laborstandards - cases - aug24

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G.R. Nos. 82763-64 March 19, 1990

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,vs.

NATIONAL LABOR RELATIONS COMMISSION, LABOR

ARBITER ISABEL P. ORTIGUERRA, and LABOR ALLIANCE FOR NATIONAL DEVELOPMENT, respondents.

The Legal Counsel for petitioner.

Piorello E. Azura, Errol Ismael, B. Palaci and Maria Lourdes C. Legaspi

for APT.

Pablo B. Castillon for respondent LAND.

MELENCIO-HERRERA, J.:

This Petition for Certiorari addresses itself to the 12 February 1986 Order of the National Labor Relations Commission directing petitioner Development Bank of the Philippines (DBP) to remit the sum of P6,292,380.00 "out of proceeds of the foreclosed properties of Lirag TextileMills Inc., sold at public auction in order to satisfy the judgment" in NLRCCases Nos. NCR-3-2581-82 and 2-2090-82.

The background facts of these two cases may be summarized as follows:

The complainants in the two cases filed below were former employees of Lirag Textile Mills, Inc. (LIRAG, for short). LIRAG was a mortgage debtor of DBP. Private respondent Labor Alliance for National Development(LAND, for brevity) was the bargaining representative of the more or less800 former rank and file employees of LIRAG. Around September 1981,LIRAG started terminating the services of its employees on the ground of retrenchment. By December of the said year there were already 180 regular employees separated from the service. LIRAG has since ceased operations presumably due to financial reverses.

In February 1982, Joselito Albay, one of the employees dismissed inSeptember 1981, filed a complaint before the National Labor RelationsCommission (NLRC) against LIRAG for illegal dismissal (Case No. 2-2090-82). On 1 March 1982, LAND, on behalf of 180 dismissed members,also filed a Complaint against LIRAG seeking separation pay, 13th month

pay, gratuity pay, sick leave and vacation leave pay and emergencyallowance (Case No. 3-2581-82). These two cases were consolidated and jointly heard by the NLRC. Said complainants have since been joined bysupervisors and managers.

In a Decision, dated 30 July 1982, Labor Arbiter Apolinar L. Sevillaordered LIRAG to pay the individual complainants. The NLRC (ThirdDivision) affirmed the same on 28 March 1982. That judgment becamefinal and executory.

On 15 April 1983, a Writ of Execution was issued. On the same day, DBPextrajudicially foreclosed the mortgaged properties for failure of LIRAG to

pay its mortgage obligation. As the only bidder at the foreclosure sale, DBPacquired said mortgaged properties for P31,346,462.90. Since DBP was thesole mortgagee, no actual payment was made, the amount of the bid having been merely credited in partial satis faction of LIRAG's indebtedness.

By reason of said foreclosure, the Writ of Execution issued in favor of thecomplainants remained unsatisfied. A Notice of Levy on Execution on the properties of LIRAG was then entered.

On 7 December 1984, LAND filed a "Motion for Writ of Execution andGarnishment" of the proceeds of the foreclosure sale.

On 30 May 1985, upon motion of LAND, Labor Arbiter Apolinar L. Sevillaordered the DBP impleaded "in the interest of justice and due process," andrequired it to intervene.

On 12 February 1986, and over the opposition of DBP, Labor Arbiter Sevilla granted the Writ of Garnishment and directed DBP to remit to the NLRC the sum of P6,292,380.00 out of the proceeds of the foreclosed properties of LIRAG sold at public auction in order to satisfy the judgment previously rendered.



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DBP sought reconsideration of the above Order on the grounds of NLRC'slack of jurisdiction over it since it was not a party to the case, and that itwas deprived of its property without due process of law. Public respondent,Labor Arbiter Isabel P. Ortiguerra denied reconsideration on 25 May 1987.DBP appealed that denial to the NLRC.

In the meantime, on 3 February 1987, by virtue of Proclamation Nos. 50and 50-A, the Asset Privatization Trust (APT) became the transferee of theDBP foreclosed assets of LIRAG. On 12 July 1989, by virtue of thattransfer, we deemed APT impleaded as a party-petitioner and gave it timewithin which to file its pleading. It submitted a Memorandum on 22 November 1989.

It appears that on 21 December 1987, a partial Compromise Agreement wasentered into between APT and LAND (Litex Chapter) whereby APT paidthe complainants-employees, ex gratia, the sum of P750,000.00 "in fullsettlement of their claims, past and present, with respect to all assets of

LITEX transferred by DBP to APT." That amount was received by LAND'slocal President. Apparently, however, on 25 January 1988, LAND, throughits national President, filed its opposition to the Compromise Agreement for being contrary to law, morals and public policy.

On 25 March 1988, the NLRC (First Division) affirmed the appealed Order and dismissed the DBP appeal.

DBP is now before us seeking a review and reversal. On 30 January 1989,the Court resolved to give due course to the petition and to require the parties to submit simultaneous memoranda. On 1 February 1990, the Court'sSecond Division referred the case to the Court en banc, which the latter accepted on the same date.

It is true that DBP was not an original party and that it was orderedimpleaded only after the Writs of Execution were not satisfied because the properties levied upon on execution had been foreclosed extrajudicially byit. DBP had to be impleaded, however, for the proper satisfaction of a final judgment. Being an incident in the execution of the final judgment award, NLRC retained jurisdiction and control over the case and could issue suchorders as were necessary for the implementation of that award. Its inclusionas a party could not have been accomplished at the earlier stages of the

proceedings because at the time of the filing of the Complaint, privaterespondents' cause of action was only against LIRAG.

DBP cannot rightfully contend that it was deprived of due process. It wasgiven the opportunity to be heard and to present its evidence. It had actually

filed its Opposition to the Motion for Execution and Garnishment filed byLAND on 7 January 1985, and the Order granting the Motion was issuedonly after hearing. DBP had also addressed an appeal to the NLRC. It hadsubmitted, therefore, to the jurisdiction of the NLRC.

Now, for the core issue — whether or not the NLRC gravely abused itsdiscretion in affirming the Order of the Labor Arbiter granting the Writ of Garnishment out of the proceeds of LIRAG's properties foreclosed by DBPto satisfy the judgment in these cases.

We are constrained to rule in the affirmative.

Article 110 of the Labor Code provides:

Art. 110. Worker preference in case of bankruptcy. — Inthe event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference asregards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary notwithstanding. Unpaid wagesshall be paid in full before other creditors may establishany claim to a share in the assets of the employer.

In implementation of the foregoing, Section 10, Rule VIII, Book III of theRevised Rules and Regulations Implementing the Labor Code, as amended, provides:

Sec. 10. Payment of wages in case of bankruptcy. — Unpaid wages earned by the employees before thedeclaration of bankruptcy or judicial liquidation of theemployer's business shall be given first preference andshall be paid in full before other creditors may establishany claim to a share in the assets of the employer.(Emphasis supplied).



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In interpreting the foregoing provisions, the Court, in Development Bank of

the Philippines vs. Santos (G.R. Nos. 78261-62, 8 March 1989),categorically stated:

It is quite clear from the provision that a declaration of

bankruptcy or a judicial liquidation must be present before the workers preference may be enforced. Thus,Article 110 of the Labor Code and its implementing rulecannot be invoked by the respondents in this case absent aformal declaration of bankruptcy or a liquidation order. . ..

Since then, however, Article 110 has been amended by Republic Act No.6715 and now reads as follows:

Sec. 1. Article 110 of Presidential Decree No. 442, asamended, otherwise known as the Labor Code of the

Philippines, is hereby further amended to read as follows:

Art. 110. Worker preference in case of bankruptcy . — Inthe event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference asregards their unpaid wages and other monetary claims,any provision of law to the contrary notwithstanding.Such unpaid wages and monetary claims shall be paid infull before the claims of the Government and other

creditors may be paid . (Amendments emphasized).

The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Governmentmust be deemed subordinate.

Section 10, Rule III, Book III of the Omnibus Rules Implementing theLabor Code has also been amended by Section 1 of the Rules andRegulations Implementing RA 6715 as approved by the then Secretary of Labor and Employment on 24 May 1989, and now provides:

Sec. 10. Payment of wages and other monetary claims in

case of bankruptcy. — In case of bankruptcy or

liquidation of the employer's business, the unpaid wagesand other monetary claims of the employees shall begiven first preference and shall be paid in full before theclaims of government and other creditors may be paid.

Notably, the terms "declaration" of bankruptcy or "judicial" liquidationhave been eliminated. Does this mean then that liquidation proceedingshave been done away with?

We opine in the negative, upon the following considerations:

1. Because of its impact on the entire system of credit, Article 110 of theLabor Code cannot be viewed in isolation but must be read in relation to theCivil Code scheme on classification and preference of credits.

Article 110 of the Labor Code, in determining the reachof its terms, cannot be viewed in isolation. Rather, Article110 must be read in relation to the provisions of the CivilCode concerning the classification, concurrence and preference of credits, which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or non-preferred, may beadjudicated in a binding manner. . . . Republic vs. Peralta(G.R. No. L-56568, May 20, 1987, 150 SCRA 37).

2. In the same way that the Civil Code provisions on classification of creditsand the Insolvency Law have been brought into harmony, so also must thekindred provisions of the Labor Law be made to harmonize with those laws.

3. In the event of insolvency, a principal objective should be to effect anequitable distribution of the insolvent's property among his creditors. Toaccomplish this there must first be some proceeding where notice to all of the insolvents's creditors may be given and where the claims of preferredcreditors may be bindingly adjudicated (De Barretto vs. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale therefore has beenexpressed in the recent case of DBP vs. Secretary of Labor (G.R. No.79351, 28 November 1989), which we quote:



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A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of other claims which may be established against the debtor.Logically, it becomes material only when the propertiesand assets of the debtors are insufficient to pay his debts

in full; for if the debtor is amply able to pay his variouscreditors in full, how can the necessity exist to determinewhich of his creditors shall be paid first or whether theyshall be paid out of the proceeds of the sale the debtor'sspecific property? Indubitably, the preferential right of credit attains significance only after the properties of thedebtor have been inventoried and liquidated, and theclaims held by his various creditors have been established(Kuenzle & Streiff (Ltd.) vs. Villanueva, 41 Phil 611(1916); Barretto vs. Villanueva, G.R. No. 14938, 29December 1962, 6 SCRA 928; Philippine Savings Bank vs. Lantin, G.R. 33929, 2 September 1983, 124 SCRA

476).

4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties.A lien creates a charge on a particular property. The right of first preferenceas regards unpaid wages recognized by Article 110 does not constitute alien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a methodadopted to determine and specify the order in which credits should be paidin the final distribution of the proceeds of the insolvent's assets. It is a rightto a first preference in the discharge of the funds of the judgment debtor.

In the words of Republic vs. Peralta, supra:

Article 110 of the Labor Code does not purport to create alien in favor of workers or employees for unpaid wageseither upon all of the properties or upon any particular property owned by their employer. Claims for unpaidwages do not therefore fall at all within the category of specially preferred claims established under Articles 2241and 2242 of the Civil Code, except to the extent that such

complaints for unpaid wages are already covered by

Article 2241, number 6: "claims for laborers wages, on

the goods manufactured or the work done;" or by Article

2242, number 3: "claims of laborers and other workersengaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings,canals and other works, upon said buildings, canals and

other works." To the extent that claims for unpaid wagesfall outside the scope of Article 2241, number 6 and 2242,number 3, they would come within the ambit of thecategory of ordinary preferred credits under Article 2244.

5. The DBP anchors its claim on a mortgage credit. A mortgage directly andimmediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security itwas constituted (Article 2176, Civil Code). It creates a real right which isenforceable against the whole world. It is a lien on an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on classification of

credits. The preference given by Article 110, when not falling within Article2241 (6) and Article 2242 (3) of the Civil Code and not attached to anyspecific property, is an ordinary preferred credit although its impact is tomove it from second priority to first priority in the order of preferenceestablished by Article 2244 of the Civil Code (Republic vs. Peralta, supra).

In fact, under the Insolvency Law (Section 29) a creditor holding amortgage or lien of any kind as security is not permitted to vote in theelection of the assignee in insolvency proceedings unless the value of hissecurity is first fixed or he surrenders all such property to the receiver of theinsolvent's estate.

6. Even if Article 110 and its Implementing Rule, as amended, should beinterpreted to mean "absolute preference," the same should be given only prospective effect in line with the cardinal rule that laws shall have noretroactive effect, unless the contrary is provided (Article 4, Civil Code).Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III, 1987Constitution) is also avoided. In point of fact, DBP's mortgage creditantedated by several years the amendatory law, RA No. 6715. To giveArticle 110 retroactive effect would be to wipe out the mortgage in DBP'sfavor and expose it to a risk which it sought to protect itself against byrequiring a collateral in the form of real property.



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In fine, the right to preference given to workers under Article 110 of theLabor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. But,

for an orderly settlement of a debtor's assets, all creditors must be convened,their claims ascertained and inventoried, and thereafter the preferencesdetermined in the course of judicial proceedings which have for their objectthe subjection of the property of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication made will be binding on all parties-in-interest, since those proceedings are proceedings in

rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony.

WHEREFORE, Certiorari is GRANTED, and the assailed Decision of public respondent, the National Labor Relations Commission (NLRC),dated 25 March 1988, is hereby SET ASIDE.

