Prescriptive period; illegal dismissal (2002)

A. State your agreement or disagreement with the

following statement and explain your answer
briefly: A criminal case filed against an employee
does not have the effect of suspending or
interrupting the running of the prescriptive period
for the filing of an action for illegal dismissal (2%)
B. State your agreement or disagreement with
the following statement and explain your answer
briefly: The period of prescription in Article 291 of
the Labor Code applies only to money claims so
that the period of prescription for other cases of
injury to the rights of employees is governed by the
Civil Code. Thus, an action for reinstatement for
injury to an employee's rights prescribes in four (4)
years as provided in Article 1146 of the Civil Code.
(3%)
SUGGESTED ANSWER:
A. I agree. The two (2) cases, namely: the criminal
case where the employee is the accused; and the
case for illegal dismissal, where the employee
would be the complainant, are two (2) separate
and independent actions governed by different
rules, venues, and procedures. The criminal case
is within the jurisdiction of the regular courts of law
and governed by the rules of procedure in criminal
cases. The action for the administrative aspect of
illegal dismissal would be filed with the NLRC and
governed by the procedural rules of the Labor
Code.
ANOTHER SUGGESTED ANSWER:
I agree. An action for illegal dismissal is an
administrative case which is entirely separate and distinct
from a criminal action. Each may proceed
independently of each other.
The right to file an action for illegal dismissal is not
dependent upon the outcome of the criminal case.
Guilt or innocence in the criminal case is not
determinative of the existence of a just or
authorized cause for a dismissal. [Pepsi-Cola
Bottling Co. v. Guanzon 172 SCRA 571(1989)}
SUGGESTED ANSWER:
B. I agree with the statement. A case of illegal
dismissal filed by an employee who has been
terminated without a just or authorized cause is not
a money claim covered by Art. 291 of the Labor
Code. An employee who is unjustly dismissed from
work is entitled to reinstatement and to his
backwages. A case of illegal dismissal is based
upon an injury to the right to security of tenure of
an employee. Thus, in accordance with Art 1146, it
must be instituted within four years. [Callanta v.
Carnation Phil. 145 SCRA 268(1986); Baliwag
Transit v. Ople 171 SCRA 250(1989); International
Harvester Macleod, Inc. v. NLRC, 200 SCRA
817(1991)]

Dismissal; Damages Recoverable (2001)

What damages can an illegally dismissed
employee collect from his employer? (2%).
SUGGESTED ANSWER:
An illegally dismissed employee may collect from
his employer ACTUAL or COMPENSATORY
damages, MORAL damages and EXEMPLARY
damages, as well as attorney's fees as damages.
ANOTHER SUGGESTED ANSWER:
Moral and exemplary damages are only proper
where the employee has been harassed and
arbitrarily terminated by the employer, Nueva Ecija
vs. Electric Cooperative Employees Association
(G.R. No. 116066, January 24, 2000; Cruz vs.
NLRC, G.R. No. 16384. February 7, 2000;
Philippine Aeolus etc., vs. Chua (G.R. No. 124617,
April 28, 2000; and Lucas vs. Royo, G.R. No.
136185, October 30, 2000).

Employee; Probationary Employees (2001)

What limitations, if any, do the law and
jurisprudence impose on an employer's right to
terminate the services of a probationary
employee? (2%)
SUGGESTED ANSWER:
The Labor Code [in Art. 281) provides that the
services of an employee who has been engaged
on a probationary basis may be terminated for a
just cause or when he fails to qualify as a regular
employee in accordance with reasonable
standards made known by the employer to the
employee at the time of his engagement. If the
probationary employee is being terminated for just
cause, he must, of course, be given due process
before his termination.

Wages; Money Claims; Attorneys Fees;

Damages (2001)
(a) Eduardo Santiago, a project worker, was being
assigned by his employer, Bagsak Builders, to
Laoag, Ilocos Norte. Santiago refused to comply
with the transfer claiming that it, in effect,
constituted a constructive dismissal because it
would take him away from his family and his usual
work assignments in Metro Manila. The Labor
Arbiter found that there was no constructive
dismissal but ordered the payment of separation
pay due to strained relations between Santiago
and Bagsak Builders plus attorney's fees
equivalent to ten percent (10%) of the value of
Santiago's separation pay.
Is the award of attorney's fees valid? State the
reasons for your answer. (2%).
SUGGESTED ANSWER:
No, the award of attorney's fees is not valid.
According to the Labor Code (Art. 111 (a)),
attorney's fees may be assessed in cases of
unlawful withholding of wages which does not exist
in the case. The worker refused to comply with a
lawful transfer order, and hence, a refusal to work.

