from
miscommunication and misapprehension of facts by the parties. The Labor Arbiter, however, ruled that there was
underpayment of respondent guards' salaries, holiday pay, premium pay for holidays and rest days, overtime pay,
13th month pay and service incentive leave benefits in the total amount of Forty Two Thousand Six Hundred Thirty
Five Pesos and Eighteen Centavos (P42,635.18). Of this amount, the CHR was ordered to reimburse petitioner an
amount of Twenty Eight Thousand Five Hundred Pesos (P28,500.00).

Both the NLRC and the Labor Arbiter found no clear proof that petitioner had in fact dismissed respondent security
guards. Mercado based his claim of illegal dismissal only on the statement of officer-in-charge Mr. Vecido that he had
not been assigned to any post. Similarly, Somosot relied merely on the verbal information relayed to him that he had
been terminated. Oliver's belief that he had been illegally dismissed was founded on the telegram from petitioner
requiring him to explain his absence without leave which he received on March 29, 1990. None of them exerted
efforts to confirm from petitioner's office whether they had in fact been dismissed.

On issue of illegal dismissal/abandonment of work:

In the case of Indophil Acrylic Manufacturing Corporation vs. NLRC, 7 where private respondent filed a complaint for
illegal dismissal against his employer after he was prevented by the company guard from entering the company
premises on the ground that he had resigned, the Court, which held that private respondent was not illegally
dismissed, stated:

xxx

The present case, which has lasted for almost four (4) years, could have been avoided had private
respondent made previous inquiry regarding the veracity of Mr. Gaviola's instruction, and not simply relied
on the bare statement of the company guard. Private respondent should have been more vigilant of his
rights as an employee because at stake was not only his position but also his means of livelihood.

xxx

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Furthermore, petitioner denied the allegation that it terminated respondent security guards' employment without just
cause and even alleged that respondent guards abandoned their employment. Thus, absent any showing of an overt
or positive act proving that petitioner had dismissed Mercado, Somosot and Oliver, their claim of illegal dismissal
cannot be sustained.8

xxx

On liability of principal/contractor.

The Labor Arbiter found that Mercado, Somosot and Oliver were not paid the minimum wage from January 1, 1988 to
March 22, 1990. On the basis of this finding, he determined that respondent security guards incurred underpayments
in their wages for the periods January 1, 1988 to August 31, 1988 and July 1, 1989 to March 22, 1990.12 However, he
noted that there were no underpayments in their wages for the period September 1, 1988 to June 30, 1989.13 The
discrepancy between the minimum wage prevailing for the periods concerned and the wages and other benefits
received by the security guards also served as the basis for the Labor Arbiter's computation of underpayments for
overtime, 13th month and service incentive leave benefits.

However, in computing the underpayment for overtime, 13th month and service incentive leave benefits, the Labor
Arbiter erroneously included the period from September 1, 1988 to June 30, 1989 in spite of his finding that there was
no underpayment in wages during said period.

The period from September 1, 1988 to June 30, 1989 should thus be excluded in the computation of the
underpayments for overtime, 13th month and service incentive leave benefits of respondent security guards.
Accordingly, there is a need to recompute the underpaid amounts due to the respondent security guards with respect
to their overtime, 13th month and service incentive leave benefits in conformity with the evidence presented.

The Court also finds merit in petitioner's argument that the NLRC should not have reversed the Labor Arbiter's finding
that the CHR is liable for the payment of P28,500.00 representing the differentials of respondent security guards'
wage, overtime, 13th month and service incentive leave benefits for the period July 1, 1989 to April 15, 1990.

The record shows that petitioner informed the CHR regarding the increase in the wages of the security guards
effective July 1, 1989, pursuant to R.A. 6727 which mandated a Twenty Five Peso (P25.00) increase in the daily
wage rate in a Letter dated August 7, 1989.14 In its reply letter dated April 16, 1990, the CHR stated that it had
approved the increase in the wages effective April 16, 1990.15

The CHR, however, maintains that it is not liable to pay increased wages to the security guards and claims that there
is a proviso in Section 4 of R.A. 672716 which exempts employees already receiving more than P100.00 daily from
receiving the P25.00 increase required under said law. The CHR argues that since the security guards were receiving
P103.56 daily for the year 1989, it was not required to pay them the P25.00 per day increase under R.A. 6727. The
CHR further asserts that its approved increase in the security guards' wages from April 16, 1990 was due only to
humanitarian reasons and was not an admission of any obligation to increase the same under R.A. 6727.17