The Development Bank of the Philippines, the Asset Privatization Trust, theLabor Alliance for National Development (LAND), and other creditors whomay be so minded, are hereby directed, within sixty (60) days from notice,to institute involuntary insolvency proceedings before the proper Courtwhere all the assets of Lirag Textile Mills, Inc., may be inventoried, the preferences of all its creditors determined, and their claims discharged in a binding and conclusive manner. No costs.

SO ORDERED.



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G.R. No. 126773 April 14, 1999

RUBBERWORLD (PHILS.), INC., or JULIE YAP ONG , petitioner,vs.

NATIONAL LABOR RELATIONS COMMISSION, MARILYN F.

ARELLANO, EMILY S. LEGASPI, MYRNA S. GALGANA,MERCEDITA R. SONGCO, WILFREDO V. SANTOS, JOSEPHINES. RAMOS, REDENTOR G. HONA, LUZ B. HONA, ROLANDO B.CRUZ, GUILLERMA R. MUZONES, CARMELITA V. HALILI,SUSAN A. REYES, EMILY A. ROBILLOS, PLACIDO REYES,MANOLITO DELA CRUZ, VICTORINO C. FRANCISCO, ROGER B. MARIÑAS, VIOLETA ALEJO, RICARDO T. TORRES, EMMADELA TORRE, PERLA N. MANZANERO, FRANCISCO D.SERDONCILLO, LUISITO P. HERNANDEZ, RAYMOND PEREÑA,EDITHA A. SERDONCILLO, FRANCISCO GENER, MARIO B.REYES, VALERIANO A. HERRERA, JORGE S. SEÑERES, ELENAS. IGNACIO, EMERITA S. CACHERO, NERIZA G. ENRIQUEZ,

LOLITA M. FABULAR, NORMITA M. HERNANDEZ,DOMINADOR P. ENRIQUEZ, respondents.

PANGANIBAN, J

Presidential Decree 902-A, as amended, provides that "upon theappointment of a management committee, rehabilitation receiver, board or body pursuant to this Decree, all actions for claims against corporations, partnerships, or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. 1 Such suspension is intended to give enough breathing space for themanagement committee or rehabilitation receiver to make the businessviable again, without having to divert attention and resources to litigationsin various fora. Among the actions suspended are those for money claims before labor tribunals, like the National Labor Relations Commission(NLRC) and the labor arbiters.

Statement of the Case

The foregoing summarizes this Court's grant of the Petition for Certiorari under Rule 65 of the Rules of Court, assailing the April 26, 1996 Resolution2 promulgated by the NLRC 3 which upheld the labor arbiter's refusal tosuspend proceedings involving monetary claims of the petitioner'semployees.

Petitioner likewise assails the June 20, 1996 NLRC Resolution 4 whichdenied its Motion for Reconsideration.

On November 20, 1996, this Court issued a temporary restraining order,signed by then Chief Justice Andres R. Narvasa, "restraining the publicrespondents from further conducting proceedings in the aforesaid caseseffective immediately . . .

The Facts

The facts are undisputed. They are narrated by the Office of the Solicitor general as follows:

Petitioner . . . is a domestic corporation which used to bein the business of manufacturing footwear, bags andgarments. It filed with the Securities and ExchangeCommission on November 24, 1994 a petition for suspension of payments praying that it be declared in astate of suspension of payments and that the SECaccordingly issue an order restraining its creditors fromenforcing their claims against petitioner corporation. Itfurther prayed for the creation of a managementcommittee as well as for the approval of the proposedrehabilitation plan and memorandum of agreement between petitioner corporation and its creditors.

In an order dated December 28, 1994, the SEC favorablyruled on the petition for suspension of payments thusly:

Accordingly, with the creation of theManagement Committee, all actions for claims against RubberworldPhilippines, Inc. pending before any



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court, tribunal, office, board, bodyCommission of Sheriff are herebydeemed SUSPENDED.

Consequently, all pending incidents for

preliminary injunctions, writ of attachments ( sic), foreclosures and thelike are hereby rendered moot andacademic.

Private respondents, who claim to be employees of petitioner corporation, filed against petitioners [from]April to July 1995 their respective complaints for illegaldismissal, unfair labor practice, damages and payment of separation pay, retirement benefits, 13th month pay andservice incentive pay.

Petitioners moved to suspend the proceedings in theabove labor cases on the strength of the SEC Order datedDecember 28, 1994. Likewise, petitioners cited therulings of BF Homes vs. Court of Appeals (190 SCRA262), Alemar's Sibal & Sons. Inc., vs. Elbinias (186SCRA 94) and Bank of Philippine Islands vs. Court of

Appeals (229 SCRA 223) to support their motion tosuspend the proceedings in the labor cases.

In an Order dated September 25, 1995, the Labor Arbiter denied the aforesaid motion holding that the injunctioncontained in the SEC Order applied only to the

enforcement of established rights and did not include thesuspension of proceedings involving claims against petitioner which have yet to be ascertained. The Labor Arbiter further held that the order of the SEC suspendingall actions for claims against petitioners does not cover the claims of private respondents in the labor cases because said claims and the concomitant liability of petitioners still had to be determined, thus carrying nodissipation of the assets of petitioners.1âwphi1.nêt

Petitioners appealed the adverse order of the Labor Arbiter to public respondent which, in a Resolution datedApril 26, 1996, dismissed the appeal for lack of merit and,instead, sustained the rulings of the Labor Arbiter.

The motion for reconsideration of petitioners fared no better and was denied by public respondent in aResolution dated June 20, 1996. 5

Hence, this petition. 6

The Issue

Petitioner raises only one issue:

Whether or not the Respondent NLRC acted without or in

excess of jurisdiction or with grave abuse of discretionamounting to lack of jurisdiction in affirming the order of Labor Arbiter Voltaire A. Balitaan denying petitioners'motion to suspend proceedings despite the Order of theSecurities and Exchange Commission under Sec. 6 (c) of P.D. 902-A directing the suspension of all actions againsta company under the first stages of insolvency proceedings. 7

This Court's Ruling

The petition is meritorious.

Sole Issue:

Suspension of Proceedings

Jurisprudence teaches us:

. . . where the petition filed is one for declaration of a stateof suspension of payments due to a recognition of theinability to pay one's debts and liabilities, and where the



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petitioning corporation either: (a) has sufficient propertyto cover all its debts but foresees the impossibility of meeting them when they fall due (solvent but illiquid) or (b) has no sufficient property (insolvent) but is under themanagement of a rehabilitation receiver or a management

committee, the applicable law is P.D. 902-A pursuant toSec. 5 par. (d) thereof. However, if the petitioningcorporation has no sufficient assists to cover its liabilitiesand is not under a rehabilitation receiver or a managementcommittee created under P.D. 902-A and does not seek merely to have the payments of its debts suspended, butseeks a declaration of insolvency . . . the applicable law isAct 1956 [The Insolvency Law] on voluntary Insolvency,. . . 8

In the case at bar, Petitioner Rubberworld filed before the SEC a Petitionfor Declaration of Suspension of Payments, as well as a proposed

rehabilitation plan. On December 28, 1994, the SEC ordered the creation of a management committee and the suspension of all actions for claimsagainst Rubberworld. Clearly, the applicable law is PD 902-A, as amended,the relevant provisions of which read:

Sec. 5. In addition to the regulatory adjudicative functionsof the Commission over corporations, partnerships andother forms of associations registered with it as expresslygranted under existing laws and decrees, it shall haveoriginal and exclusive jurisdiction to hear and decidecases involving:

xxx xxx xxx

d) Petitions of corporations, partnerships or associationsto be declared in the state of payments in cases where thecorporation, partnership or association possessessufficient property to cover all its debts regulatory butforesees the impossibility of meeting them when theyrespectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a

rehabilitation receiver or management committee created pursuant to this Decree.

Sec. 6. In order to effectively exercise such jurisdiction,the Commission shall possess the following powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, realor personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other caseswhenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors: . . . Provided , finally, That uponappointment of a management committee, therehabilitation receiver, board or body, pursuant to this

Decree, all actions for claims against corporations, partnerships, or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly.

It is plain from the foregoing provisions of law that "upon the appointment[by the SEC] of a management committee or a rehabilitation receiver," allactions for claims against the corporation pending before any court, tribunalor board shall ipso jure be suspended. 9 The justification for the automaticstay of all pending actions for claims "is to enable the managementcommittee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might

unduly hinder or prevent the "rescue" of the debtor company. To allow suchother actions to continue would only add to the burden of the managementcommittee or rehabilitation receiver, whose time, effort and resourceswould be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation. 10

Parenthetically, the rehabilitation of a financially distressed corporation benefits its employees, creditors, stockholders and, in a larger sense, thegeneral public, And in considering whether to rehabilitate or not, the SECgives preference to the interest of creditors, including employees. The



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reason its that shareholders can recover their investments only uponliquidation of the corporation, and only if there are assets remaining after allcorporate creditors are paid. 11

Labor Claims Included

in Suspension Order

The solicitor general, representing Public Respondent NLRC, argues thatthe rationale for an automatic stay will not be frustrated even if the NLRC proceeds with the disposition of these labor cases, because any favorableobtained by the private respondents would only establish their rights ascreditors. The solicitor general also contends that the assailed Resolutionsof the NLRC will not result in an undue preference for the assets of Rubberworld, as the private respondents will still present their claims beforethe management committee. 12

We disagree. The law is clear: upon the creation of a managementcommittee or the appointment of a rehabilitation receiver, all claims for actions "shall be suspended accordingly." No exception in favor of labor claims is mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos

distinguere debemos. 13 Allowing labor cases to proceed clearly defeats the purpose of the automatic stays and severally encumbers the managementcommittee's and resources. The said committee would need to defendagainst these suits, to the detriment of its primary and urgent duty to work towards rehabilitating the corporation and making it viable again. The ruleotherwise would open the floodgates to other similarly situated claimantsand forestall if not defeat the rescue efforts. Besides, even if the NLRC

awards the claims of private respondents, as it did, its ruling could not beenforced as long as the petitioner is under the management committee. 14

In Chua v. National Labor Relations Commission, 15 we ruled that labor claims cannot proceed independently of a bankruptcy liquidation proceeding, since these claims "would spawn needless controversy, delays,andconfusion." 16 With more reason, allowing labor claims to continue in spiteof a SEC suspension order in a rehabilitation case would merely lead tosuch results.

The solicitor general insists that since Article 217 of the Labor Code 17 vested [public respondent with jurisdiction to hear and decide these labor cases, the NLRC did not exceed its jurisdiction when it refused to suspendthe proceeding therein. 18 The Court is not persuaded.

Article 217 of the Labor Code should be construed not in isolation but inharmony with PD 902-A, according to the basic rule in statutoryconstruction that implied repeals are not favored. 19 Indeed, it is axiomaticthat each and every statute must be construed in a way that would avoidconflict with existing laws. 20 true, the NLRC has the power to hear anddecide labor disputes, but such authority is deemed suspended when PD902-A is put into effect by the Securities and Exchange Commission.

Preference in Favor of Workers in

Case of Bankruptcy or Liquidation

The private respondents contend that automatic stay under PD 902-A is notapplicable to the instant case; otherwise, the preference granted to workers by Article 110 of the Labor Code would be rendered ineffective. 21 Thiscontention is misleading.

The preferential right of workers and employees under Article 110 of theLabor code may be invoked only upon the institution of insolvency or judicial liquidation proceeding. 22 Indeed, it is well-settled that "adeclaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced." 23 But debtorsresort to preference of credit — giving preferred creditors the rights to havetheir claims paid ahead of those of other claimants — only when their assetsare insufficient to pay their debts fully. 24 The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease on lifeand thereby allow creditors to be paid their claims from its earnings. Ininsolvency proceedings, on the other hand, the company stops operating,and the claims of creditors are satisfied from the assets of the insolventcorporation. The present case involves the rehabilitation, not the liquidation,of petitioner-corporation. Hence, the preference of credit granted to workersor employees under Article 110 of the Labor Code is not applicable.

Duration of Automatic



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Stay Under PD 902-A

Finally, private respondents posit that under Section 6 of the InsolvencyLaw, the December 28, 1994 Order of the SEC suspending all actions for claims against Rubberworld should have expired after three months, in the

absence of an agreement between the company and the corporate creditors.25 Private respondents also accuse the SEC of abusing its power by"allowing said suspension order to remain pending for many years withoutresolving and approving any rehabilitation plan." 26 They contend that"[t]his is fatal to the instant petition for it had been a party to the abuse bythe SEC of its suspension order." 27

This Court notes that PD 902-A itself does not provide for the duration of the automatic stay. Neither does the Order 28 of the SEC. Hence, thesuspensive effect has no time limit and remains in force as long asreasonably necessary to accomplish the purpose of the Order. 29 On theother hand, the attack against the SEC's alleged "abuse of power" is

misplaced. Under review in this Petition for Certiorari are Resolutions of the NLRC, nor of the SEC. The scope of this review is thus limited towhether the NLRC gravely abused or exceeded its jurisdiction in refusing toheed the SEC Order of Suspension and in issuing its challengedResolutions. In any event, the bare allegation of inaction is insufficient tocondemn the Securities and Exchange Commission and the managementcommittee where, it should be noted, all affected parties, including the labor union in the company, are represented.

WHEREFORE, the petition is hereby GRANTED. The assailed Resolutionsof the NLRC dated April 26, 1996, and June 20, 1996, are REVERSED andSET ASIDE. No costs.

SO ORDERED.



