LABOR STANDARDS - Midterms
Table of Contents
METROPOLITAN BANK and TRUST COMPANY, INC., Petitioner, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION and REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD - REGION II, Respondents.2
PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant
Manager, respondents...6
SENTINEL SECURITY AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ADRIANO CABANO JR., VERONICO C.
ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY, and MAXIMO ORTIZ, respondents.
10
PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING (BAHAMAS) CO., LTD.) and TRANS-GLOBAL MARITIME
AGENCY, INC., Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO, Respondents.
11
NIÑA JEWELRY MANUFACTURING OF METAL ARTS, INC. (otherwise known as NIÑA MANUFACTURING AND METAL ARTS, INC.) and ELISEA
B. ABELLA, Petitioners, vs. MADELINE C. MONTECILLO and LIZA M. TRINIDAD, Respondents.
15
FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and
GILBERTO SABSALON,respondents...21
JETHRO INTELLIGENCE & SECURITY CORPORATION and YAKULT PHILS., INC. Petitioners, vs. THE HON. SECRETARY OF LABOR AND
EMPLOYMENT, FREDERICK GARCIA, GIL CORDERO, LEONIELYN UDALBE, MICHAEL BENOZA, EDWIN ABLITER, CELEDONIO SUBERE
and MA. CORAZON LANUZA,Respondents...23
ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, REGENT FOOD CORPORATION AND/OR RICKY SEE
(PRESIDENT), respondents...25
EMMANUEL BABAS, DANILO T. BANAG, ARTURO V. VILLARIN, SR., EDWIN JAVIER, SANDI BERMEO, REX ALLESA, MAXIMO SORIANO, JR.,
ARSENIO ESTORQUE, and FELIXBERTO ANAJAO, Petitioners, vs. LORENZO SHIPPING CORPORATION, Respondent.
29
Republic of the Philippines
SUPREME COURT
Manila THIRD DIVISION
G.R. NO. 144322 February 6, 2007
METROPOLITAN BANK and TRUST COMPANY, INC., Petitioner, vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION and REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD - REGION II, Respondents.
D E C I S I O N AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking the reversal of the Decision1 of the Court of Appeals (CA) dated July 19, 2000 in
CA-G.R. SP No. 42240 which denied the petition for certiorari and prohibition of Metropolitan Bank and Trust Company, Inc. (petitioner).
The procedural antecedents and factual background of the case are as follows: On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II, Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise known as the Wage Rationalization Act,2issued Wage Order No. R02-03 (Wage Order), as
follows:
Section 1. Upon effectivity of this Wage Order, all employees/workers in the private sector throughout Region II, regardless of the status of employment are granted an across-the-board increase of P15.00 daily.3
The Wage Order was published in a newspaper of general circulation on December 2, 19954 and took effect on January 1, 1996.5 Its Implementing Rules6 were approved on February
14, 1996.7 Per Section 13 of the Wage Order, any party aggrieved by the Wage Order may file
an appeal with the National Wages and Productivity Commission (NWPC) through the RTWPB within 10 calendar days from the publication of the Wage Order.
In a letter-inquiry to the NWPC dated May 7, 1996, the Bankers' Council for Personnel Management (BCPM), on behalf of its member-banks, requested for a ruling on the eligibility of establishments with head offices outside Region II to seek exemption from the coverage of the Wage Order since its member-banks are already paying more than the prevailing minimum wage rate in the National Capital Region (NCR), which is their principal place of business.8
In a letter-reply dated July 16, 1996, the NWPC stated that the member-banks of BCPM are covered by the Wage Order and do not fall under the exemptible categories listed under the Wage Order.9
In a letter-inquiry to the NWPC dated July 23, 1996, petitioner sought for interpretation of the applicability of said Wage Order.10 The NWPC referred petitioner's inquiry to the RTWPB.
In a letter-reply dated August 12, 1996, the RTWPB clarified that the Wage Order covers all private establishments situated in Region II, regardless of the voluntary adoption by said establishments of the wage orders established in Metro Manila and irrespective of the amounts already paid by the petitioner.11
On October 15, 1996, the petitioner filed a Petition for Certiorari and Prohibition with the CA seeking nullification of the Wage Order on grounds that the RTWPB acted without authority when it issued the questioned Wage Order; that even assuming that the RTWPB was vested with the authority to prescribe an increase, it exceeded its authority when it did so without any ceiling or qualification; that the implementation of the Wage Order will cause the petitioner, and other similarly situated employers, to incur huge financial losses and suffer labor unrest.12
On March 24, 1997, the Office of the Solicitor General (OSG) filed a Manifestation and Motion in lieu of Comment affirming the petitioner's claim that the RTWPB acted beyond its authority in issuing the Wage Order prescribing an across-the-board increase to all workers and employees in Region II, effectively granting additional or other benefits not contemplated by R.A. No. 6727.13
In view of the OSG's manifestation, the CA directed respondents NWPC and RTWPB to file their comment.14
On September 22, 1997, respondents filed their Comment praying that the petition should be dismissed outright for petitioner's procedural lapses; that certiorari and prohibition are unavailing since petitioner failed to avail of the remedy of appeal prescribed by the Wage Order; that the Wage Order has long been in effect; and that the issuance of the Wage Order was performed in the exercise of a purely administrative function.15
On July 19, 2000, the CA rendered its Decision denying the petition. The appellate court held that a writ of prohibition can no longer be issued since implementation of the Wage Order had long become fait accompli, the Wage Order having taken effect on January 1, 1996 and its implementing rules approved on February 14, 1996; that a writ of certiorari is improper since the Wage Order was issued in the exercise of a purely administrative function, not judicial or quasi-judicial; that the letter-query did not present justiciable controversies ripe for consideration by the respondents in the exercise of their wage-fixing function, since no appeal from the Wage Order was filed; that petitioner never brought before the said bodies any formal and definite challenge to the Wage Order and it cannot pass off the letter-queries as actual applications for relief; that even if petitioner's procedural lapse is disregarded, a regional wage order prescribing a wage increase across-the-board applies to banks adopting a unified wage system and a disparity in wages between employees holding similar positions in different regions is not wage distortion.16
Hence, the present petition anchored on the following grounds:
4.1 THE COURT OF APPEALS ERRED IN REFUSING TO DECLARE WAGE ORDER NO. R02-03 NULL AND VOID AND OF NO LEGAL EFFECT.
4.1.1 THE BOARD, IN ISSUING WAGE ORDER NO. R02-03, EXCEEDED THE AUTHORITY DELEGATED TO IT BY CONGRESS.
4.1.2 WAGE ORDER NO. R02-03 IS AN UNREASONABLE INTRUSION INTO THE PROPERTY RIGHTS OF PETITIONER.
4.1.3 WAGE ORDER NO. R02-03 UNDERMINES THE VERY ESSENCE OF COLLECTIVE BARGAINING.
4.1.4 WAGE ORDER NO. R02-03 FAILS TO TAKE INTO ACCOUNT THE VERY RATIONALE FOR A UNIFIED WAGE STRUCTURE.
4.2 PETITIONER'S RECOURSE TO A WRIT OF CERTIORARI AND PROHIBITION WAS PROPER.17
Following the submission of the Comment18 and Reply19 thereto, the Court gave due course to
the petition and required both parties to submit their respective memoranda.20 In compliance
therewith, petitioner and respondents submitted their respective memoranda.21
Petitioner poses two issues for resolution, to wit: (1) whether Wage Order No. R02-03 is void and of no legal effect; and (2) whether petitioner's recourse to a petition for certiorari and prohibition with the CA was proper.
Anent the first issue, petitioner maintains that the RTWPB, in issuing said Wage Order, exceeded the authority delegated to it under R.A. No. 6727, which is limited to determining and fixing the minimum wage rate within their respective territorial jurisdiction and with respect only to employees who do not earn the prescribed minimum wage rate; that the RTWPB is not
authorized to grant a general across-the-board wage increase for non-minimum wage earners; that Employers Confederation of the Philippines v. National Wages and Productivity
Commission22(hereafter referred to as "ECOP") is not authority to rule that respondents have
been empowered to fix wages other than the minimum wage since said case dealt with an across-the-board increase with a salary ceiling, where the wage adjustment is applied to employees receiving a certain denominated salary ceiling; that the Wage Order is an
unreasonable intrusion into its property rights; that the Wage Order undermines the essence of collective bargaining; that the Wage Order fails to take into account the rationale for a unified wage structure.
As to the second issue, petitioner submits that ultra vires acts of administrative agencies are correctible by way of a writ of certiorari and prohibition; that even assuming that it did not observe the proper remedial procedure in challenging the Wage Order, the remedy
of certiorari and prohibition remains available to it by way of an exception, on grounds of justice and equity; that its failure to observe procedural rules could not have validated the manner by which the disputed Wage Order was issued.
Respondents counter that the present petition is fatally defective from inception since no appeal from the Wage Order was filed by petitioner; that the letter-query to the NWPC did not constitute the appeal contemplated by law; that the validity of the Wage Order was never raised before the respondents; that the implementation of the Wage Order had long become fait accompli for prohibition to prosper. Respondents insist that, even if petitioner's procedural lapses are disregarded, the Wage Order was issued pursuant to the mandate of R.A. No. 6727 and in accordance with the Court's pronouncements in the ECOP case;23 that the Wage Order is not an
intrusion on property rights since it was issued after the required public hearings; that the Wage Order does not undermine but in fact recognizes the right to collective bargaining; that the Wage Order did not result in wage distortion.
The Court shall first dispose of the procedural matter relating to the propriety of petitioner's recourse to the CA before proceeding with the substantive issue involving the validity of the Wage Order.
Certiorari as a special civil action is available only if the following essential requisites concur: (1)
it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law.24
On the other hand, prohibition as a special civil action is available only if the following essential requisites concur: (1) it must be directed against a tribunal, corporation, board, officer, or person exercising functions, judicial, quasi-judicial, or ministerial; (2) the tribunal, corporation, board or person has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law.25
A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties.26 Quasi-judicial function is a term which
applies to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature.27 Ministerial
function is one which an officer or tribunal performs in the context of a given set of facts, in a prescribed manner and without regard to the exercise of his own judgment upon the propriety or impropriety of the act done.28
In the issuance of the assailed Wage Order, respondent RTWPB did not act in any judicial, quasi-judicial capacity, or ministerial capacity. It was in the nature of subordinate legislation, promulgated by it in the exercise of delegated power under R.A. No. 6727. It was issued in the exercise of quasi-legislative power. Quasi-legislative or rule-making power is exercised by administrative agencies through the promulgation of rules and regulations within the confines of the granting statute and the doctrine of non-delegation of certain powers flowing from the separation of the great branches of the government.29
Moreover, the rule on the special civil actions of certiorari and prohibition equally mandate that these extra-ordinary remedies are available only when "there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law." A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from the injurious effects of the judgment or rule, order or resolution of the lower court or agency.30
Section 13 of the assailed Wage Order explicitly provides that any party aggrieved by the Wage Order may file an appeal with the NWPC through the RTWPB within 10 days from the
publication of the wage order.31 The Wage Order was published in a newspaper of general
circulation on December 2, 1995.32
In this case, petitioner did not avail of the remedy provided by law. No appeal to the NWPC was filed by the petitioner within 10 calendar days from publication of the Wage Order on December 2, 1995. Petitioner was silent until seven months later, when it filed a letter-inquiry on July 24, 1996 with the NWPC seeking a clarification on the application of the Wage Order. Evidently, the letter-inquiry is not an appeal.