Given this fact, there can be no basis for the

payment of attorney's fees.
(b) Could the labor arbiter have validly awarded
moral and exemplary damages to Santiago instead
of attorney's fees? Why? (3%).
SUGGESTED ANSWER;
No, moral and exemplary damages can be awarded only
if the worker was illegally terminated in an arbitrary or
capricious manner. (Nueva Ecija Electric Cooperative
Inc., Employees Assn., us.NLRC, G.R. No. 116066,
January 24, 2000; Cruz us. NLRC, G.R. No. 116384,
February 7, 2000; Phil. Aeolus etc., vs. NLRC, G.R. No.
124617, April
28, 2000),

Dismissal; Authorized Causes;

Retrenchment & Redundancy (2001)
(a) What conditions must prevail and what
requirements, if any, must an employer comply
with to justify/effect a valid retrenchment program?
(2%).
SUGGESTED ANSWER;
In the case of Asian Alcohol Corp. vs. NLRC, G.R. No.
131108, March 25,1999, the Supreme Court stated that
the requirements for a valid retrenchment must be proved
by clear and convincing evidence:
(1) that the retrenchment is reasonably necessary and
likely to prevent business losses which, if already
incurred, are not merely de minimis, but SUBSTANTIAL,
SERIOUS, ACTUAL and REAL or if only expected, are
reasonably imminent as perceived objectively and in good
faith by the employer;
(2) that the employer served WRITTEN NOTICE
both to the employees and to the Department
of Labor and Employment at least one month
prior to the intended date of retrenchment;
(3) that the employer pays the retrenched
employees SEPARATION PAY equivalent to
one month pay or at least one month pay for
every year of service, whichever is higher;
(4) that the employer exercises its prerogative to
retrench employees in GOOD FAITH for the
advancement of its interest and not to defeat
or circumvent the employees' right to security
of tenure; and
(5) that the employer used FAIR and
REASONABLE CRITERIA in ascertaining who
would be dismissed and who would be
retained among the employees, such as status
(i.e., whether they are temporary, casual,
regular or managerial employees), efficiency,
seniority, physical fitness, age, and financial
hardship for certain workers.

(b) What conditions must prevail and what

requirements, if any, must an employer comply
with to justify/effect a valid redundancy program?
(2%).

SUGGESTED ANSWER:
In the case of Asian Alcohol Corp. (supra), the
Supreme Court stated that REDUNDANCY exists when
the service capability of the work is in excess
of what is reasonably needed to meet the
demands on the enterprise. A REDUNDANT
POSITION is one rendered superfluous by any
number of factors, such as overhiring of workers,
decreased volume of business dropping of a
particular line previously manufactured by the
company or phasing out of a service activity
previously undertaken by the business. Under
these conditions, the employer has no legal
obligation to keep in its payroll more employees
than are necessary for the operation of its
business.
For the implementation of a redundancy program
to be valid, the employer must comply with the
following REQUISITES:
(1) written notice served on both the employees
and the Department of Labor and Employment at
least one month prior to the intended date of
retrenchment;
(2) payment of separation pay equivalent to at
least one month pay or at least one month pay for
every year of service whichever is higher;
(3) good faith in abolishing the redundant
positions; and
(4) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and
accordingly abolished.

Dismissal; Authorized Causes; Seniority

Rule (2001)
(c) Is the SENIORITY RULE or "last in first out"
policy to be strictly followed in effecting a
retrenchment or redundancy program? (1%).
SUGGESTED ANSWER:
Again, in Asian Alcohol Corp., the Supreme Court
stated that with regard the policy of "first in, last
out" in choosing which positions to declare as
redundant or whom to retrench to prevent further
business losses, there is no law that mandates
such a policy. The reason is simple enough. A host
of relevant factors come into play in determining
cost efficient measures and in choosing the
employees who will be retained or separated to
save the company from closing shop. In

determining these issues, management plays a

pre-eminent role. The characterization of positions
as redundant is an exercise of business judgment
on the part of the employer. It will be upheld as
long as it passes the test of arbitrariness.