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G.R. No. 117195 February 20, 1996

DANNY T. RASONABLE, petitioner,vs.

NATIONAL LABOR RELATIONS COMMISSION, JOEY

GUEVARRA AND VICTORY LINER, INC., respondents.

D E C I S I O N

PUNO, J .:

On March 19, 1993, petitioner DANNY T. RASONABLE filed a complaintfor illegal dismissal with the Regional Arbitration Branch No. III, SanFernando, Pampanga, against private respondents VICTORY LINER, INC.and JOEY GUEVARRA, praying for reinstatement, payment of backwagesand other benefits, damages and attorney's fees.1

In a Decision,2 dated November 8, 1993, Labor Arbiter Ariel C. Santosfound private respondents guilty of illegal dismissal. They were ordered to pay petitioner the total sum of P84,957.47, representing the latter's backwages from March 1, 1993 (when petitioner was illegally dismissed)up to November 8, 1993 (the date of the Labor Arbiter's Decision), 13thmonth pay, separation pay equivalent to one-half month salary for everyyear of service and ten percent (10%) of the total award as attorney's fees.

Dissatisfied, both parties appealed to the National Labor RelationsCommission (NLRC). In his appeal,3 petitioner prayed that the Labor Arbiter's Decision be modified by awarding him instead full backwages,

separation pay equivalent to one (1) month pay for every year of service,and other benefits which he would have received had he not been illegallydismissed.

Upon the other hand, private respondents claimed that the Labor Arbiter decided their case when it was not as yet submitted for decision as the parties were then in the verge of striking an amicable settlement. They prayed that the case be remanded to the Labor Arbiter for settlement and/or reception of further evidence of both parties.4

In a Decision,5 dated March 30, 1994, the NLRC modified the Decision of the Labor Arbiter by increasing the award of separation pay from one-half (1/2) month pay to one (1) month pay for every year of service and bydeleting the award of attorney's fees. Both parties moved for reconsideration. Both motions were denied.6

They filed separate petitions for certiorari to this Court. Privaterespondents' petition, entitled "Victory Liner, Inc. v. NLRC, et al." (G.R. No. 116848) was filed on September 8, 1994 and they reiterated their position before the NLRC. The THIRD DIVISION of this Court, in aMinute Resolution, dated September 21, 1994, denied due course to privaterespondents' petition. Their motion for reconsideration was denied withfinality on November 16, 1994.7

Upon the other hand, petitioner filed the petition at bar against privaterespondents and the NLRC on October 6, 1994. His petition was given duecourse and the parties were directed to file their respective Memorandum.

In his petition, petitioner charges that public respondent NLRC committedgrave abuse of discretion: (a) in deleting the award of attorney's fees, and;(b) in failing to award other benefits, like holiday pay, service incentiveleave pay, 13th month pay, backwages and separation pay accruing from November 8, 1993 (the date of the labor arbiter's Decision) up to the finalitythereof.

At the outset, it bears emphasis that when the Third Division of this Courtdenied due course to private respondents' petition (G.R. No. 116848), theCourt in effect wrote finis to the issue of illegal dismissal. It is thus settledthat petitioner was illegally dismissed from service. Similarly a non-issue is

the labor arbiter's award of separation pay in lieu of reinstatement whichwas not challenged by petitioner in his appeal to the NLRC. What thenremains is the determination of the monetary awards to be adjudged to petitioner and the period covered thereby.

We hold that public respondent NLRC committed grave abuse of discretionwhen it ruled that there is no basis for the award of attorney's fees in favor of petitioner. It is settled that in actions for recovery of wages or where anemployee was forced to litigate and incur expenses to protect his rights andinterests, he is entitled to an award of attorney's fees .8

http://www.lawphil.net/judjuris/juri1996/feb1996/gr_117195_1996.html#fnt1


































12

We come now to the other monetary benefits being claimed by petitioner.Public respondent denied petitioner's claim for service incentive pay andholiday pay on the ground that petitioner failed to present substantialevidence to support his claim. In the absence of a clear showing by petitioner of grave abuse of discretion on the part of the publ ic respondent,its factual finding binds this Court.

Next, petitioner contends that as a result of his illegal dismissal, he isentitled to an award of separation pay, backwages and 13th month pay notonly from the time the complaint was filed up to the November 8, 1993Decision of the Labor Arbiter but also from the time the arbiter's decisionwas rendered up to the finality of said decision. He faults the ruling of the public respondent that under Art. 279 of the Labor Code, as amended bySection 34 of R.A. 6715, an illegally dismissed employee shall be entitledto reinstatement and to his full backwages and other benefits computedfrom the time his compensation was withheld from him up to the time of hisactual reinstatement. In the case at bar, instead of ordering petitioner's

reinstatement, the Labor Arbiter awarded to petitioner separation pay. Itcomputed the separation pay on the basis of petitioner's length of service,i.e. from the time of his employment up to the time of dismissal. Petitioner is thus deemed separated from service as of the date of the arbiter's decisionawarding him separation pay. Hence, public respondent held that petitioner is no longer entitled to an award of 13th month pay and backwages after thedate of the decision of the labor arbiter granting petitioner separation pay,the employer-employee relationship having ceased.

We find merit in petitioner's contention.

A look back on our law and jurisprudence on illegal dismissal is in order.

Originally, an illegally dismissed employee is entitled to the payment of backwages from the date of di smissal to the date of reinstatement less theamount he may have earned elsewhere during said period. Should thelaborer decide not to return to work, the deduction should be made up to thetime the judgment becomes final.9 Hence, under the old law, payment of backwages is computed from the time of dismissal up to finality of decisionin case the laborer is not reinstated. To prevent double compensation, theearnings derived by a dismissed employee in other jobs during the periodhis case is pending is deducted from the grant of backwages to be awardedto him. Likewise, the award of backwages would carry with it payment of

the benefits to which an employee would have been entitled if he were notdismissed.

Thereafter, in the case of Mercury Drug Co. v. Court of Industrial

Relations,10 the Court simplified the computation of backwages which was

unduly delaying the speedy termination of illegal dismissal cases bylimiting its payment to three (3) years without qualification or deduction.Under the Mercury Drug rule, the worker is to be paid his backwages fixedas of the time of his dismissal without deduction for their earningselsewhere during their lay-off and without qualification of their wages asthus fixed, i.e., unqualified by any increases or other benefits that may have been received by their co-workers who were not dismissed. 11 Such award isunderstood to be inclusive of leave benefits: in making the award, the courtnecessarily takes into consideration holidays, vacation leaves; all workingdays are paid for regardless of whether or not the same fall on holidays or employee's leave days; the regular allowances that the employee had beenreceiving should however be included in the salary base.12

The Mercury Drug rule was changed by Article 279 of the Labor Code, asamended by Section 34 of R.A. 6715.13 It provides:

Art. 279. Security of Tenure. In cases of regular employment, theemployer shall not terminate the services of an employee exceptfor a just cause or when authorized by this Title. An employee whois unjustly dismissed from work shall be entitled to reinstatement

without loss of seniority rights and other privileges and to his full

backwages, inclusive of allowances, and to his other benefits or

their monetary equivalent computed from the time his

compensation was withheld from him up to the time of his actual

reinstatement . (emphasis supplied).

As the law stands now, an employee who has been illegally dismissed after the effectivity of R.A. 6715 shall be entitled to reinstatement, full backwages and other benefits for the entire period that he was out of work and until actual reinstatement. However, in lieu of reinstatement, petitioner may instead be awarded separation pay. Separation pay is the amount thatan employee receives at the time of his severance from the service and isdesigned to provide the employee with the wherewithal during the periodthat he is looking for another employment.14 The grant of separation pay



























13

does not preclude an award for backwages for the latter represents theamount of earnings lost by reason of the unjustified dismissal. Additionally,a dismissed employee is entitled to 13th month pay.15

Public respondent holds that award of separation pay implies termination of

employment as of the date of the decision. Hence, from the date of thedecision of the labor arbiter granting separation pay, an illegally dismissedemployee is no longer entitled to an award of backwages and 13th month pay, the employer-employee relationship having been severed.

We are not persuaded. In a number of cases,16 we ruled that there is noinconsistency in the grant of both backwages and separation pay to anillegally dismissed employee. In Lim v. NLRC , supra, the Court elucidatedthe propriety of awarding both separation pay and backwages in this wise:

We have ordered the payment of both (separation pay and backwages) . . . as otherwise, the employee might be deprived of

benefits justly due him. Thus, if an employee who has worked onlyone year is sustained by the labor court after three years from hisunjust dismissal, granting him separation pay only would entitlehim to only one month salary. There is no reason why he shouldnot also be paid three years backwages corresponding to the periodwhen he could not return to his work or could not find employmentelsewhere.

A mere order for reinstatement issued by the labor arbiter is totally differentfrom actual restoration of an employee to his previous position. It is for thisreason that Article 279, as amended by R.A. 6715, provides for payment of full backwages and other benefits from the time of dismissal up to the time

of actual reinstatement . Thus, in case reinstatement is adjudged, the awardof backwages and other benefits continues beyond the date of the labor arbiter's decision ordering reinstatement and extends up to the time saidorder of reinstatement is actually carried out. Correlatively, an award of separation pay, in lieu of reinstatement, and other benefits due to theemployee, without actual payment thereof, does not have the effect of terminating the employment of an illegally dismissed employee. The awardof the labor arbiter could still be overturned or modified and, in most cases,its execution could be unreasonably delayed.17 Thus, until actual receipt of the award of separation pay, the employer-employee relationship subsists,

entitling the illegally dismissed employee to an award of backwages, 13thmonth pay and other benefits from the time of his dismissal until finality of the decision of the labor arbiter.

With the enactment of R.A. 6715, we now go back to the policy adopted by

this Court prior to the Mercury Drug rule, i.e., payment of full backwagesshall be made from the date of dismissal up to finality of the judgmentshould reinstatement be not decreed, less the amount which the dismissedemployee may have earned during said period, taking into consideration theincreases and other benefits, including the 13th month pay, received by hisco-employees who were not dismissed. Payment of separation pay shall becomputed from the date of the dismissed employee's service until finality of our decision.18

IN VIEW WHEREOF, the petition is hereby GRANTED. The Decision of public respondent NLRC is MODIFIED. The labor arbiter's award of attorney's fees is reinstated. Payment of backwages, less earnings

elsewhere, and qualified by increases and other benefits (including the 13thmonth pay) shall be computed from the date of his dismissal until thefinality of our decision. Payment of the separation pay, on the other hand,shall be computed from the date of petitioner's employment until finality of our decision. No cost.

SO ORDERED.



















14

G.R. No. 116354 December 4, 1997

HEIRS OF THE LATE R/O REYNALDO ANIBAN represented byBRIGIDA P. ANIBAN, petitioners,vs.

NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINETRANSMARINE CARRIERS, INC., NORWEGIAN SHIPMANAGEMENT, INC. A/S, and PIONEER INSURANCE ANDSURETY CORPORATION, respondents.

BELLOSILLO, J.:

BRIGIDA P. ANIBAN representing the heirs of the late Reynaldo Anibanassails the decision of the National Labor Relations Commission (NLRC), 1 reversing that of the Philippine Overseas Employment Administration

(POEA) which ruled that myocardial infarction was an occupationaldecease in the case of radio operator Reynaldo Aniban and awarded, asidefrom attorney's fees of US$6,700.00, a total of US$67,000.00 in death benefits to his heirs: US$13,000.00 for death benefits under the POEAStandard Employment Contract; US$30,000.00 for death benefits under theCollective Bargaining Agreement; and US$24,000.00 as additionalcompensation for his three (3) children under eighteen (18) years of age atUS$8,000.00 each, 2 as well as denying the motion for its reconsideration. 3

Reynaldo Aniban was employed by the Philippine Transmarine Carriers,Inc. (TRANSMARINE) acting in behalf of its foreign principal NorwegianShip Management A/S (NORWEGIAN) 4 as radio operator (R/O) on boardthe vessel " Kassel " for a contract period of his employment, R/O Anibandied due to myocardial infarction. 5 He was survived by a pregnant wife andthree (3) minor children who prayed for death benefits provided under par.(1) of the POEA Standard Employment Contract thus —

1. In case of death of the seaman during the term of hiscontract, the employer shall pay his beneficiaries thePhilippine currency equivalent to the amount of: . . . . b.US$13,000.00 for other officers including radio operatorsand master electricians.

A claim was also made for additional death benefits under theCollective Bargaining Agreement executed between AssociatedMarine Officers and Seamen's Union of the Philippines and NORWEGIAN represented by TRANSMARINE, to wit:

Article 11

Compensation for loss of Life

Death caused by an Occupational Injury or Disease. — In the event of death of an officer due to an occupationalinjury or disease while serving on board, while travellingto and from the vessel on Company's business or due tomarine peril, the Company will pay his beneficiaries acompensation in accordance with the POEA's rules andregulations . . . . It is agreed that these beneficiaries will be the following next of kin: The officer's spouse,

children or parents in this preferential order.

The company will pay an additional compensation to the beneficiaries listed aboved with same preferential order tothat compensation provided by the POEA Rules andRegulations. The additional compensation will beUS$30,000.00 plus US$8,000.00 to each child under theage of eighteen (18) years, maximum US$24,000.00 (notexceeding 3 children).