It must also be noted that the NWPC only referred petitioner's letter-inquiry to the RTWPB. Petitioner did not appeal the letter-reply dated August 12, 1996 of the RTWPB to the NWPC. No direct action was taken by the NWPC on the issuance or implementation of the Wage Order. Petitioner failed to invoke the power of the NWPC to review regional wage levels set by the RTWPB to determine if these are in accordance with prescribed guidelines. Thus, not only was it improper to implead the NWPC as party-respondent in the petition before the CA and this Court, but also petitioner failed to avail of the primary jurisdiction of the NWPC under Article 121 of the Labor Code, to wit:
ART. 121. Powers and Functions of the Commission. - The Commission shall have the following powers and functions:
x x x x
(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed guidelines and national development plans;
x x x x
(f) To review plans and programs of the Regional Tripartite Wages and Productivity Boards to determine whether these are consistent with national development plans; (g) To exercise technical and administrative supervision over the Regional Tripartite Wages and Productivity Boards;
x x x x (Emphasis supplied)
Under the doctrine of primary jurisdiction, courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact.33
Nevertheless, the Court will proceed to resolve the substantial issues in the present petition pursuant to the well-accepted principle that acceptance of a petition for certiorari or prohibition as well as the grant of due course thereto is addressed to the sound discretion of the court.34 It is
a well-entrenched principle that rules of procedure are not inflexible tools designed to hinder or delay, but to facilitate and promote the administration of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate, rather than promote substantial justice, must always be eschewed.35
As to respondents' submission that the implementation of the Wage Order can no longer be restrained since it has become fait accompli, the Wage Order having taken effect on January 1, 1996 and its implementing rules approved on February 14, 1996, suffice it to state that courts will decide a question otherwise moot if it is capable of repetition yet evading review.36 Besides,
a case becomes moot and academic only when there is no more actual controversy between the parties or no useful purpose can be served in passing upon the merits. Such circumstances do not obtain in the present case. The implementation of the Wage Order does not in any way render the case moot and academic, since the issue of the validity of the wage order subsists even after its implementation and which has to be determined and passed upon to resolve petitioner's rights and consequent obligations therein.
For this Honorable Court to yield to the respondents' urging that, as there has been fait accompli, then this Honorable Court should passively accept and accede to the prevailing situation is an unacceptable suggestion. Dismissal of the instant petition, as respondents so propose is a proposition fraught with mischief. Respondents' submission will create a dangerous precedent. Should this Honorable Court decline now to perform its duty of interpreting and indicating what the law is and should be, this might tempt again those who strut about in the corridors of power to recklessly and with ulterior motives commit illegal acts, either brazenly or stealthily, confident that this Honorable Court will abstain from entertaining future challenges to their acts if they manage to bring about a fait accompli.38
Having disposed of this procedural issue, the Court now comes to the substance of the petition. R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industrial dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.39
In line with its declared policy, R.A. No. 672740 created the NWPC,41 vested with the power to
prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels;42 and authorized the RTWPB
to determine and fix the minimum wage rates applicable in their respective regions, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC.43 Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set
the daily minimum wage rates,44 based on the standards or criteria set by Article 12445 of the
Labor Code.
In ECOP,46 the Court declared that there are two ways of fixing the minimum wage: the
"floor-wage" method and the "salary-ceiling" method. The "floor-"floor-wage" method involves the fixing of a determinate amount to be added to the prevailing statutory minimum wage rates. On the other hand, in the "salary-ceiling" method, the wage adjustment was to be applied to employees receiving a certain denominated salary ceiling. In other words, workers already being paid more than the existing minimum wage (up to a certain amount stated in the Wage Order) are also to be given a wage increase.47
To illustrate: under the "floor wage method", it would have been sufficient if the Wage Order simply set P15.00 as the amount to be added to the prevailing statutory minimum wage rates, while in the "salary-ceiling method", it would have been sufficient if the Wage Order states a specific salary, such as P250.00, and only those earning below it shall be entitled to the salary increase.
In the present case, the RTWPB did not determine or fix the minimum wage rate by the "floor-wage method" or the "salary-ceiling method" in issuing the Wage Order. The RTWPB did not set a wage level nor a range to which a wage adjustment or increase shall be added. Instead, it granted an across-the-board wage increase of P15.00 to all employees and workers of Region
2. In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order to wage earners receiving more than the prevailing minimum wage rate, without a denominated salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits not contemplated by R.A. No. 6727.