Dismissal; Authorized Causes; Downsizing

Employees (2001)
Soon after the Asian meltdown began in October
1997, ABC Realty and Management Corporation
undertook a downsizing program and terminated
nearly a third of its regular workforce. The affected
employees questioned their termination arguing
that the action was precipitate in that ABC had not
proved that it sustained any losses. Is the claim of
the employees correct? Explain your answer, (3%).
SUGGESTED ANSWER:
The claim of the employees may or may not be
correct. When the Corporation undertook its
"downsizing" program, it may have terminated its
employees on either one of two grounds, namely,
redundancy or retrenchment.
For REDUNDANCY, there is no requirement of
losses, whereas in retrenchment, substantial
losses, actual or anticipated, is a requirement.
(Article 283, Labor Code). In Atlantic Gulf and
Pacific Company vs. NLRC, G.R. No. 127516. May
28, 1999, the Supreme Court ruled:
"... it is necessary to distinguish redundancy
from retrenchment... Redundancy exists when
the services of an employee are in excess of
what is required by an enterprise.
RETRENCHMENT on the other hand, ... is
resorted to primarily to avoid or minimize
business losses."
In Escareal vs. NLRC, 213 SCRA 472 (1992), the
Supreme Court ruled that the law does not require
financial loss as a basis for redundancy.

Backwages; Basis (2001)

(a) "A", an employee of Company "B", was found
to have been illegally dismissed and was ordered
to be reinstated and paid backwages from the time
of dismissal until actual reinstatement. The case
was elevated all the way to the Supreme Court. By
the time the Supreme Court's decision became
final and executory, B had closed down and was in
the process of winding up. Nonetheless, B paid A
his backwages and separation pay. A complained
that Bs computation was erroneous in that A's
allowances was not included. Is A correct in his
claim? For what reason(s)? (2%).
SUGGESTED ANSWER:
A is correct. After its amendment by Rep. Act No.
6715, the backwages that an employee who has been
unjustly dismissed is entitled to receive is not
limited to his full backwages but also includes his

allowances and the other benefits or their

monetary equivalent.
ANOTHER SUGGESTED ANSWER:
In the case of Consolidated .Rural Bank us. NLRC,
G.R. No. 123810, January 20,1999, the Supreme
Court ruled that allowances of the employee
should be included in the computation of backwages.

Dismissal; Separation Pay; Backwages

(2002)
Lyric Theater Corp. issued a memorandum
prohibiting all ticket sellers from encashing any
check from their cash collections and requiring
them instead to turn over all cash collections to the
management at the end of the day. In violation of
this memorandum, Melody, a ticket seller,
encashed five (5) checks from her cash collection.
Subsequently the checks were dishonored when
deposited in the account of Lyric Theater. For this
action, Melody was placed under a 20-day
suspension and directed to explain why she should
not be dismissed for violation of the company's
memorandum. In her explanation, she admitted
having encashed the checks without the
company's permission. While the investigation was
pending, Melody filed a complaint against Lyric
Theater for backwages and separation pay. The
Labor Arbiter ordered Lyric Theater to pay Melody
P115,420.79 representing separation pay and
backwages. The NLRC affirmed the ruling of the
Labor Arbiter. Is the ruling of the NLRC correct?
Explain briefly. (5%)
SUGGESTED ANSWER:
The ruling of the NLRC affirming the Labor
Arbiter's decision ordering Lyric Theater to pay
P115,420.79 representing separation pay and backwages
is wrong.
The Labor Arbiter's decision is wrong because:
a) It is premature. There was still no termination.
All that was done by the employer (Lyric
Theater) was to place the employee (Melody) under a 20day suspension, meanwhile directing her to explain why
she should not be dismissed for violation of company's
memoranda.
b) The order for Lyric Theater to pay separation pay has
no factual basis. Separation pay is to be paid to an
employee who is terminated due to the Installation of
labor saving devices, retrenchment to prevent losses or
the closing or cessation of operation of the establishment
undertaking. None of these events has taken place.
Neither is separation pay here in lieu of reinstatement.
Melody is not entitled to reinstatement because there is a
just cause for her termination.
c) The order for Lyric Theater to pay backwages
has no factual basis. If after investigation, Lyric
Theater dismisses Melody, there is just cause
for such termination. There is willful