The claim was granted only to the extent of US$13,000.00 provided under the POEA Standard Employment Contract. The claim under the CBA wasrejected on the ground that myocardial infarction of which R/O Aniban diedwas not an occupational disease as to entitle his heirs to the additional death benefits provided therein. Consequently, Brigida Aniban and her childrenfiled a formal complaint for non-payment of death compensation benefitsunder the CBA. 6

On 11 January 1994 the POEA ruled that myocardial infarction was anoccupational disease in the case of R/O Aniban and granted the prayer of his heirs for payment of death benefits under the POEA StandardEmployment Contract as well as under the Collective Bargaining



15

Agreement plus attorney's fees of US$6,700.00 equivalent to 10 % of thetotal award. 7

On appeal, however, the NLRC reversed the POEA and denied the claimfor additional death benefits on the ground that it was the Employees

Compensation Commission (ECC) which had original and exclusive jurisdiction to hear and determine the c laim for death benefits. 8 A motion toreconsider the decision of the NLRC was denied; hence, this petition by theheirs of R/O Reynaldo Aniban.

Two issues are raised before us: (a) whether the POEA has jurisdiction todetermine the claim of petitioners for death benefits, and (b) whether myocardial infarction is an occupational disease as to entitle petitioners tothe death benefits provided under the CBA.

It must be stated at the outset that the proper issue raised before us is thatdealing with the jurisdiction of the POEA to resolve the claim for additional

death benefits since the NLRC denied the claim on this sole ground.However, we are likewise addressing the second issue, i.e., merits of theclaim, to afford the parties the relief they seek and prevent further needlessdelay in the resolution thereof.

On the issue of jurisdiction, it is not disputed that R/O Reynaldo Anibanwas a Filipino seaman and that he died on board the vessel of his foreignemployer during the existence of his employment contract, hence, this claimfor death benefits by his widow and children.

The law applicable at the time the complaint was filed on 13 November 1992 was Art. 20 of the Labor Code as amended by E.O. Nos. 797 9 and 24710 which clearly provided that "original and exclusive jurisdiction over allmatters or cases including money claims, involving employer-employeerelations, arising out of or by virtue of any law or contract involving

Filipino seamen for overseas employment is vested with the POEA. 11

On the other hand, the jurisdiction of the ECC comes into play only whenthe liability of the State Insurance Fund is in issue, as correctly suggested by the Solicitor General. The ECC was created under Title II, Bk. IV, of theLabor Code with the heading of Employees Compensation and State

Insurance Fund . In addition to its powers and duties enumerated in Art.

177, Art. 180 explicitly provides that the Commission exercises appellate

jurisdiction only over decisions rendered by either the Government ServiceInsurance System (GSIS) or Social Security System (SSS) in the exercise of their respective original and exclusive jurisdictions. Hence, the ECC maynot be considered as having jurisdiction over money claims, albeit deathcompensation benefits, of overseas contract workers. Thus, in so ruling, the NLRC clearly committed grave abuse of discretion.

As regards the second issue, i.e., whether the death Reynaldo Aniban due tomyocardial infarction is compensable, the POEA ruled in the affirmativewhen it likened the infirmity to a "heart attack" commonly aggravated by pressure and strain. It was observed that R/O Aniban, in addition toundergoing physical exertion while performing his duties as radio operator,was also exposed to undue pressure and strain as he was required to be oncall twenty-four (24) hours a day to receive/transmit messages and to keeptrack of weather conditions. Such pressure and strain were aggravated by being away from his family, a plight commonly suffered by all seamen. In

the case of R/O Aniban, the separation was particularly distressful as his pregnant wife was due to deliver their fourth child. Hence, the POEA ruledthat myocardial infarction was an occupational disease.

We cannot rule otherwise. Reynaldo Aniban was healthy at the time he boarded the vessel of his foreign employer. His medical records reveal thathe had no health problem except for a "defective central vision secondary toinjury." 12 Hence, he was certified "fit to work as radio operator" by theexamining physician. However, R/O Aniban died three (3) months after he boarded " Kassel " due to myocardial infarction. As aforesaid, the POEAruled that the cause of death could be considered occupational. Being afactual finding by the administrative agency tasked with its determination,

such conclusion deserves respect and must be accorded finality.13

Besideswe have already repeatedly ruled that death due to myocardial infarction iscompensable. 14 In Eastern Shipping Lines, Inc. v. POEA, 15 althoughcompensability was not the main issue, we upheld the decision of the POEAadjudging as compensable the death of a seaman on board the vessel of hisforeign employer due to myocardial infarction.

Although it may be conceded in the instant case that the physical exertioninvolved in carrying out the functions of a radio operator may have beenquite minimal, we cannot discount the pressure and strain that went with the position of radio operator. As radio operator, Reynaldo Aniban had to place



16

his full attention in hearing the exact messages received by the vessel and torelay those that needed to be transmitted to the mainland or to other vessels.We have already recognized that any kind of work or labor produces stressand strain normally resulting in the wear and tear of the human body. 16 It isnot required that the employment contributed even in a small degree to itsdevelopment. 17

It must be stressed that the strict rules of evidence are not applicable inclaims for compensation considering that probability and not the ultimate

degree of certainty is the test of proof in compensation proceedings. 18

It is a matter of judicial notice that an overseas worker, having to ward off homesickness by reason of being physically separate from his family for theentire duration of his contract, bears a great degree of emotional strain whilemaking an effort to perform his work well. The strain is even greater in thecase of a seaman who is constantly subjected to the perils of the sea while atwork abroad and away from his family. In this case, there is substantial

proof that myocardial infarction is an occupational disease for whichAniban's employer obligated itself to pay death benefits and additionalcompensation under the CBA in the event of the demise of its employee byreason thereof.

On the award of attorney's fees which NLRC deleted on the ground thatthere was no unlawful withholding of wages, suffice it to say that Art. 111of the Labor Code does not limit the award of attorney's fees to cases of unlawful withholding of wages only. What it explicitly prohibits is theaward of attorney's fees which exceed 10% of the amount of wagesrecovered. Thus, under the circumstances, attorney's fees are recoverablefor the services rendered by petitioner's counsel to compel Aniban's

employer to pay its monetary obligations under the CBA. However theamount of P50,000.00 claimed as attorneys' fees in this case is thereasonable compensation based on the records and not the maximum 10%of the total award as granted by POEA. The reduction of unreasonableattorney's fees is within our regulatory powers. 19

WHEREFORE, the assailed Decision and Resolution of the National Labor Relations Commission are REVERSED and SET ASIDE.

The Decision of the Philippine Overseas Employment Administration dated10 January 1994 ordering respondents Philippine Transmarine Carriers,Inc., Norwegian Ship Management A/S, and Pioneer Insurance and SuretyCorporation jointly and severally to pay the heirs of the late R/O ReynaldoAniban represented by his widow Brigida P. Aniban the following amountsin Philippine currency at the prevailing rate of exchange at the time of payment: (a) US$13,000.00 for death benefits in accordance with POEAStandard Employment Contract; (b) US30,000.00 death benefits under theCollective Bargaining Agreement; (c) US$24,000.00 additionalcompensation for the three (3) children under 18 years of age atUS$8,000.00 each; and, (d) US$6,700.00 for attorney's fees, isREINSTATED and ADOPTED herein, with the MODIFICATION that theaward of US$6,700.00 or its equivalent in Philippine currency for attorney'sfees is reduced to P50,000.00, with costs against private respondents.

SO ORDERED.



17

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEESUNION-ALU-TUCP and ANTONIO V. BALINANG, petitioners,vs.

NATIONAL LABOR RELATIONS COMMISSION (2nd Division) andMETROPOLITAN BANK and TRUST COMPANY, respondents.

Gilbert P. Lorenzo for petitioners.

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust CompanyEmployees Union-ALU-TUCP (MBTCEU) and its president, Antonio V.Balinang, raise the issue of whether or not the implementation by theMetropolitan Bank and Trust Company of Republic Act No. 6727,mandating an increase in pay of P25 per day for certain employees in the private sector, created a distortion that would require an adjustment under said law in the wages of the latter's other various groups of employees.

On 25 May 1989, the bank entered into a collective bargaining agreementwith the MBTCEU, granting a monthly P900 wage increase effective 01January 1989, P600 wage increase 01 January 1990, and P200 wageincrease effective 01 January 1991. The MBTCEU had also bargained for

the inclusion of probationary employees in the list of employees who would benefit from the first P900 increase but the bank had adamantly refused toaccede thereto. Consequently, only regular employees as of 01 January1989 were given the increase to the exclusion of probationary employees.

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act torationalize wage policy determination be establishing the mechanism and proper standards thereof, . . . fixing new wage rates, providing wageincentives for industrial dispersal to the countryside, and for other purposes," took effect. Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutoryminimum wage rates of all workers and employees in the private sector, whether agricul tural or non-agricultural,shall be increased by twenty-five pesos (P25) per day, . ..: Provided , That those already receiving above theminimum wage rates up to one hundred pesos(P100.00)shall also receive an increase of twenty-five pesos(P25.00) per day, . . .

xxx xxx xxx

(d) If expressly provided for and agreed upon in thecollective bargaining agreements, all increase in the daily basic wage rates granted by the employers three (3)months before the effectivity of this Act shall be creditedas compliance with the increases in the wage rates prescribed herein, provided that, where such increases are

less than the prescribed increases in the wage rates under this Act, the employer shall pay the difference. Suchincrease shall not include anniversary wage increases,merit wage increase and those resulting from theregularization or promotion of employees.

Where the application of the increases in the wage ratesunder this Section results in distortions as defined under existing laws in the wage structure within anestablishment and gives rise to a dispute therein, suchdispute shall first be settled voluntarily between the parties and in the event of a deadlock, the same shall be

finally resolved through compulsory arbitration by theregional branches of the National Labor RelationsCommission (NLRC) having jurisdiction over theworkplace.

It shall be mandatory for the NLRC to conduct continoushearings and decide any dispute arising under this Sectionwithin twenty (20) calendar days from the time saiddispute is formally submitted to it for arbitration. The pendency of a dispute arising from a wage distortion shall



18

not in any way delay the applicability of the increase inthe wage rates prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its probationary employees and to those who had been

promoted to regular or permanent status before 01 July 1989 but whosedaily rate was P100 and below. The bank refused to give the same increaseto its regular employees who were receiving more than P100 per day andrecipients of the P900 CBA increase.

Contending that the bank's implementation of Republic Act 6727 resulted inthe categorization of the employees into (a) the probationary employees asof 30 June 1989 and regular employees receiving P100 or less a day whohad been promoted to permanent or regular status before 01 July 1989, and(b) the regular employees as of 01 July 1989, whose pay was over P100 aday, and that, between the two groups, there emerged a substantiallyreduced salary gap, the MBTCEU sought from the bank the correction of

the alleged distortion in pay. In order to avert an impeding strike, the bank petitioned the Secretary of Labor to assume jurisdiction over the case or tocertify the same to the National Labor Relations Commission (NLRC)under Article 263 (g) of the Labor Code. 1 The parties ultimately agreed torefer the issue for compulsory arbitration to the NLRC.

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decisionof 05 February 1991, the labor arbiter disregard with the bank's contentionthat the increase in its implementation of Republic Act 6727 did notconstitute a distortion because "only 143 employees or 6.8% of the bank's population of a total of 2,108 regular employees" benefited. He stressed that"it is not necessary that a big number of wage earners within a company be

benefited by the mandatory increase before a wage distortion may beconsidered to have taken place," it being enough, he said, that such increase"result(s) in the severe contraction of an intentional quantitative differencein wage between employee groups."

The labor arbiter concluded that since the "intentional quantitativedifference" in wage or salary rates between and among groups of employeesis not based purely on skills or length of service but also on "other logical bases of differentiation, a P900.00 wage gap intentionally provided in acollective bargaining agreement as a quantitative difference in wage

between those who WERE regular employees as of January 1, 1989 andthose who WERE NOT as of that date, is definitely a logical basis of differentiation (that) deserves protection from any distorting statutory wageincrease." Otherwise, he added, "a minimum wage statute that seek to upliftthe economic condition of labor would itself destroy the mechanism of collective bargaining which, with perceived stability, has been labor'sconstitutional and regular source of wage increase for so long a time now."Thus, since the "subjective quantitative difference" between wage rates had been reduced from P900.00 to barely P150.00, correction of the wagedistortion pursuant to Section 4(c) of the Rules Implementing Republic Act6727 should be made.

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent ishereby directed to restore to complainants and their members the Nine Hundred (P900.00) Pesos CBA wage

gap they used to enjoy over non-regular employees as of January 1, 1989 by granting them a Seven Hundred Fifty(P750.00) Pesos monthly increase effective July 1, 1989.

SO ORDERED. 2

The bank appealed to the NLRC. On 31 May 1991, the NLRC SecondDivision, by a vote of 2 to 1, reversed the decision of the Labor Arbiter.Speaking, through Commissioners Rustico L. Diokno and Domingo H.Zapanta, the NLRC said:

. . . a wage distortion can arise only in a situation wherethe salary structure is characterized by intentionalquantitative differences among employee groupsdetermined or fixed on the basis of skills, length of service, or other logical basis of differentiation and suchdifferences or distinction are obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary of Labor and Employment,February 18, 1991).