It must be noted that both the Labor Arbiter and the NLRC found that there were discrepancies in the minimum wage
prescribed under R.A. 6727 and what were actually received by respondent security guards from July 1, 1989. The
rule is that the factual findings of the Labor Arbiter, when affirmed by the NLRC are accorded to great weight and
respect when supported by substantial evidence, and devoid of any unfairness and arbitrariness.18

Section 6 of R.A. 6727 imposes the liability for payment of the increase in wages on the principal which in this case is
the CHR, thus:

In case of contracts for construction projects and for security, janitorial and similar services, the
prescribed increases in the wage rates of the workers shall be borne by the principals or clients of
the construction/service contractors and the contract shall be deemed amended accordingly. In the
event however, that the principal or client fails to pay the prescribed wage rates, the construction/service
contractor shall be jointly and severally liable with his principal or client. (Emphasis supplied.)

14
It is thus clear that the CHR is the party liable for payment of the wage increase due to respondent security guards.
While petitioner, as the contractor, is held solidarily liable for the payment of wages, including wage increases, as
prescribed under the Labor Code,19 the obligation ultimately belongs to the CHR as principal. The Court in Eagle
Security Agency, Inc. vs. NLRC,20 also cited in Rabago vs. NLRC,21 and Spartan Security and Detective Agency vs.
NLRC,22 ruled on this issue as follows:

The Wage Orders are explicit that payment of the increase are "to be borne" by the principal or
client. "To be borne", however, does not mean that the principal, PTSI in this case, would directly pay the
security guards the wage and allowance increases because there is no privity of contract between them.
The security guards' contractual relationship is with their immediate employer, EAGLE. As an employer,
EAGLE is tasked, among others, with the payment of their wages [See Article VII, Sec. 3 of the Contract for
Security Services, Supra, and Bautista vs. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665].

On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former
availed of the security services provided by the latter. In return, the security agency collects from its client
payment for its security services. This payment covers the wages for the security guards and also expenses
for their supervision and training, the guards' bonds, firearms with ammunitions, uniforms and other
equipments [sic], accessories, tools, materials and supplies necessary for the maintenance of a security
force.

Premises considered, the security guards' immediate recourse for the payment of the increases is
with their direct employer, EAGLE. However, in order for the security agency to comply with the new
wage and allowance rates it has to pay the security guards, the Wage Orders made specific
provision to amend existing contracts for security services by allowing the adjustment of the
consideration paid by the principal to the security agency concerned. What the Wage Orders require,
therefore, is the amendment of the contract as to the consideration to cover the service contractor's
payment of the increase mandated. In the end therefore, the ultimate liability for the payment of the
increases rests with the principal (Emphasis supplied.).23

The Labor Arbiter was therefore correct in requiring the CHR to reimburse petitioner the amount of P28,500.00
representing the unpaid wage increases of respondent security guards for the period July 1, 1989 to April 15, 1990.

Petitioner's Letter dated August 7, 1989 addressed to the CHR regarding the increase in wage rates of its security
guards pursuant to R.A. 6727 cannot be interpreted as a mere proposal for wage increases for its employees,
because the wage increase referred to therein is one mandated by law, and as R.A. 6727 expressly provides in
Section 6 thereof existing contracts for security services between the service contractor and the principal are deemed
amended by said law. There is, therefore, no merit in the NLRC's assertion that since the CHR agreed to increase the
wages of respondent security guards only from April 16, 1990, it can only be held liable for wage increases from that
date instead of from July 1, 1989.

WHEREFORE, the assailed decision of the NLRC in NLRC Case Nos. 00-03-01791-90 and 00-03-01886-90 is
hereby affirmed with the MODIFICATION that the amounts corresponding to the underpayment of overtime, 13th
month and service incentive leave benefits for the period September 1, 1988 to June 30, 1989 as determined by the
Labor Arbiter be recomputed; and the ruling of the Labor Arbiter that the CHR is liable to reimburse petitioner in the
amount of Twenty Eight Thousand Five Hundred Pesos (P28,500.00) representing the unpaid wage increases from
July 1, 1989 to April 15, 1990 due to respondents Mercado, Somosot and Oliver is hereby REINSTATED.

SO ORDERED.

xxx

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