disobedience by the employee of the lawful

orders of her employer in connection with her
work. She did not just violate the lawful order
of the employer. She violated it five times.
Melody did not give any justifiable reason for
violating the company's memorandum
prohibiting the encashment of checks. [Jo
Cinema Corp. v. Avellana, GR No. 132837,
June 28, 2001]

Backwages (2002)
A. An employee was ordered reinstated with
backwages. Is he entitled to the benefits and
increases granted during the period of his lay-off?
Explain briefly. (3%)

303 SCRA 432, (1999)]

ANOTHER SUGGESTED ANSWER:

Yes. The General Manager may be held jointly and
severally liable for back wages of an illegally
dismissed employee if he or she actually
authorized or ratified the wrongful dismissal of the
employee under the rule of respondeat superior. In
case of illegal dismissal, corporate directors and
officers are solidarity liable with the corporation
where termination of employment are done with
malice or bad faith. [Bogo-Medellin Sugar Planters
Assoc., Inc. v. NLRC, 296 SCRA 108, (1998)]
Retirement; Retirement Pay (2001)

SUGGESTED ANSWER:
A. Yes. An employee who is ordered reinstated
with backwages is entitled to the benefits and
increases granted during the period of his lay-off.
The Supreme Court has ruled: "Backwages are
granted for earnings a worker lost due to his illegal
dismissal and an employer is obliged to pay an
illegally dismissed employee the whole amount of
salaries plus all other benefits and bonuses and
general increases to which the latter should have
been normally entitled had he not been dismissed."
[Sigma Personnel Services v. NLRC, 224 SCRA
181 (1993)]

B. Ukol was compulsorily retired by his employer, Kurot

Bottling Corporation, upon the former's reaching 65 years
of age, having rendered 30 years of service. Since there
was no CBA, B. Ukol was paid his retirement benefits
computed 15 days' pay for every year of service, based
on B. Ukol's highest salary during each year of his
employment. Not satisfied, B. Ukol filed action with the
Arbitration Branch of the NLRC claiming that his
retirement benefits were not computed properly. Is B.
Ukol's claim meritorious? What are the components of his
retirement benefits? (2%),
SUGGESTED ANSWER:

Self Organization; Unions; Membership;

Dismissal in Bad Faith (2002)
A On what ground or grounds may a union
member be expelled from the organization? (3%)
B. May the general manager of a company be held
jointly and severally liable for backwages of an
illegally dismissed employee? (2%)
SUGGESTED ANSWER:
A. Union members may be expelled from the labor
organization only on valid grounds provided for in
the Union Constitution, By-Laws, or conditions for
union membership.
ANOTHER SUGGESTED ANSWER:
Whenever appropriate for any violation of the rights
as:
a) Refusal to pay union dues and special
assessments;
b) Disloyalty to the union; and
c) Violation of the constitution and by-laws of the
union.
SUGGESTED ANSWER:
B. Yes. If it is shown that he acted in bad faith, or
without or in excess of authority, or was motivated
by personal ill-will in dismissing the employee, the
general manager may be held jointly and severally
liable for the backwages of an illegally dismissed
employee. [ARB Construction C. v. Court of Appeals, 332
SCRA 427, (2000), Lim v. NLRC,

Ukol's claim is meritorious. His retirement benefit is to be

computed in accordance with Article 287, which reads: "In
the absence of a retirement plan or agreement providing
for retirement benefits of employees in the establishment,
an employee may retire ... and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six
months being considered as one whole year. The same
Article then explains that the term one-half (1/2) month
salary means fifteen days plus one- twelfth (1/12) of the
13th month pay and the cash equivalent of not more than
five (5) days of service incentive leaves. The components
of retirement pay are:
(1) 15 days pay;
(2) 1/12 of the 13th month pay; and
(3) cash equivalent of not more than five (5) days of
service incentive leave.
(b) What exception(s) do(es) the law on retirement
benefits provide(s) if any? (3%).
SUGGESTED ANSWER:
Retail, service and agricultural establishments or
operations employing not more than ten (10) employees
or workers are exempted from the coverage of the
provision on retirement benefits in the Labor Code.
Also, where there is a retirement plan of the employer
that grants more than what the Labor Code grants.