19

As applied in this case, We noted that in the new wagesalary structure, the wage gaps between Level 6 and 7levels 5 and 6, and levels 6 and 7 ( sic) were maintained.While there is a noticeable decrease in the wage gap between levels 2 and 3, Levels 3 and 4, and Levels 4 and5, the reduction in the wage gaps between said levels isnot significant as to obliterate or result in severecontraction of the intentional quantitative differences insalary rates between the employees groups. For thisreason, the basis requirement for a wage in this case.Moreover, there is nothing in the law which would justifyan across-the-board adjustment of P750.00 as ordered bythe labor Arbiter.

WHEREFORE, premises considered, the appealeddecision is hereby set aside and a new judgment is herebyentered, dismissing the complaint for lack of merit.

SO ORDERED. 3

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of saidquantitative distinction/difference aforecited but clearlythere is a contraction. Would such contraction be severeas to warrant the necessary correction sanctioned by thelaw in point, RA 6727? It is may considered view that thequantitative intended distinction in pay between the twogroups of workers in respondent company was contracted

by more than fifty (50%) per cent or in particular by moreor less eighty-three (83%) per cent hence, there is nodoubt that there is an evident severe contraction resultingin the complained of wage distortion.

Nonetheless, the award of P750.00 per month to all of herein individual complainants as ordered by the Labor Arbiter below, to my mind is not the most equitableremedy at bar, for the same would be an across the boardincrease which is not the intention of RA 6727. For that

matter, herein complainants cannot by right claim for thewhole amount of P750.00 a month or P25.00 per daygranted to the workers covered by the said law in thesense that they are not covered by the said increasemandated by RA 6727. They are only entitled to the relief granted by said law by way of correction of the pay scalein case of distortion in wages by reason thereof.

Hence, the formula offered and incorporated in WageOrder No. IV-02 issued on 21 May 1991 by the RegionalTripartite Wages and Productivity Commission for correction of pay scale structures in case of wagedistortion as in the case at bar which is:

Minimum Wage = % x Prescribed = Distortion

—————— Increased Adjustment

Actual Salary

would be the most equitable and fair under thecircumstances obtaining in this case.

For this very reason, I register my dissent from themajority opinion and opt for the modification of the Labor Arbiter's decision as afore-discussed. 4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been denied, the MBTCEU and its president filed the instant petition for

certiorari, charging the NLRC with gave abuse of discretion by

its refusal (a) "to acknowledge the existence of a wage distortion in thewage or salary rates between and among the employee groups of therespondent bank as a result of the bank's partial implementation" of Republic Act 6727 and (b) to give due course to its claim for an across-the- board P25 increase under Republic Act No. 6727. 5

We agree with the Solicitor General that the petition is impressed withmerit. 6



20

The term "wage distortion", under the Rules Implementing Republic Act6727, is defined, thus:

(p) Wage Distortion means a situation where an increasein prescribed wage rates results in the elimination or

severe contradiction of intentional quantitative differencesin wage or salary rates between and among employeegroups in an establishment as to effectively obliterate thedistinctions embodied in such wage structure based onskills, length of service, or other logical bases of differentiation.

The issue of whether or not a wage distortion exists as a consequence of thegrant of a wage increase to certain employees, we agree, is, by and large, aquestion of fact the determination of which is the statutory function of the NLRC. 7 Judicial review of labor cases, we may add, does not go beyond theevaluation of the sufficiency of the evidence upon which the labor official's

findings rest.8

As such, factual findings of the NLRC are generallyaccorded not only respect but also finality provided that its decision aresupported by substantial evidence and devoid of any taint of unfairness of arbitrariness. 9 When, however, the members of the same labor tribunal arenot in accord on those aspects of a case, as in this case, this Court is wellcautioned not to be as so conscious in passing upon the sufficiency of theevidence, let alone the conclusions derived therefrom.

In this case, the majority of the members of the NLRC, as well as itsdissenting member, agree that there is a wage distortion arising from the bank's implementation of the P25 wage increase; they do differ, however,on the extent of the distortion that can warrant the adoption of corrective

measures required by law.

The definition of "wage distortion,"10

aforequoted, shows that suchdistortion can so exist when, as a result of an increase in the prescribedwage rate, an "elimination or severe contraction of intentional quantitativedifferences in wage or salary rates" would occur "between and amongemployee groups in an establishment as to effectively obliterate thedistinctions embodied in such wage structure based on skills, length of service, or other logical bases of differentiation." In mandating anadjustment, the law did not require that there be an elimination or total

abrogation of quantitative wage or salary differences; a severe contractionthereof is enough. As has been aptly observed by Presiding Commissioner Edna Bonto-Perez in her dissenting opinion, the contraction between personnel groupings comes close to eighty-three (83%), which cannot, byany stretch of imagination, be considered less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set by the CBA to about P900 per month as of 01 January1989. It is intentional as it has been arrived at through the collective bargaining process to which the parties are thereby concluded. 11 TheSolicitor General, in recommending the grant of due course to the petition,has correctly emphasized that the intention of the parties, whether the benefits under a collective bargaining agreement should be equated withthose granted by law or not, unless there are compelling reasons otherwise,must prevail and be given effect. 12

In keeping then with the intendment of the law and the agreement of the

parties themselves, along with the often repeated rule that all doubts in theinterpretation and implementation of labor laws should be resolved in favor of labor, 13 we must approximate an acceptable quantitative difference between and among the CBA agreed work levels. We, however, do notsubscribe to the labor arbiter's exacting prescription in correcting the wagedistortion. Like the majority of the members of the NLRC, we are also of the view that giving the employees an across-the-board increase of P750may not be conducive to the policy of encouraging "employers to grantwage and allowance increases to their employees higher than the minimumrates of increases prescribed by statute or administrative regulation," particularly in this case where both Republic Act 6727 and the CBA allow acredit for voluntary compliance. As the Court, through Associate Justice

Florentino Feliciano, also pointed out in Apex Mining Company, Inc. v. NLRC : 14

. . . . (T)o compel employers simply to add on legislatedincreases in salaries or allowances without regard to whatis already being paid, would be to penalize employerswho grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, thiswould be counter-productive so far as securing theinterests of labor is concerned. . . .



21

We find the formula suggested then by Commissioner Bonto-Perez, whichhas also been the standard considered by the regional Tripartite Wages andProductivity Commission for the correction of pay scale structures in casesof wage distortion, 15 to well be the appropriate measure to balance therespective contentions of the parties in this instance. We also view it as being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the sameis GRANTED DUE PROCESS, the questioned NLRC decision is herebySET ASIDE and the decision of the labor arbiter is REINSTATED subjectto the MODIFICATION that the wage distortion in question be corrected inaccordance with the formula expressed in the dissenting opinion of Presiding Commissioner Edna Bonto-Perez. This decision is immediatelyexecutory.

SO ORDERED.



22

G.R. No. 131247 January 25, 1999

PRUBANKERS ASSOCIATION, petitioner,vs.PRUDENTIAL BANK & TRUST COMPANY, respondent.

PANGANIBAN, J.:

Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy wirhout a corresponding raise for higher-tieredemployees in the same region of the country, resulting in the elimination or the severe diminution of the distinction between the two groups. Suchdistortion does not arise when a wage order gives employees in one branchof a bank higher compensation than that given to their counterparts in other regions occupying the same pay scale, who are not covered by said wage

order. In short, the implementation of wage orders in one region but not inothers does not in itself necessarily result in wage distortion.

The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision 1 of the Court of Appeals in CA-GR SP No. 42525. Thedispositive portion of the challenged Decision reads:

WHEREFORE, the petition is GRANTED. The assaileddecision of the Voluntary Arbitration Committee dated

June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued with grave abuse of discretiontantamount to lack of or excess of jurisdiction, and a new judgment is rendered finding that no wage distortionresulted from the petitioner's separate and regionalimplementation of Wage Order No. VII-03 at its Cebu,Mabolo and P. del Rosario.

The June 18, 1996 Decision of the Voluntary Arbitration Commitee, 2 which the Court of Appeals reversed and set aside, disposed as follows:

WHEREFORE, it is hereby ruled that the Bank's separateand regional implementation of Wage Order No. VII-03at its Cebu, Mabolo and P. del Rosario branches created awage distortion in the Bank nationwide which should beresolved in accordance with Art. 124 of the Labor Code. 3

The Facts

The facts of the case are summarized by the Court of Appeals thus:

On November 18, 1993, the Regional Tripartite Wagesand Productivity Board of Region V issued Wage Order No. RB 05-03 which provided for a Cost of LivingAllowance (COLA) to workers in the private sector whoha[d] rendered service for at least three (3) months beforeits effectivity, and for the same period [t]hereafter, in thefollowing categories: SEVENTEEN PESOS AND FIFTY

CENTAVOS (P17.50) in the cities of Naga and Legaspi;FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) inthe municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN PESOS (P10.00) for all other areas in theBicol Region.

Subsequently on November 23, 1993, the RegionalTripartite Wages and Productivity Board of Region VIIissued Wage Order No. RB VII-03, which directed theintegration of the COLA mandated pursuant to WageOrder No. RO VII-02-A into the basic pay of all workers.It also established an increase in the minimum wage rates

for all workers and and employees in the private sector asfollows: by Ten Pesos (P10.00) in the cities of Cebu,Mandaue and Lapulapu; Five Pesos (P5.00) in themunicipalities of Compostela, Liloan, Consolacion,Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon andTagbilaran.

The petitioner then granted a COLA of P17.50 to itsemployees at its Naga Branch, the only branch covered by



23

Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into the basic pay of its rank-and-fileemployees at its Cebu, Mabolo and P. del Rosario branches, the branches covered by Wage Order No. RBVII-03.

On June 7, 1994, respondent Prubankers Associationwrote the petitioner requesting that the Labor Management Committee be immediately convened todiscuss and resolve the alleged wage distortion created inthe salary structure upon the implementation of the saidwage orders. Respondent Association then demanded inthe Labor Management Committee meetings that the petitioner extend the application of the wage orders to itsemployees outside Regions V and VII, claiming that theregional implementation of the said orders created a wagedistortion in the wage rates of petitioner's employeesnationwide. As the grievance could not be settled in thesaid meetings, the parties agreed to submit the matter tovoluntary arbitration. The Arbitration Committee formedfor that purpose was composed of the following: publicrespondent Froilan M. Bacungan as Chairman, with Attys.Domingo T. Anonuevo and Emerico O. de Guzman asmembers. The issue presented before the Committee waswhether or not the bank's separate and regionalimplementation of Wage Order No. 5-03 at its NagaBranch and Wage Order No. VII-03 at its Cebu, Maboloand P. del Rosario branches, created a wage distortion inthe bank nationwide.

The Arbitration Committee on June 18, 1996 renderedquestioned decision. 4

Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held thatthe variance in the salary rates of employees in different regions of thecountry was justified by RA 6727. It noted that "the underlyingconsiderations in issuing the wage orders are diverse, based on the

distinctive situations and needs existing in each region. Hence, there is no basis to apply the salary increases imposed by Wage Order No. VII-03 toemployees outside of Region VII." Furthermore, the Court of Appeals ruledthat "the distinctions between each employee group in the region aremaintained, as all employees were granted an increase in minimum wagerate. 5

The Issues

In its Memorandum, petitioner raises the following issues: 6

I

Whether or not the Court of Appeals departed from theusual course of judicial procedure when it disregarded thefactual findings of the Voluntary Arbitration Committeeas to the existence of wage distortion.

II

Whether or not the Court of Appeals committed graveerror in law when it ruled that wage distortion exists onlywithin a region and not nationwide.

III

Whether or not the Court of Appeals erred in implyingthat the term "establishment" as used in Article 125 of the

Labor Code refers to the regional branches of the bank and not to the bank as a whole.

The main issue is whether or not a wage distortion resulted fromrespondent's implementation of the aforecited Wage Orders. As a preliminary matter, we shall also take up the question of forum-shopping.



24

The Court's Ruling

The petition is devoid of merit. 7

Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forum-shopping. It maintains that petitioner failed tocomply with Section 2 of Rule 42 of the Rules of Court, which requires that parties must certify under oath that they have not commenced any other action involving the same issues in the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, they must state the status of thesame; and if they should thereafter learn that a similar action or proceedinghas been filed or is pending before the said courts, they should promptlyinform the aforesaid courts or any other tribunal or agency within five daystherefrom. Specifically, petitioner accuses respondent of failing to inform

this Court of the pendency of NCMB-NCR-RVA-O4-012-97 entitled "InRe: Voluntary Arbitration between Prudential Bank and PrubankersAssociation" (hereafter referred to as "voluntary arbitration case"), an actioninvolving issues allegedly similar to those raised in the present controversy.

In its Reply, petitioner effectively admits that the voluntary arbitration casewas already pending when it filed the present petition. However, it claimsno violation of the rule against forum-shopping, because there is no identityof causes of action and issues between the two cases.

We sustain the respondent. The rule on forum-shopping was first includedin Section 17 of the Interim Rules and Guidelines issued by this Court on

January 11, 1983, which imposed a sanction in this wise: "A violation of therule shall constitute contempt of court and shall be a cause for the summarydismissal of both petitions, without prejudice to the taking of appropriateaction against the counsel or party concerned." Thereafter, the Courtrestated the rule in Revised Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in the 1997 amendments tothe Rules of Court.