In no uncertain terms must it be stressed that the function of promulgating rules and regulations may be legitimately exercised only for the purpose of carrying out the provisions of a law. The power of administrative agencies is confined to implementing the law or putting it into effect. Corollary to this guideline is that administrative regulation cannot extend the law and amend a legislative enactment.48 It is axiomatic that the clear letter of the law is controlling and cannot be
amended by a mere administrative rule issued for its implementation.49 Indeed, administrative or
executive acts, orders, and regulations shall be valid only when they are not contrary to the laws or the Constitution.50
Where the legislature has delegated to an executive or administrative officers and boards authority to promulgate rules to carry out an express legislative purpose, the rules of
administrative officers and boards, which have the effect of extending, or which conflict with the authority-granting statute, do not represent a valid exercise of the rule-making power but constitute an attempt by an administrative body to legislate.51
It has been said that when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in this case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.52
Thus, the Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants a wage increase to employees earning more than the minimum wage rate; and pursuant to the separability clause53 of the Wage Order, Section 1 is declared valid with respect to employees
earning the prevailing minimum wage rate.1awphi1.net
Prior to the passage of the Wage Order, the daily minimum wage rates in Region II was set at P104.00 for the Province of Isabela, P103.00 for the Province of Cagayan, P101.00 for the Province of Nueva Vizcaya, andP100.00 for the Provinces of Quirino and Batanes.54 Only
employees earning the above-stated minimum wage rates are entitled to the P15.00 mandated increase under the Wage Order.
Although the concomitant effect of the nullity of the Wage Order to those employees who have received the mandated increase was not put in issue, this Court shall make a definite pronouncement thereon to finally put this case to rest. As ruled by the Court in Latchme
Motoomull v. Dela Paz,55 "the Court will always strive to settle the entire controversy in a single
proceeding leaving no root or branch to bear the seeds of future litigation."56
Applying by analogy, the Court's recent pronouncement in Philippine Ports Authority v. Commission on Audit,57thus:
In regard to the refund of the disallowed benefits, this Court holds that petitioners need not refund the benefits received by them based on our rulings in Blaquera v. Alcala, De Jesus v.
Commission on Audit and Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit.
In Blaquera, the petitioners, who were officials and employees of several government departments and agencies, were paid incentive benefits pursuant to EO No. 292 and the Omnibus Rules Implementing Book V of EO No. 292. On January 3, 1993, then President Fidel V. Ramos issued Administrative Order (AO) No. 29 authorizing the grant of productivity incentive benefits for the year 1992 in the maximum amount of P1,000. Section 4 of AO No. 29 directed all departments, offices and agencies which authorized payment of CY 1992 Productivity Incentive Bonus in excess of P1,000 to immediately cause the refund of the excess. Respondent heads of the departments or agencies of the government concerned caused the deduction from petitioners' salaries or allowances of the amounts needed to cover the overpayments. Petitioners therein filed a petition for certiorari and prohibition before this Court to prevent respondents therein from making further deductions from their salaries or allowances. The Court ruled against the refund, thus:
Considering, however, that all the parties here acted in good faith, we cannot
countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices
concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such benefits.
The said ruling in Blaquera was applied in De Jesus.
In De Jesus, COA disallowed the payment of allowances and bonuses consisting of representation and transportation allowance, rice allowance, productivity incentive bonus, anniversary bonus, year-end bonus and cash gifts to members of the interim Board of Directors of the Catbalogan Water District. This Court affirmed the disallowance because petitioners therein were not entitled to other compensation except for payment of per diemunder PD No. 198. However, the Court ruled against the refund of the allowances and bonuses received by petitioners, thus:
This ruling in Blaquera applies to the instant case. Petitioners here received the additional
allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No. 313 authorized such payment. At the time petitioners received the additional allowances and bonuses, the Court had not yet decided Baybay Water District. Petitioners had no knowledge that such payment was without legal basis. Thus, being in good faith, petitioners need not refund the allowances and bonuses they received but disallowed by the COA.
Further, in KMG, this Court applied the ruling in Blaquera and De Jesus in holding that the Social Insurance Group (SIG) personnel of the Government Service Insurance System need not refund the hazard pay received by them although said benefit was correctly disallowed by COA. The Court ruled:
The Court however finds that the DOH and GSIS officials concerned who granted hazard pay under R.A. No. 7305 to the SIG personnel acted in good faith, in the honest belief that there was legal basis for such grant. The SIG personnel in turn accepted the hazard pay benefits likewise believing that they were entitled to such benefit. At that time, neither the concerned DOH and GSIS officials nor the SIG personnel knew that the grant of hazard pay to the latter is not sanctioned by law. Thus, following the rulings of the Court in De Jesus v. Commission on Audit, and Blaquera v. Alcala, the SIG personnel who previously received hazard pay under R.A. No. 7305 need not refund such benefits.
In the same vein, the rulings in Blaquera, De Jesus and KMG apply to this case. Petitioners received the hazard duty pay and birthday cash gift in good faith since the benefits were authorized by PPA Special Order No. 407-97 issued pursuant to PPA Memorandum Circular No. 34-95 implementing DBM National Compensation Circular No. 76, series of 1995, and PPA Memorandum Circular No. 22-97, respectively. Petitioners at that time had no knowledge that the payment of said benefits lacked legal basis. Being in good faith, petitioners need not refund the benefits they received.58 (Emphasis supplied)
employees, other than minimum wage earners, who received the wage increase mandated by the Wage Order need not refund the wage increase received by them since they received the wage increase in good faith, in the honest belief that they are entitled to such wage increase and without any knowledge that there was no legal basis for the same.