Dismissal; Authorized Causes; Closure & Cessation

(2001)
Company "A" was engaged in the manufacture of goods
using the by-products of coconut trees and employed
some fifty workers who lived in the coconut plantation in
Quezon Province. The land upon which A conducted its
operation was subjected to land reform under R.A. 6657
for distribution to the tenants and residents of the land.
Consequently, A had to close its operations and dismiss
its workers. The union representing the employees
demanded that A pay the dismissed workers separation
pay under Art. 283 of the Labor Code that requires,
among others, the payment of separation pay to
employees in cases of "closing or cessation of operations
of the establishment or undertaking". Is the union's claim
correct or not? Why? (5%)
SUGGESTED ANSWER:
The union's claim is not correct. In the case of National
Federation of Labor vs. NLRC, G.R. No. 127718, March
2. 2000, the Supreme Court ruled that there is no
obligation to pay separation pay if the closure is not a
unilateral and voluntary act of the employer.
In the question, the closure was brought about not by a
unilateral and voluntary act of the employer but due to the
act of government in the implementation of the
Comprehensive Agrarian Reform Law.
Dismissal; Payroll Reinstatement; Reinstatement
Order (1999)
FACTS: In the illegal dismissal case filed by Sharon
Cometa against Up & Down Company, the labor Arbiter
rendered a decision directing her immediate
reinstatement and payment of full backwages. The
Company appealed to the NLRC. Following her lawyer's
advise that the reinstatement aspect of the decision is
immediately executory, Sharon went to the HRD Office of
the Company and demanded immediate reinstatement.
When the Company refused, her lawyer, Atty. Maximiano
Anunciacion, filed a motion to cite the employer in
contempt. Acting on the motion, the NLRC ordered the
payroll reinstatement of Sharon Cometa. 1. Can the
company or any of its officials be cited for contempt for
refusing to reinstate Sharon Cometa? Why? (3%)

Yes. Under Art. 223 of the Labor Code, an employer has

two options in order for him to comply with an order of
reinstatement, which is immediately executory, even
pending appeal. FIRSTLY, he can admit the dismissed
employee back to work under the same terms and
conditions prevailing prior to his dismissal or separation
or to a substantially equivalent position if the former
position is already filled up. SECONDLY, the employer
can be reinstated in the payroll. Failing to exercise any of
the above options, the employer can be compelled under
PAIN OF CONTEMPT, to pay instead the salary of the
employee effective from the date the employer failed to
reinstate despite an executory writ of execution served
upon him. Under Art. 218 of the Labor Code, the NLRC
has the power to cite persons for direct and indirect
contempt.
ANOTHER ALTERNATIVE ANSWER:
In a case (Maranaw Hotel Corp. v. NLRC, 238 SCRA
191), the Supreme Court said that although the
reinstatement aspect of a Labor Arbiter's decision was
immediately executory, it does not follow that it is selfexecutory. There must still be a writ of execution issued
motu proprio or upon motion of the interested party. (See
Article 224)
2. May the NLRC order the payroll reinstatement of
Sharon Cometa? Why? (2%)
SUGGESTED ANSWER;
The NLRC may NOT order the payroll reinstatement of
Sharon Cometa. The Labor Code (Article 223) provides
that in the immediate reinstatement of a dismissed
employee, the employee shall be admitted back to work
under the same terms and conditions prevailing prior to
the employee's dismissal or, at the option of the
employer, merely reinstated in the payroll. Thus, the
reinstatement of the employee in the payroll is at the
option of the employer and not of the NLRC or the Labor
Arbiter who have the power only to direct reinstatement.
Natl Labor Relations Commissions (2001)
Company "A", within the reglementary period, appealed
the decision of a Labor Arbiter directing the reinstatement
of an employee and awarding backwages. However, A's
cash bond was filed beyond the ten day period. Should
the NLRC entertain the appeal? Why? (5%).