As explained by this Court in First Philippine International Bank v. Court

of Appeals, 8 forum-shopping exists where the elements of litis pendentia

are present, and where a final judgment in one case will amount to res

judicata in the other. Thus, there is forum-shopping when, between anaction pending before this Court and another one, there exist: "a) identity of parties, or at least such parties as represent the same interests in bothactions, b) identity of rights asserted and relief prayed for, the relief beingfounded on the same facts, and c) the identity of the two preceding particulars is such that any judgement rendered in the other action, will,regardless of which party is successful amount to res judicata in the actionunder consideration; said requisites also constitutive of the requisites for auter action pendant or lis pendens ." 9 Another case elucidates theconsequence of forum-shopping: "[W]here a litigant sues the same partyagainst whom another action or actions for the alleged violation of the sameright and the enforcement of the same relief is/are still pending, the defenseof litis pendentia in one case is a bar to the others; and, a final judgment inone would constitute res judicata and thus would cause the dismissal of therest." 10

The voluntary arbitration case involved the issue of whether the adoption bythe Bank of regionalized hiring rates was valid and binding. On the other hand, the issue now on hand revolves around the existence of a wagedistortion arising from the Bank's separate and regional implementation of the two Wage Orders in the affected branches. A closer look would showthat, indeed, the requisites of forum-shopping are present.

First , there is identity of parties. Both cases are between the Bank and theAssociation acting on behalf of all its members. Second, although therespective issues and reliefs prayed for in the two cases are stateddifferently, both actions boil down to one single issue: the validity of theBank's regionalization of its wage structure based on RA 6727. Even if the

voluntary arbitration case calls for striking, down the Bank's regionalizedhiring scheme while the instant petition calls for the correction of thealleged wage distortion caused by the regional implementation of WageOrder No. VII-03, the ultimate relief prayed for in both cases is themaintenance of the Bank's national wage structure. Hence, the finaldisposition of one would constitute res judicata in the other. Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal of both actions is indeed warranted.

Nonetheless, we deem it appropriate to pass upon the main issue on itsmerit in view of its importance.



25

Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of theLabor Code, as amended by Republic Act No. 6727, which reads:

Art. 124. Standards/Criteria for Minimum Wage Fixing — . . .

As used herein, a wage distortion shall mean a situationwhere an increase in prescribed wage results in theelimination of severe contraction of intentionalquantitative differences in wage or salary rates betweenand among employee groups in an establishment as toeffectively obliterate the distinctions embodied in suchwage structure based on skills, length of service, or other logical bases of differentiation.

Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a classification of positions and ranking of these positions atvarious levels. One visualizes a hierarchy of positions with correspondingranks basically in terms of wages and other emoluments. Where asignificant change occurs at the lowest level of positions in terms of basicwage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level, and resulting in a parity between thelowest level and the next higher level or rank, between new entrants and oldhires, there exists a wage distortion. . . . . The concept of a wage distortionassumes an existing grouping or classification of employees whichestablishes distinctions among such employees on some relevant or

legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees" 11

Wage distortion involves four elements:

1. An existing hierarchy of positions with correspondingsalary rates

2. A significant change in the salary rate of a lower payclass without a concomitant increase in the salary rate of ahigher one

3. The elimination of the distinction between the two

levels

4. The existence of the distortion in the same region of thecountry

In the present case, it is clear that no wage distortion resulted whenrespondent implemented the subject Wage Orders in the covered branches.In the said branches, there was an increase in the salary rates of all payclasses. Furthermore, the hierarchy of positions based on skills, lengh of service and other logical bases of differentiation was preserved. In other words, the quantitative difference in compensation between different payclasses remained the same in all branches in the affected region. Put

differently, the distinction between Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the implementation of the twoWage Orders in the said region. Hence, it cannot be said that there was awage distortion.

Petitioner argues that a wage distortion exists, because the implementationof the two Wage Orders has resulted in the discrepancy in the compensationof employees of similar pay classification in different regions. Hence, petitioner maintains that, as a result of the two Wage Orders, the employeesin the affected regions have higher compensation than their counterparts of the same level in other regions. Several tables are presented by petitioner toillustrate that the employees in the regions covered by the Wage Orders are

receiving more than their counterparts in the same pay scale in other regions.

The Court is not persuaded. A wage parity between employees in different rungs, is not at issue here, but a wage disparity between employees in the same rung but located in different regions of the country.

Contrary to petitioner's postulation, a disparity in wages between employeesholding similar positions but in different regions does not constitute wagedistortion as contemplated by law. As previously enunciated, it is the



26

hierarchy of positions and the disparity of their corresponding wages andother emoluments that are sought to be preserved by the concept of wagedistortion. Put differently, a wage distortion arises when a wage order engenders wage parity between employees in different rungs of theorganizational ladder of the same establishment. It bears emphasis thatwage distortion involves a parity in the salary rates of different pay classes

which, as a result, eliminates the distinction between the different ranks inthe same region.

Different Regional Wages

Mandated by RA 6727

Petitioner's claim of wage distortion must also be denied for one other reason. The difference in wages between employees in the same pay scalein different regions is not the mischief sought to be banished by the law. Infact, Republic Act No. 6727 (the Wage Rationalization Act), recognizes

"existing regional disparities in the cost of living." Section 2 of said law provides:

Sec 2. It is hereby declared the policy of the State torationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures toensure a decent standard of living for the workers andtheir families; to guarantee the rights of labor to its justshare in the fruits of production; to enhance employmentgeneration in the countryside through industry dispersal;and to allow business and industry reasonable returns oninvestment, expansion and growth.

The State shall promote collective bargaining as the primary mode of settling wages and other terms andconditions of employment; and whenever necessary, theminimum wage rates shall be adjusted in a fair andequitable manner, considering existing regional disparitiesin the cost of living and other socio-economic factors andthe national economic and social development plans.

RA 6727 also amended Article 124 of the Labor Code, thus:

Art. 124. Standards/Criteria for Minimum Wage Fixing. — The regional minimum wages to be established by theRegional Board shall be as nearly adequate as iseconomically feasible to maintain the minimum standardsof living necessary for the health, efficiency and generalwell-being of the employees within the frame work of the

national economic and social development program. Inthe determination of such regional minimum wages, theRegional Board shall, among other relevant factors,consider the following:

a. The demand for living wages; b. Wage adjustment vis-a-vis the consumer price index;c. The cost of living and changes or increases therein;d. The needs of workers and their families;e. The need to induce industries to invest in the countryside;f. Improvements in standards of living;g. The prevailing wage levels;h. Fair return of the capital invested and capacity to pay of

employers;

I. Effects on employment generation and family income;and

II. The equitable distribution of income and wealth along theimperatives of social and economic development.

From the above-quoted rationale of the law, as well as the criteriaenumerated, a disparity in wages between employees with similar positionsin different regions is necessarily expected. In insisting that the employees

of the same pay class in different regions should receive the samecompensation, petitioner has apparently misunderstood both the meaning of wage distortion and the intent of the law to regionalize wage rates.

It must be understood that varying in each region of the country arecontrolling factors such as the cost of living; supply and demand of basicgoods, services and necessities; and the purchasing power of the peso. Other considerations underscore the necessity of the law. Wages in some areasmay be increased in order to prevent migration to the National CapitalRegion and, hence, to decongest the metropolis. Therefore, what the



27

petitioner herein bewails is precisely what the law provides in order toachieve its purpose.

Petitioner claims that it "does not insist that the Regional Wage Boardscreated pursuant to RA 6727 do not have the authority to issue wage orders based on the distinctive situations and needs existing in each region. Soalso, . . . it does not insist that the [B]ank should not implement regionalwage orders. Neither does it seek to penalize the Bank for following WageOrder VII-03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon a national wage structure and replace the same with aregionalized structure in violation of the principle of equal pay for equalwork. And, it is wrong to say that its act of abandoning its national wagestructure is mandated by law."

As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not objecting, on the one hand, to the right of theregional wage boards to impose a regionalized wage scheme; while

insisting, on the other hand, on a national wage structure for the wholeBank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.

The objective of the law also explains the wage disparity in the examplecited by petitioner: Armae Librero, though only in Pay Class 4 in Mabolo,was, as a result of the Wage Order, receiving more than Bella Cristobal,who was already in Pay Class 5 in Subic. 12 RA 6727 recognizes that thereare different needs for the different situations in different regions of thecountry. The fact that a person is receiving more in one region does notnecessarily mean that he or she is better off than a person receiving less inanother region. We must consider, among others, such factors as cost of

living, fulfillment of national economic goals, and standard of living. In anyevent, this Court, in its decisions, merely enforces the law. It has no power to pass upon its wisdom or propriety.

Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in only oneregion violates the equal-pay-for-equal-work principle. This is not correct.At the risk of being repetitive, we stress that RA 6727 mandates that wagesin every region must be set by the particular wage board of that region,

based on the prevailing situation therein. Necessarily, the wages in differentregions will not be uniform. Thus, under RA 6727, the minimum wage inRegion 1 may be different from that in Region 13, because thesocioeconomic conditions in the two regions are different.

Meaning of " Establishment "

Petitioner further contends that the Court of Appeals erred in interpretingthe meaning of "establishment" in relation to wage distortion. It quotes theRA 6727 Implementing Rules, specifically Section 13 thereof which speaksof "workers working in branches or agencies of establishments in or outsidethe National Capital Region." Petitioner infers from this that the regionaloffices of the Bank do not themselves constitute, but are simply branchesof, the establishment which is the whole bank. In effect, petitioner arguesthat wage distortion covers the pay scales even of employees in differentregions, and not only those of employees in the same region or branch. Wedisagree.

Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of establishments in or outside the Nat ional CapitalRegion shall be those applicable in the place where they are sanctioned "The last part of the sentence was omitted by petitioner in its argument.Given the entire phrase, it is clear that the statutory provision does notsupport petitioner's view that "establishment" includes all branches andoffices in different regions.

Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992)entitled "Revised Guidelines on Exemption From Compliance With thePrescribed Wage/Cost of Living Allowance Increases Granted by the

Regional Tripartite Wages and Productivity Board," which states that"establishment" "refers to an economic unit which engages in one or

predominantly one kind of economic activity with a single fixed location."

Management Practice

Petitioner also insists that the Bank has adopted a uniform wage policy,which has attained the status of an established management practice; thus, itis estopped from implementing a wage order for a specific region only. Weare not persuaded. Said nationwide uniform wage policy of the Bank had



28

been adopted prior to the enactment of RA 6727. After the passage of saidlaw, the Bank was mandated to regionalize its wage structure. Although theBank implemented Wage Order Nos. NCR-01 and NCR-02 nationwideinstead of regionally even after the effectivity of RA 6727, the Bank at thetime was still uncertain about how to follow the new law. In any event, thatsingle instance cannot be constitutive of "management practice."

WHEREFORE, the petition is DENIED and the assailed Decision isAFFIRMED. Costs against petitioner.

SO ORDERED.



29

G.R. No. 131750 November 16, 1998

FRANCISCO GUICO, JR., doing business under the name and style of COPYLANDIA SERVICES & TRADING, petitioner,vs.

THE HON. SECRETARY OF LABOR & EMPLOYMENTLEONARDO A. QUISUMBING, THE OFFICE OF REGIONALDIRECTOR OF REGION I, DEP'T. OF LABOR & EMPLOYMENT,ROSALINA CARRERA, ET. AL., respondents.

PUNO, J.:

This is a petition for certiorari seeking a review of two (2) Orders 1 issued by the respondent Secretary of Labor and Employment dismissing petitioner's appeal.

The case started when the Office of the Regional Director, Department of Labor and Employment (DOLE), Region I, San Fernando, La Union,received a letter-complaint dated April 25, 1995, requesting for aninvestigation of petitioner's establishment, Copylandia Services & Trading,for violation of labor standards laws. Pursuant to the visitorial andenforcement powers of the Secretary of Labor and Employment or his dulyauthorized representative under Article 128 of the Labor Code, as amended,inspections were conducted at Copylandia's outlets on April 27 and May 2,1995. The inspections yielded the following violations involving twenty-one (21) employees who are copier operators: (1) underpayment of wages;(2) underpayment of 13th month pay; and (3) no service incentive leave

with pay. 2

The first hearing of the case was held on June 14, 1995, where petitioner was represented by Joseph Botea, Officer-in-Charge of the Dagupan Cityoutlets, while the 21 employees were represented by Leilani Barrozo,Gemma Gales, Majestina Raymundo and Laureta Clauna. It was establishedthat a copier operator was receiving a daily salary ranging from P35.00 toP60.00 plus commission of P20.00 per P500.00 worth of photocopying.There was also incentive pay of P20.00 per P250.00 worth of photocopyingin excess of the first P500.00. 3

On July 13, 1995, petitioner's representative submitted a Joint Affidavitsigned and executed by the 21 employees expressing their disinterest in prosecuting the case and their waiver and release of petitioner from hisliabilities arising from non-payment and underpayment of their salaries andother benefits. Individually signed documents dated December 21, 1994, purporting to be the employees' Receipt, Waiver and Quitclaim were also

submitted. 4

In the investigation conducted by Hearing Officer Adonis Peralta on July21, 1995, the 21 employees claimed that they signed the Joint Affidavit for fear of losing their jobs. They added that their daily salary was increased toP92.00 effective July 1, 1995, but the incentive and commission schemeswere discontinued. They alleged that they did not waive the unpaid benefitsdue to them. 5

On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Order 6 favorable to the 21 employees. First, he ruled that the purported Receipt,

Waiver and Quitclaim dated December 21 and 22, 1994, could not cause thedismissal of the labor standards case against the petitioner since the samewere executed before the filing of the said case. Moreover, the employeesrepudiated said waiver and quitclaim. Second, he held that despite the salaryincrease granted by the petitioner, the daily salary of the employees was still below the minimum daily wage rate of P119.00 under Wage Order No. RB-I-03. Thirdly, he held that the removal of the commission and incentiveschemes during the pendency of the case violated the prohibition againstelimination or diminution of benefits under Article 100 of the Labor Code,as amended. The dispositive portion of the Order states:

WHEREFORE, premises considered and pursuant to the

Rules on the Disposition of Labor Standards Cases in theRegional Offices issued by the Secretary of Labor andEmployment on 16 September 1987, respondentCopylandia Services and Trading thru its owner/manager Mr. Francisco Guico, is hereby ORDERED to pay theemployees the amount of ONE MILLION EIGHTY ONETHOUSAND SEVEN HUNDRED FIFTY SIX PESOSAND SEVENTY CENTAVOS (P1,081,756.70)representing their backwages, distributed as follows:



30

1. Rosalina Carrera — P 68,010.91

2. Joanna Ventura — 28,568.10

3. Mercelita Paredes — 68,010.91

4. Aida Licuanan — 68,010.91

5. Gemma Gales — 68,010.91

6. Clotilda Zarata — 27,808.33

7. Consolacion Miguel — 65,708.28

8. Gemma Macalalay — 68,010.91

9. Wandy Aquino — 19,559.58

10. Laureta Clauna — 68,010.91

11. Josephine Valdez — 27,808.33

12. Leilani Berrozo — 27,808.33

13. Majestina Raymundo — 68,010.91

14. Theresa Rosario — 68,010.91

15. Edelyn Maramba — 68,010.91

16. Yolly Dimabayao — 40,380.60

17. Vilma Calaguin — 68,010.91

18. Maila Balolong — 40,380.60

19. Clarissa Villena — 27,808.33

20. Maryann Galinato — 68,010.91

21. Desiree Cabansag — 27,808.33

——————

Total P1,081,756.70.

and to submit proof of payment to this Office withinseven (7) day is from receipt hereof. Otherwise, a Writ of Execution will be issued to enforce this Order.