Considering the foregoing, the Court need not delve on the other arguments raised by the parties.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals dated July 19, 2000 in CA-G.R. SP No. 42240 is MODIFIED. Section 1 of Wage Order No. R02-03 issued on October 17, 1995 by the Regional Tripartite Wages and Productivity Board for Region II, Tuguegarao, Cagayan is declared VALID insofar as the mandated increase applies to employees earning the prevailing minimum wage rate at the time of the passage of the Wage Order and VOID with respect to its application to employees receiving more than the prevailing minimum wage rate at the time of the passage of the Wage Order.
No costs. SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila SECOND DIVISION
G.R. No. 146530 January 17, 2005
PEDRO CHAVEZ, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.
D E C I S I O N
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated December 15,
2000 of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the respondent company’s products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila. The respondent company furnished the petitioner with a truck. Most of the petitioner’s delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the afternoon two or three days after. The deliveries were made in accordance with the routing slips issued by respondent company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant manager, his (the petitioner’s) desire to avail himself of the benefits that the regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month pay, among others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed an amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee relationship between the respondent company and the petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract of service which he and the respondent company entered into. The said contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the services to be rendered to the Principal, under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by the
contractor to the principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change to this travel route shall be subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or delivery transport services fully rendered by the Contractor shall be on a per trip basis depending on the size or classification of the truck being used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (P300.00) and EFFECTIVE December 15, 1984. b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis, following the same route mentioned, shall be THREE HUNDRED FIFTY (P350.00) Pesos and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of any damage to, loss of any goods, cargoes, finished products or the like, while the same are in transit, or due to reckless [sic] of its men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power over its men working for him subject to this agreement, and that the Contractor shall hold the Principal free and harmless from any liability or claim that may arise by virtue of the Contractor’s non-compliance to the existing provisions of the Minimum Wage Law, the Employees Compensation Act, the Social Security System Act, or any other such law or decree that may hereafter be enacted, it being clearly understood that any truck drivers, helpers or men working with and for the Contractor, are not employees who will be indemnified by the Principal for any such claim, including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts were substantially the same. The relationship of the respondent company and the petitioner was allegedly governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means and methods by which his work was accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled to regularization because he was not an employee of the respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his contractual relation with the respondent company was due to his violation of the terms and conditions of their contract. The petitioner allegedly failed to observe the minimum degree of diligence in the proper maintenance of the truck he was using, thereby exposing respondent company to unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee of the respondent company as he was performing a service that was necessary and desirable to the latter’s business. Moreover, it was noted that the petitioner had discharged his duties as truck driver for the respondent company for a continuous and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the constitutional provision affording full protection to labor and security of tenure. The Labor Arbiter found that the petitioner’s dismissal was anchored on his insistent demand to be regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the due process requirements, the respondents were found guilty of illegal dismissal. The dispositive portion of the Labor Arbiter’s decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his separation pay equivalent to one (1) month pay per year of service based on the average monthly pay of P10,800.00 in lieu of reinstatement as his reinstatement back to work will not do any good between the parties as the employment relationship has already become strained and full backwages from the time his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue to run. Also to pay complainant his 13th month pay, night shift differential pay and service incentive leave pay hereunder computed as follows:
a) Backwages ……….. P248,400.00 b) Separation Pay ………….…... P140,400.00
c) 13th month pay ………….……P 10,800.00 d) Service Incentive Leave Pay .. 2,040.00 TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the
decision of the Labor Arbiter. In the said decision, the NLRC characterized the contract of service between the respondent company and the petitioner as a "scheme" that was resorted to by the respondents who, taking advantage of the petitioner’s unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and implications of his becoming a regularized employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision
and, this time, holding that no employer-employee relationship existed between the respondent company and the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not exercise control over the means and methods by which the petitioner accomplished his delivery services. It upheld the validity of the contract of service as it pointed out that said contract was silent as to the time by which the petitioner was to make the deliveries and that the petitioner could hire his own helpers whose wages would be paid from his own account. These factors indicated that the petitioner was an independent contractor, not an employee of the respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code on the regularization of employees. Said contract, including the fixed period of employment contained therein, having been knowingly and voluntarily entered into by the parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed the
petitioner’s complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which was referred to the CA following the ruling in St. Martin Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular employee of the respondent company because as its truck driver, he performed a service that was indispensable to the latter’s business. Further, he
had been the respondent company’s truck driver for ten continuous years. The CA also reasoned that the petitioner could not be considered an independent contractor since he had no substantial capital in the form of tools and machinery. In fact, the truck that he drove belonged to the respondent company. The CA also observed that the routing slips that the respondent company issued to the petitioner showed that it exercised control over the latter. The routing slips indicated the chronological order and priority of delivery, the urgency of certain deliveries and the time when the goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting that he just filed a complaint for regularization. This actuation of the petitioner negated the respondents’ allegation that he abandoned his job. The CA held that the respondents failed to discharge their burden to show that the petitioner’s dismissal was for a valid and just cause. Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of regular employment, it is but necessary for the courts to scrutinize with extreme caution their legality and justness. Where from the circumstances it is apparent that a contract has been entered into to preclude acquisition of tenurial security by the employee, they should be struck down and disregarded as contrary to public policy and morals. In this case, the "contract of service" is just another attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the assailed Resolution dated December 15, 2000 upholding the contract of service between the petitioner and the respondent company. In reconsidering its decision, the CA explained that the extent of control exercised by the respondents over the petitioner was only with respect to the result but not to the means and methods used by him. The CA cited the following circumstances: (1) the respondents had no say on how the goods were to be delivered to the customers; (2) the petitioner had the right to employ workers who would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of no moment because his status was determined not by the length of service but by the contract of service. This contract, not being contrary to morals, good customs, public order or public policy, should be given the force and effect of law as between the respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioner’s complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10
The threshold issue that needs to be resolved is whether there existed an employer-employee relationship between the respondent company and the petitioner. We rule in the affirmative. The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct.11 The most important element is the
employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.12 All the four elements are present in this
case.