SO ORDERED. 7

Petitioner received a copy of the Order on November 10, 1995. On November 15, 1995, petitioner filed a Notice of Appeal. 8 The next day, hefiled a Memorandum of Appeal accompanied by a Motion to ReduceAmount of Appeal Bond and a Manifestation of an Appeal Bond.

In his appeal memorandum, 9 petitioner questioned the jurisdiction of theRegional Director citing Article 123 of the Labor Code, as amended, 10 andSection 1, Rule IX of the Implementing Rules of Republic Act No. 6715. 11 He argued that the Regional Director has no jurisdiction over the complaintof the 21 employees since their individual monetary claims exceed theP5,000.00 limit. He alleged that the Regional Director should have indorsedthe case to the Labor Arbiter for proper adjudication and for a more formal

proceeding where there is ample opportunity for him to present evidence tocontest the claims of the employees. He further alleged that the RegionalDirector erred in computing the monetary award since it was done withoutregard to the actual number of days and time worked by the employees. Healso faulted the Regional Director for not giving credence to the Receipt,Waiver and Quitclaim of the employees.

In the Motion to Reduce Amount of Appeal Bond, 12 petitioner claimed hewas having difficulty in raising the monetary award which he denounced asexorbitant. Pending resolution of the motion, he posted an appeal bond in



31

the amount of P105,000.00 insisting that the jurisdiction of the RegionalDirector is limited to claims of P5,000.00 per employee and there were 21employees involved in the case.

On November 22, 1995, petitioner also filed a request to hold in abeyanceany action relative to the case for a possible amicable settlement with theemployees. 13

On January 10, 1996, District Labor Officer Adonis Peralta forwarded aReport showing that the petitioner and most of the 21 employees hadreached a compromise agreement. The Release, Waiver and Quitclaim wassigned by the following employees and show the following amounts theyreceived, viz :

1. Aida Licuanan — P 3,000.00

2. Clarissa Villena — 3,000.00

3. Gemma Gales — 3,000.00

4. Desiree Cabansag — 3,000.00

5. Clotilda Zarata — 3,000.00

6. Consolacion Miguel — 5,000.00

7. Josephine Valdez — 3,000.00

8. Maryann Galinato — 5,000.00

9. Theresa Rosario — 3,000.00

10. Yolly Dimabayao — 3,000.00

11. Vilma Calaguin — 3,000.00

12. Gemma Macalalay — 3,000.00

13. Edelyn Maramba — 5,000.00

14. Charito Gonzales — 3,000.00

15. Joanna Ventura — 3,000.00

Four (4) employees did not sign in the compromise agreement.They insisted that they be paid what is due to them according tothe Order of the Regional Director in the total amount of P231,841.06. They were Laureta Clauna, Majestina Raymundo,Leilani Barrozo and Rosalina Carrera. 14

In a letter 15 dated February 23, 1996, the Regional Director informed petitioner that he could not give due course to his appeal since the appeal bond of P105,000.00 fell short of the amount due to the 4 employees whodid not participate in the settlement of the case. In the same letter, hedirected petitioner to post, within ten (10) days from receipt of the letter, the

amount of P126,841.06 or the difference between the monetary award dueto the 4 employees and the appeal bond previously posted.

On March 13, 1996, petitioner filed a Motion for Reconsideration to ReduceAmount of Appeal Bond. 16 He manifested that he has closed down his business operations due to severe financial losses and implored theRegional Director to accept the appeal bond already filed for reasons of justice and equity.

In an Order dated December 3, 1936, the respondent Secretary denied theforegoing Motion for Reconsideration on the ground that the directive fromthe Regional Director to post an additional surety bond is contained in a"mere letter" which cannot be the proper subject of a Motion for Reconsideration and/or Appeal before his office. He added that for failureof the petitioner to post the correct amount of surety or cash bond, hisappeal was not perfected following Article 128 (b) of the Labor Code, asamended. Despite the non-perfection of the appeal, respondent Secretarylooked into the Receipt, Waiver and Quitclaim signed by the employees andrejected it on the ground that the consideration was unconscionablyinadequate. He ruled, nonetheless, that the amount received by the saidemployees should be deducted from the judgment award and the differenceshould be paid by the petitioner.



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On December 26, 1996, petitioner filed a Motion for Reconsideration. OnFebruary 13, 1997, he filed a Motion to Admit Additional Bond and postedthe amount of P126,841.06 in compliance with the order of the RegionalDirector in his letter dated February 13, 1996. 17

On October 24, 1997, the respondent Secretary denied the Motion for Reconsideration. He ruled that the Regional Director has jurisdiction over the case citing Article 128 (b) of the Labor Code, as amended. He pointedout that Republic Act No. 7730 repealed the jurisdictional limitationsimposed by Article 129 on the visitorial and enforcement powers of theSecretary of Labor and Employment or his duly authorized representatives.In addition, he held that petitioner is now estopped from questioning thecomputation made by the Regional Director as a result of the compromiseagreement he entered into with the employees. Lastly, he reiterated hisruling that the Receipt, Waiver and Quitclaim signed by the employees wasnot valid.

Petitioner is now before this Court raising the following issues:

I

Whether or not Public Respondent acted with grave abuseof discretion amounting to lack or in excess of jurisdictionwhen he set aside the Release and Quitclaim executed bythe seventeen ( sic) complainants before the Office of theRegional Director when Public Respondent himself ruledthat the Appeal of the Petitioner was not perfected and,therefore, Public Respondent did not acquire jurisdictionover the case.

II

Whether or not Public Respondent acted with grave abuseof discretion amounting to lack or in excess of jurisdictionwhen in complete disregard of Article 227 of the Labor Code, Public Respondent set aside and nullified theRelease and Quitclaim executed by the seventeen ( sic)complainants.

III

Whether or not Public Respondent acted with grave abuseof discretion amounting to lack or in excess of jurisdictionwhen he affirmed the Order of the Regional Director who,in complete disregard of the due process requirements of law, computed the monetary award given to the privaterespondents without notice to petitioner and without benefit of hearing.

IV

Whether or not petitioner is deemed estopped fromappealing the decision of the Regional Director when it( sic) entered into a compromise settlement withcomplainants/private respondents.

The threshold issues that need to be settled in this case are: (1) whether or not the Regional Director has jurisdiction over the instant labor standardscase, and (2) whether or not petitioner perfected his appeal.

With regard to the issue of jurisdiction, petitioner alleged that the RegionalDirector has no jurisdiction over the instant case since the individualmonetary claims of the 21 employees exceed P5,000.00. He further arguedthat following Article 129 of the Labor Code, as amended, and Section 1,Rule IX of the Implementing Rules of Republic Act No. 6715, the jurisdiction over this case belongs to the Labor Arbiter, and the RegionalDirector should have indorsed it to the appropriate regional branch of the National Labor Relations Commission (NLRC). On the other hand, the

respondent Secretary held that the jurisdictional limitation imposed byArticle 129 on his visitorial and enforcement power under Article 128 (b) of the Labor Code, as amended, has been repealed by Republic Act No. 7730.18 He pointed out that the amendment "[n]otwithstanding the provisions of Article 129 and 217 of the Labor Code to the contrary" erased all doubts asto the amendatory nature of the new law, and in effect, overturned thisCourt's ruling in the case of Servando's Inc. v. Secretary of Labor and

Employment .19



33

We sustain the jurisdiction of the respondent Secretary. As the respondentcorrectly pointed out, this Court's ruling in Servando — that the visitorial power of the Secretary of Labor to order and enforce compliance with labor standard laws cannot be exercised where the individual claim exceedsP5,000.00, can no longer be applied in view of the enactment of R.A. No.7730 amending Article 128(b) of the Labor Code, viz :

Art. 128 (b) — Notwithstanding the provisions of Articles129 and 217 of this Code to the contrary, and in caseswhere the relationship of employer-employee still exists,the Secretary of Labor and Employment or his dulyauthorized representatives shall have the power to issuecompliance orders to give effect to the labor standards provisions of the Code and other labor legislation basedon the findings of the labor employment and enforcementofficers or industrial safety engineers made in the courseof inspection. The Secretary or his duly authorizedrepresentatives shall issue writs of execution to theappropriate authority for the enforcement of their orders,except in cases where the employer contests the findingsof the labor employment and enforcement officer andraises issues supported by documentary proofs whichwere not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this articlemay be appealed to the latter. In case said order involves amonetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bondissued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amountequivalent to the monetary award in the order appealedfrom. (Emphasis supplied.)

The records of the House of Representatives 20 show thatCongressmen Alberto S. Veloso and Eriberto V. Loreto sponsoredthe law. In his sponsorship speech, Congressman Velosocategorically declared that "this bill seeks to do away with the jurisdictional limitations imposed through said ruling (referring toServando) and to finally settle any lingering doubts on the

visitorial and enforcement powers of the Secretary of Labor andEmployment." 21 Petitioner's reliance on Servando is thusuntenable.

The next issue is whether petitioner was able to perfect his appeal to theSecretary of Labor and Employment. Article 128(b) of the Labor Codeclearly provides that the appeal bond must be "in the amount equivalent tothe monetary award in the order appealed from." The records show that petitioner failed to post the required amount of the appeal bond. His appealwas therefore not perfected.

IN VIEW WHEREOF, the petition for certiorari is dismissed. No pronouncement as to costs.



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G.R. No. 154101 March 10, 2006

EJR CRAFTS CORPORATION, Petitioner,vs.

HON. COURT OF APPEALS, DIRECTOR BARTOLOME C.AMOGUIS, NATIONAL CAPITAL REGION, DEPARTMENT OFLABOR AND EMPLOYMENT, DERSECRETARY JOSE M.ESPAÑOL, JR., DEPARTMENT OF LABOR AND EMPLOYMENT,NIVEA MAHILUM, MICHELLE JAVIER, CONDANCIA SANTOS,ELIZABETH RAMOS, VIRGINIA FROTUGO, NOEMI PASIG,NELIA RICOHERMOSA, NIMFA CORTAN, AMELIAMATAMOROSA, BABYLYN1 ANDAL, MARGARITA SALASIBAO,MERCEDES GALLO, STEFANNY MORENO, AMY DEL MUNDO,VIRGINIA SUMALVALOG, BERNARDO ACERO, VIRGINIASANTOS, RAPELO RELLETA, LOUISE CAMAEG, PRICILLACANLAS, LOREN LOLITA, LORNA BUCARILLE, MERLAFERNANDEZ, GLORIA ABAD, LIGAYA SUPINA, PATIRICOLOURDES, RITA BATAN, MA. FE BERNALES, MARCELINAADONGA, RODOLFO DOMINGO, ESTEVA WESIN, ANALYNEUGENIO, JOSEPHINE ARGONIA, LINA MAGNO, YOLLYBOCO, JEAN ARO, ALMANZA GERARDO, MIRA SOLON,MAYLIN SABALILAG, MERCY QUITOLA, MARIBEL LAVILLA,JOSEPHINE ESGUERDO, FORTEL MEGMINDA, ALMA DIAZ,LEA CALISURA, MAMERTA BALLESTEROS, MELY GENOGUIN,LORNA DACASIN, CARMEN MARIETA, AUREA AMBAHAN andANNIE RESA, Respondents.

D E C I S I O N

CHICO-NAZARIO,J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rulesof Civil Procedure assailing the Decision2 of the Court of Appeals whichdismissed the special civil action for certiorari filed by petitioner seeking toannul the Resolutions3 of the Undersecretary of Labor affirming the Order 4 of the Regional Director, National Capital Region (NCR), which found petitioner liable to private respondents in the amount of P1,382,332.80 for underpayment of wages, regular holiday pay, overtime pay, nonpayment of 13th month pay and service incentive leave pay.