First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered."13 That the petitioner was paid on a per trip basis is
not significant. This is merely a method of computing compensation and not a basis for determining the existence or absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an employment status, depending on whether the elements of an employer-employee relationship are present or not.14 In this case, it cannot be gainsaid that the petitioner received compensation from the
respondent company for the services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of payroll.15 The payroll should show, among other things, the employee’s
rate of pay, deductions made, and the amount actually paid to the employee. Interestingly, the respondents did not present the payroll to support their claim that the petitioner was not their employee, raising speculations whether this omission proves that its presentation would be adverse to their case.16
Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the services of the petitioner as truck driver. They exercised this power by terminating the petitioner’s services albeit in the guise of "severance of contractual relation" due allegedly to the latter’s breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most important. Compared to an employee, an independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under its own responsibility according to its own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof.17 Hence, while an independent
contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s power to control the means and methods by which the employee’s work is to be performed and accomplished.18
Although the respondents denied that they exercised control over the manner and methods by which the petitioner accomplished his work, a careful review of the records shows that the latter performed his work as truck driver under the respondents’ supervision and control. Their right of control was manifested by the following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent company’s goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles, Bataan;20 and
4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver the same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were to be delivered to the customers as, for example, the words "tomorrow morning" was written on slip no. 2776.
These circumstances, to the Court’s mind, prove that the respondents exercised control over the means and methods by which the petitioner accomplished his work as truck driver of the respondent company. On the other hand, the Court is hard put to believe the respondents’ allegation that the petitioner was an independent contractor engaged in providing delivery or hauling services when he did not even own the truck used for such services. Evidently, he did not possess substantial capitalization or investment in the form of tools, machinery and work premises. Moreover, the petitioner performed the delivery services exclusively for the respondent company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish the existence of an employer-employee relationship between the respondent company and the petitioner. It bears stressing that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by what the parties say it should be.22
Having established that there existed an employer-employee relationship between the
respondent company and the petitioner, the Court shall now determine whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.23 In this case, the respondents failed to prove any such cause for the petitioner’s
dismissal. They insinuated that the petitioner abandoned his job. To constitute abandonment, these two factors must concur: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship.24Obviously,
the petitioner did not intend to sever his relationship with the respondent company for at the time that he allegedly abandoned his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of abandonment is totally
inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for reinstatement.25
Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.26 The negligence, to warrant removal from service, should not merely
be gross but also habitual.27 The single and isolated act of the petitioner’s negligence in the
proper maintenance of the truck alleged by the respondents does not amount to "gross and habitual neglect" warranting his dismissal.
… As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to complainant’s breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we are very much inclined to believe complainant’s story that his dismissal from the service was anchored on his insistent demand that he be considered a regular employee. Because complainant in his right senses will not just abandon for that reason alone his work especially so that it is only his job where he depends chiefly his existence and support for his family if he was not aggrieved by the respondent when he was told that his services as driver will be terminated on February 23, 1995.28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of full backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the time his compensation was withheld from him up to the time of his actual reinstatement.29 However, as found by the Labor Arbiter, the circumstances obtaining in this case
do not warrant the petitioner’s reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an award of separation pay equivalent to one month for every year of service from the time of his illegal dismissal up to the finality of this judgment in addition to his full backwages, allowances and other benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of
the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur. Republic of the Philippines
SUPREME COURT
Manila FIRST DIVISION
G.R. No. 122468 November 16, 1998
SENTINEL SECURITY AGENCY, INC., petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, ADRIANO CABANO JR., VERONICO C. ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY, and MAXIMO ORTIZ, respondents.
G.R. No. 122716 November 16, 1998
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, VERONICO ZAMBO, HELCIAS ARROYO, ADRIANO CABANO, MAXIMO ORTIZ, and RUSTICO ANDOY, respondents.
R E S O L U T I O N
PANGANIBAN, J.:
Separately filed before us by Petitioners Sentinel Security Agency, Inc. and Philippine American Life Insurance Company (hereafter referred to as the Agency and the Client, respectively) are two Motions for Reconsideration of this Court's September 3, 1998 Decision in GR Nos. 122468 and 122716.
Petitioner Agency, in its Motion for Reconsideration, merely reiterates the same basic issues and arguments already submitted to the Court, which has sufficiently passed upon them in the assailed Decision. Thus, they cannot warrant a modification, much less a reversal, of our dispositions therein.
On the other hand, Petitioner Client requests a clarification of its own liability. That the complainants' illegal dismissal was the sole responsibility of the Agency was clearly stated by the Court in the assailed Decision, which we quote hereunder:
. . . [T]here was no suspension of operation, business or undertaking, bona fide or not, that would have justified placing the complainants off-detail and making them wait for a period of six months. . . . The only logical conclusion from the foregoing discussion is that the Agency illegally dismissed the complainants. Hence, as a necessary consequence, the complainants are entitled to . . . back wages. . . . . 1
Relevant to this controversy is the recent pronouncement of the Court in Rosewood v. National
Labor Relations Commission: 2
. . . [A]n order to pay back wages and separation pay is invested with a punitive character, such that an indirect employer should not be made liable without a finding that it had committed or conspired in the illegal dismissal.