Sometime in 1997, private respondents filed a complaint for underpaymentof wages, regular holiday pay, overtime pay, nonpayment of 13th month pay and service incentive leave pay against petitioner before the RegionalOffice, NCR of the Department of Labor and Employment (DOLE). Actingon the complaint, Regional Director Bartolome Amoguis issued aninspection authority to Senior Labor Enforcement Officer Napoleon Santos.

On 22 August 1997, an inspection was conducted on the premises of petitioner’s offices wherein the following violations of labor standards law

were discovered, to wit: nonpresentation of employment records (payrollsand daily time records); underpayment of wages, regular holiday pay, andovertime pay; and nonpayment of 13th month pay and service incentiveleave pay. On the same day, the Notice of Inspection Result was received by and explained to the manager of petitioner corporation Mr. Jae KwanLee, with the corresponding directive that necessary restitution be effectedwithin five days from said receipt.

As no restitution was made, the Regional Office thereafter conductedsummary investigations. However, despite due notice, petitioner failed toappear for two consecutive scheduled hearings. Furthermore, petitioner failed to question the findings of the Labor Inspector received by andexplained to the corporation’s manager.

Thus, on 6 November 1997, Regional Director Amoguis issued the assailedOrder, the decretal portion of which reads:

WHEREFORE, premises considered, respondents EJR CRAFTSCORPORATION and/or MR. SASIGWANI DAVE and MR. JAE KUANLEE is hereby ordered to pay JEAN ARO, ET AL., the total amount of

ONE MILLION THREE HUNDRED EIGHTY-TWO THOUSANDTHREE HUNDRED THIRTY-TWO PESOS and 80/100 (P1,382,332.80)corresponding to their claims within ten (10) days from receipt hereof,otherwise, a WRIT OF EXECUTION shall be issued.5

Petitioner then filed a Motion for Reconsideration of said Order on 21 November 1997 arguing that the Regional Director has no jurisdiction over the case as private respondents were allegedly no longer connected with petitioner corporation at the time of the filing of the complaint and when theinspection was conducted, and that private respondents’ claims are within

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the exclusive and original jurisdiction of the Labor Arbiters. Petitioner further contends that it was never served with the notices of the hearings nor was it notified of the inspection results, thus denying it of due process.

In the 14 May 1998 Order of the Labor Secretary Cresenciano B. Trajano, petitioner’s Motion for Reconsideration was treated as an appeal and petitioner was directed to file an appeal bond equivalent to the amountadjudged in the assailed Order within 10 calendar days from receipt of theorder; otherwise, the appeal will be dismissed for not having been perfected.On 3 June 1998, petitioner filed a supplemental motion for reconsiderationand a motion for reduction of bond. Thereafter, petitioner filed amanifestation and motion praying that the surety bond in the amount of P100,000.00 be approved as compliance with the order of SecretaryTrajano. In an order dated 10 July 1998, Undersecretary Jose M. Español,Jr. denied the motion for reduction of bond for lack of merit, and petitioner was ordered to post a cash or surety bond in the amount of P1,382,332.80,which petitioner complied with on 31 July 1998 by filing a surety bond inthe amount ordered.

On 24 November 1998, Undersecretary Español issued the assailedResolution affirming the Order of the Regional Director with modificationthat Mr. Dave Sasigwani and Mr. Jae Kwan Lee are not personally liable.The Motion for Reconsideration filed by petitioner was subsequently deniedfor lack of merit.

Upon receipt of the Resolution denying its motion for reconsideration, petitioner filed a Petition for Certiorari under Rule 65 of the Rules of Court before the Court of Appeals. Said petition was thereafter dismissed in theDecision dated 20 July 2001. According to the appellate court:

The pivotal issue in this case is whether the Regional Director has jurisdiction over the claims of herein private respondents.

We find in favor of the private respondents.

It is admitted that for the Regional Director to exercise the power to order compliance, or the so-called "enforcement power" under Article 128(b) of P.D. No. 442 as amended, it is necessary that the employer-employeerelationship still exists.

In support of its contention that it is the Labor Arbiter and not the RegionalDirector who has jurisdiction over the claims of herein private respondents, petitioner contends that at the time the complaint was filed, the privaterespondents were no longer its employees. However, aside from photocopies of documents entitled "Release and Quitclaim," no other evidence was adduced by the petitioner to substantiate this claim. These

documents, being mere photocopies are unreliable and incompetent withoutthe original and deserves little credence or weight.

Moreover, when compared to other documents in the records of this case,the entries in said "Release and Quitclaim" raise serious doubts as to theauthenticity and veracity of such photocopies. Upon perusal of such"Release and Quitclaim", We find that the entries therein do not correspondwith the declarations of the private respondents in theQuestionnaires/Affidavits which they filled up and submitted to the DOLE.

x x x x

As is well-settled, if doubts exist between the evidence presented by theemployer and the employee, the scales of justice must be tilted in favor of the employee. Since it is a time-honored rule that in controversies between alaborer and his master, doubts reasonably arising from the evidence, or inthe interpretation of agreements and writings should be resolved in theformer’s favor (Prangan vs. NLRC, 289 SCRA 142).

x x x x

Left with no other evidence of its allegation, petitioner’s denial becomes anegative and self-serving evidence which has no weight in law.

Accordingly, the allegation of lack of jurisdiction necessarily fails.

x x x x

Petitioner’s allegation that it was denied due process is not well taken.

A perusal of the records, particularly the Notice of Inspection Result,reveals that petitioner, through its manager Mr. Jae Kwan Lee, was served acopy of the result of the inspection and that the same was explained to him.



36

The said notice of inspection result advised petitioner to submit within five(5) working days to the Regional Office its questions or objections to thefindings of the Labor Enforcement Officer, otherwise an order of compliance shall be issued. However, instead of submitting its objections or question such findings, petitioner chose to remain silent even after it wasnotified of the hearings to be conducted on said case. It is only after an

order was issued by the Regional Director directing the petitioner to pay asubstantial amount that it began to assert its right. Clearly, there was nodenial of due process.

Furthermore, petitioner was given another chance to present its case when itfiled a motion for reconsideration which the DOLE considered an appeal.

Finally, the Undersecretary of Labor correctly affirmed the Order of theRegional Director since the assailed Order was not without basis.

Said order of Regional Director Amoguis was based on the uncontested

result of the inspection, on the Questionnaires/Affidavits of the privaterespondents, and on the applicable provision of the Labor Code. Moreover, petitioner failed to prove its case during the appeal since it did not adduceevidence sufficient to warrant reversal of the assailed Order of RegionalDirector.

Accordingly, We find the assailed resolutions to be in harmony with theevidence on record and existing law and jurisprudence.

WHEREFORE, based on the foregoing premises, the instant petition ishereby DISMISSED.6

Petitioner’s Motion for Reconsideration was subsequently denied in aResolution dated 28 June 2002.

Hence, the instant petition seeking the resolution of the following issues:

I. Whether or not public respondent Regional Director has jurisdiction over the case;

II. Whether or not public respondents had committed grave abuseof discretion in dismissing the appeal and/or motion for reconsideration and the subsequent petition for certiorari of the petitioner;

III. Whether or not the public respondents had denied to the petitioner its right to due process of law;

IV. Whether or not, in the possibility that public respondentRegional Director has jurisdiction over the case, his decision was afaithful application of the law and correct appreciation of theevidence on record.

Petitioner maintains that the Regional Director has no jurisdiction over theinstant case since private respondents have ceased to be connected with the petitioner at the time of the filing of the complaint as well as when theinspection/investigation was conducted by the Labor Enforcement Officer.

According to petitioner, this fact is supported by the Quitclaim and Releaseforms submitted by petitioner and attached as annexes to the petition for certiorari filed before the Court of Appeals, as it is clearly stated therein that private respondents had already finished their contract with petitioner. Thus, petitioner contends that there being no employer-employee relationship between private respondents and petitioner, the claims of the privaterespondents for payment of monetary benefits fall within the exclusive andoriginal jurisdiction of the Labor Arbiter.

It is further argued by petitioner that it was denied due process as it was notgiven an opportunity to prove before the Regional Director that privaterespondents had already severed their employment with the corporation and

had been paid the claimed monetary benefits because they were never notified of the inspection results nor of the hearings conducted.

At this juncture, it would be wise to stress that the arguments espoused by petitioner in support of its position are anchored on alleged facts thecontrary of which have been found by the Regional Director, theUndersecretary of Labor, and the Court of Appeals. In essence, petitioner implores this Court to ascertain and evaluate certain material facts which,however, are not within the province of the Court to consider in petitionsfor review, especially since said facts have already been determined by the







37

administrative agency involved and such findings thereafter affirmed by theappellate court.

As a rule, findings of fact by administrative agencies are accorded greatrespect, if not finality by the courts. As stated in the case of Villaflor v.Court of Appeals7:

The findings of fact of an administrative agency must be respected as longas they are supported by substantial evidence, even if such evidence mightnot be overwhelming or even preponderant. It is not the task of an appellatecourt to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrativeagency in respect of sufficiency of evidence.

Furthermore, as a general rule, findings of fact of the Court of Appeals arefinal and conclusive and cannot be reviewed on appeal by the SupremeCourt, provided they are borne out by the record or based on substantial

evidence.

8

It is not the function of this Court to analyze or weigh evidenceall over again, unless there is a showing that the findings of the lower courtare totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of discretion.9

Therefore, this Court not being a trier of facts cannot pass upon theauthenticity and veracity of the quitclaim and release forms – the only pieceof evidence presented by petitioner to support its contention that noemployer-employee relationship exists between petitioner and privaterespondents at the time of the filing of the complaint. The said quitclaimand release forms had already been considered by both the Undersecretaryof Labor and the Court of Appeals and found to be "unreliable and do not

correspond to other documents on record which would prove that privaterespondents were working for the petitioner up to August 1997."10 Theconclusion reached by both the Undersecretary of Labor and the Court of Appeals, after thoroughly considering all pieces of evidence presented before them regarding this issue, must now be regarded with great respectand finality by this Court.

While it is true that there are instances when this Court may resolve factualissues, such as: 1) when the findings are grounded entirely on speculation,surmises, or conjectures; 2) when the inference made is manifestly

mistaken, absurd or impossible; 3) when there is grave abuse of discretion;4) when the judgment is based on a misapprehension of facts; 5) when thefindings of facts are conflicting; 6) when in making its findings, the Courtof Appeals went beyond the issues of the case, or its findings are contrary tothe admissions of both the appellant and the appellee; 7) when the findingsare contrary to the trial court; 8) when the findings are conclusions without

citation of specific evidence on which they are based; 9) when the facts setforth in the petition as well as in the petitioner’s main and reply briefs are

not disputed by the respondent; 10) when the findings of fact are premisedon the supposed absence of evidence and contradicted by the evidence onrecord; or 11) when the Court of Appeals manifestly overlooked certainrelevant facts not disputed by the parties, which, if properly considered,would justify a different conclusion;11 however, none of these exceptionsare applicable in the instant case.

Considering thus that there still exists an employer-employee relationship between petitioner and private respondents and that the case involvesviolations of labor standard provisions of the Labor Code, we agree with the

Undersecretary of Labor and the appellate court that the Regional Director has jurisdiction to hear and decide the instant case in conformity withArticle 128(b) of the Labor Code which states:

Art. 128. Visitorial and Enforcement Power. –

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code tothe contrary, and in cases where the relationship of employer-employee stillexists, the Secretary of Labor and Employment or his duly authorizedrepresentatives shall have the power to issue compliance orders to giveeffect to the labor standards provisions of this Code and other labor

legislation based on the findings of labor employment and enforcementofficers or industrial safety engineers made in the course of inspection. TheSecretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders,except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported bydocumentary proofs which were not considered in the course of inspection.12



























38

With respect to petitioner’s claim that it had been denied due process as it

was not served a copy of the inspection report and neither was it notified of the hearings, thus refusing it the opportunity to contest the findings of theLabor Enforcement Officer and the jurisdiction of the Regional Director,We cannot but agree with both the Undersecretary of Labor and the Courtof Appeals that such assertion is bereft of merit. A perusal of the records

will reveal that petitioner corporation’s manager Mr. Jae Kwan Lee wasserved a copy of the Inspection Report and that the same was explained tohim on the same day that the said inspection was conducted. As correctly pointed out by the Undersecretary of Labor, by affixing his signaturethereon, Mr. Jae Kwan Lee acknowledged receipt of the same and that hehas understood its contents. Nevertheless, petitioner failed to object to thefindings of the Labor Enforcement Officer. Moreover, petitioner was againgiven an opportunity to contest such findings when it was summoned by theOffice of Chief Labor Enforcement Division to attend the summaryinvestigation on 8 and 22 September 1997, but petitioner failed to attend. Itwas only after the Regional Director issued an order adjudging petitioner liable to pay private respondents the amount of P1,382,332.80 that it

commenced to question the jurisdiction of the Regional Director over thecomplaints of private respondents. Evidently, petitioner was never deniedits right to due process, but rather it chose not to participate in the proceedings until an order unfavorable to its interests was issued.

WHEREFORE, premises considered, the petition for review is herebyDENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 53791is hereby AFFIRMED. With Costs.

SO ORDERED.

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