In the present case, the Court held that the Client was not responsible for the illegal dismissal of the complainants and, thus, not liable for the payment of back wages and separation pay, viz.:
The Client did not, as it could not, illegally dismiss the complainants. Thus, if should not be held liable for separation pay and back wages. 3
In sum, while the exoneration of the Client from the payment of separation pay and back wages was clearly stated in the body of our Decision, such fact was not included in the dispositive portion. In this sense, the Motion for Reconsideration has merit.
However, the Decision did not completely exonerate the Client which, as an indirect employer, is solidarily liable with Petitioner Agency for the complainants' unpaid service incentive leave, pursuant to Articles 106, 107 and 109 of the Code. As clarified by the Court in Rosewood:
. . . Under these cited provisions of the Labor Code should the contractor fail to pay the wages of its employees in accordance with law, the indirect employer (the petitioner in this case), is jointly and severally liable with the contractor, but such responsibility should be understood to be limited to the extent of the work performed under the contract, in the same manner and extent that he is liable to the employees directly employed by him. This liability of petitioner covers the payment of the workers' performance of any work, task, job or project. So long as the work, task, job or project has been performed for petitioner's benefit or on its behalf, the liability accrues for such period even if, later on, the employees are eventually transferred or reassigned elsewhere.
The complainants' service incentive leave pay accrued to them during the years 1991-1993; that is, before they were illegally dismissed by the Agency on January 16, 1994, as clearly shown in the labor arbiter's computation (see last page of Annex "A" to the Petition; rollo, p. 31). WHEREFORE, the Motion for Reconsideration filed by the Agency is hereby DENIED, as it (1) raises the same basic issues already sufficiently passed upon in the Court's Decision and (2) fails to submit any substantial argument to warrant reversal or modification thereof insofar as its liabilities are concerned. The Motion for Reconsideration filed by the Client is GRANTED IN PART. We hereby CLARIFY that for complainants' back wages and separation pay, Philippine American Life Insurance Company is ABSOLVED from liability; but for complainants' service incentive leave pay, its solidary liability with the Agency is REITERATED.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 148130 June 16, 2006
PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING (BAHAMAS) CO., LTD.) and TRANS-GLOBAL MARITIME AGENCY, INC., Petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO, Respondents.
D E C I S I O N CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 25 January 2001 Decision2 and 7 May
2001 Resolution3 of the Court of Appeals in CA-G.R. SP No. 54756.
The Antecedent Facts
On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso") through Trans-Global Maritime Agency, Inc. ("Trans-Trans-Global") hired Florello W. Tanchico ("Tanchico") as First Assistant Engineer. In 1981, Tanchico became Chief Engineer. On 13 October 1992, Tanchico returned to the Philippines for a two-month vacation after completing his eight-month deployment.
On 8 December 1992, Tanchico underwent the required standard medical examination prior to boarding the vessel. The medical examination revealed that Tanchico was suffering from "Ischemic Heart Disease, Hypertensive Cardio-Muscular Disease and Diabetes Mellitus." Tanchico took medications for two months and a subsequent stress test showed a negative result. However, Esso no longer deployed Tanchico. Instead, Esso offered to pay him benefits under the Career Employment Incentive Plan. Tanchico accepted the offer.
On 26 April 1993, Tanchico filed a complaint against Esso, Trans-Global and Malayan Insurance Co., Inc. ("Malayan") before the Philippine Overseas Employment Administration (POEA) for illegal dismissal with claims for backwages, separation pay, disability and medical benefits and 13th month pay. In view of the enactment of Republic Act No. 8042 ("RA 8042")4 transferring to
the National Labor Relations Commission (NLRC) the jurisdiction over money claims of overseas workers, the case was indorsed to the Arbitration Branch of the National Capital Region. In a Decision5 dated 16 October 1996, Labor Arbiter Jose G. De Vera ("Labor Arbiter De
Vera") dismissed the complaint for lack of merit. Tanchico appealed to the NLRC.
In its Resolution6 of 3 September 1998, the NLRC affirmed the Decision of Labor Arbiter De
Vera. Tanchico filed a motion for reconsideration. In a Resolution7 promulgated on 29 March
1999, the NLRC reconsidered its 3 September 1998 Resolution, as follows:
On the claim of illegal dismissal, the same is unavailing as complainant had been declared as one with partial permanent disability. Thus, he should be entitled to disability benefit of 18 days for every year of credited service of fourteen (14) years less the amount he already received under the Company’s Disability Plan.
On the claim of 13th month pay, the respondent Agency not falling under the enumerated exempted employers under P.D. 851 and in the absence of any proof that respondent is already paying its employees a 13th month pay or more in a calendar year, perforce, respondent agency should pay complainant his monthly pay computed at [sic] the actual month [sic] worked, which is 8 months.
Since complainant was forced to litigate his case, he is hereby awarded 10% of the total award as attorney’s fees.
SO ORDERED.8
Esso and Trans-Global moved for the reconsideration of the 29 March 1999 Resolution.9 In its
27 July 1999 Resolution,10 the NLRC denied their motion.
Esso, now using the name Petroleum Shipping Limited ("Petroleum Shipping"), and Trans-Global (collectively referred to as "petitioners") filed a petition for certiorari before the Court of Appeals assailing the 29 March 1999 and 27 July 1999 Resolutions of the NLRC.
The Ruling of the Court of Appeals
In its Decision promulgated on 25 January 2001, the Court of Appeals affirmed in toto the 29 March 1999 Resolution of the NLRC.
The Court of Appeals ruled that Tanchico was a regular employee of Petroleum Shipping. The Court of Appeals held that petitioners are not exempt from the coverage of Presidential Decree No. 851, as amended ("PD 851")11which mandates the payment of 13th month pay to all
employees. The Court of Appeals further ruled that Tanchico is entitled to disability benefits based on his 14 years of tenure with petitioners. The Court of Appeals stated that the employer-employee relationship subsisted even during the period of Tanchico’s vacation. The Court of Appeals noted that petitioners were aware of Tanchico’s medical history yet they still deployed him for 14 years. Finally, the Court of Appeals sustained the award of attorney’s fees.
Petitioners moved for the reconsideration of the Decision. In its 7 May 2001 Resolution, the Court of Appeals modified its Decision by deducting Tanchico’s vacation from his length of service. Thus:
WHEREFORE, our decision is hereby MODIFIED. The petitioners are ordered to pay to the private respondent the following: (1) disability wages equivalent to 18 days per year multiplied by 10 years less any amount already received under the company’s disability plan; prorated 13th month pay corresponding to eight (8) months of actual work; and attorney’s fee equivalent to 10% of the total award.
SO ORDERED.12
Petitioners went to this Court for relief on the following grounds:
I. The Court of Appeals decided a question of substance not in accord with law, applicable decision of this Court and International Maritime Law when it ruled that private respondent, a seafarer, was a regular employee;
II. The Court of Appeals decided a question of substance not in accord with law when it held that the private respondent was entitled to greater disability benefit than he was [sic];
III. The Court of Appeals decided a question of substance not heretofore determined by this Court when it ruled that private respondent was entitled to 13th month pay although it was not provided for in the contract of employment between petitioners and private respondent; and
IV. The Court of Appeals decided a question of substance not in accord with law when it awarded private respondent attorney’s fees despite the Labor Arbiter’s and the public respondent’s, albeit initially, dismissal of the complaint.13
The Issues
The issues are as follows:
1. Whether Tanchico is a regular employee of petitioners; and
2. Whether Tanchico is entitled to 13th month pay, disability benefits and attorney’s fees.
The Ruling of This Court
The petition is partly meritorious.
Seafarers are Contractual Employees
In Ravago v. Esso Eastern Marine, Ltd.,14 the Court traced its ruling in a number of cases that
seafarers are contractual, not regular, employees. Thus, in Brent School, Inc. v. Zamora,15 the
Court cited overseas employment contract as an example of contracts where the concept of regular employment does not apply, whatever the nature of the engagement and despite the provisions of Article 280 of the Labor Code. In Coyoca v. NLRC,16 the Court held that the
agency is liable for payment of a seaman’s medical and disability benefits in the event that the principal fails or refuses to pay the benefits or wages due the seaman although the seaman may not be a regular employee of the agency.
The Court squarely passed upon the issue in Millares v. NLRC17 where one of the issues raised
was whether seafarers are regular or contractual employees whose employment are terminated everytime their contracts of employment expire. The Court explained:
[I]t is clear that seafarers are considered contractual employees. They can not be considered as regular employees under Article 280 of the Labor Code. Their employment is governed by the contracts they sign everytime they are rehired and their employment is terminated when the contract expires. Their employment is contractually fixed for a certain period of time. They fall under the exception of Article 280 whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. We need not depart from the rulings of the Court in the two aforementioned cases which indeed constitute stare decisis
with respect to the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they have rendered services which are usually necessary and desirable to the business of their employer, and that they have rendered more than twenty (20) years of service. While this may be true,
the Brent case has, however, held that there are certain forms of employment which also require the performance of usual and desirable functions and which exceed one year but do not necessarily attain regular employment status under Article 280. Overseas workers including seafarers fall under this type of employment which are governed by the mutual agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino Seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be longer than 12 months. It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the mutual interest of both the seafarer and the employer why the employment status must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they can not stay for a long and an indefinite period of time at sea. Limited access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew during the COE is a reality that necessitates the limitation of its period.
Petitioners make much of the fact that they have been continually re-hired or their contracts renewed before the contracts expired (which has admittedly been going on for twenty (20) years). By such circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by practical considerations that experienced crew members are more preferred. Petitioners were only given priority or preference because of their experience and qualifications but this does not detract the fact that herein petitioners are contractual employees. They can not be considered regular employees. x x x18
The Court reiterated the Millares ruling in Gu-Miro v. Adorable19 where it held that a radio
officer on board a vessel cannot be considered as a regular employee notwithstanding that the work he performs is necessary and desirable in the business of the company.
Thus, in the present case, the Court of Appeals erred in ruling that Tanchico was a regular employee of Petroleum Shipping.
On 13th Month Pay
The Court of Appeals premised its grant of 13th month pay on its ruling that Tanchico was a regular employee. The Court of Appeals also ruled that petitioners are not exempt from the coverage of PD 851 which requires all employers to pay their employees a 13th month pay. We do not agree with the Court of Appeals. Again, Tanchico was a contractual, not a regular, employee. Further, PD 851 does not apply to seafarers. The WHEREAS clauses of PD 851 provides:
WHEREAS, it is necessary to further protect the level of real wages from ravages of world-wide inflation;
WHEREAS, there has been no increase in the legal minimum wage rates since 1970; WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year.