SUGGESTED ANSWER:
SUGGESTED ANSWER:
Yes. The company or any of its officials can be cited for
contempt. It is noted that in his decision, the Labor Arbiter
specifically directed the immediate reinstatement of
Sharon Cometa. This directive under the Labor Code
(Article 223) is immediately executory, even pending
appeal. (Pioneer Texturizing Corporation v. NLRC, 280
SCRA 806)
ALTERNATIVE ANSWER:

No, the NLRC should not entertain the appeal, as the

same was not perfected for failure to file a bond. Art. 223
of the Labor Code reads: "In case of a judgment involving
a monetary award, an appeal by the employer may be
perfected only upon the posting of cash or surety bond...
In the amount equivalent to the monetary award in the
judgment appealed from."

In ABA vs. NLRC, G.R. No. 122627. July 18, 1999, the
Supreme Court ruled: "An appeal bond is
necessary......the appeal may be perfected only upon the
posting of cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in
the amount equivalent to the monetary award in the
judgment appealed from."

reglementary period. Genevieve filed an opposition to the

appeal. The NLRC affirmed in toto the decision of the
Labor Arbiter. Both the BOI and Genevieve are not
satisfied with the decision of the NLRC, 1. What is the
remedy, if any, of BOI and before what forum? Explain
briefly. (3%)
SUGGESTED ANSWER:

ANOTHER SUGGESTED ANSWER:

The NLRC may still entertain the appeal. It is true that the
Labor Code (in Art. 223) provides that appeal is perfected
only upon the posting of a cash or surety bond. But if
Company A filed a motion for the reduction of the bond,
and said motion was only acted upon after the
reglementary period, then, the NLRC, in the interest of
substantial justice, may still take cognizance of the
appeal.

BOI can file a Motion for Reconsideration with the NLRC

after ten (10) calendar days from receipt of the decision.
If the NLRC denies the Motion for Reconsideration, BOI
can file a petition for certiorari with the Court of Appeals
under Rule 65 of the Rules of Court since the decision of
the NLRC is final and executory.
2. Can Genevieve Cruz avail herself of the same remedy
as that of BOI? Why? (2%)

Labor Dispute ( 2001)

SUGGESTED ANSWER:

"A" was able to obtain a Judgment against his former

employer, Company "B", for P750,000.00. In executing
the judgment in favor of A, the Labor Arbiter sought to
levy on B's office equipment. B filed an action for
damages and injunction against the Labor Arbiter before
the Regional Trial Court of the province where B's offices
are located. Is B's action tenable? Why? (5%).

Genevieve Cruz can avail herself of the same remedy as

that of the BOI. The remedies described for the BOI are
also the same remedies available to Genevieve Cruz as a
party to the case, pursuant to the Labor Code (Article
223) and the Rules of Court (Rule 65).

SUGGESTED ANSWER:
B's action is not tenable. In the case of Delta Ventures
Resources vs. Hon. Fernando P. Labato, G.R. No.
118216, March 9, 2000, the Supreme Court ruled that the
regular courts have no jurisdiction to act on labor cases or
various incidents arising therefrom, including the
execution of decisions, awards or orders.
ANOTHER SUGGESTED ANSWER:
Yes, B's action before the Regional Trial Court is tenable
if said action is limited to the filing of a damage suit
against the Labor Arbiter because there exists no
employer-employee relationship between "B" and the
Labor Arbiter, and there is no labor dispute between
them. In Agricultural Development Corporation vs. Court
of Appeals, G.R. No. 112139. January 31, 2000, the
Supreme Court, ruled: "It is well settled in law and
jurisprudence that where NO employer-employee
relationship exists between the parties and no issue is
involved which may be resolved by reference to the Labor
Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has
jurisdiction."
Remedies; illegal dismissal (1999)
The Labor Arbiter dismissed the complaint for illegal
dismissal filed by Genevieve Cruz against Bulag Optical
Inc. (BOI) which denied her prayer for reinstatement but
awarded financial assistance in her favor. BOI appealed
the decision of the Labor Arbiter to the NLRC within the

Panel: But the facts of the case indicate that Genevieve

did not appeal. She therefore cannot avail of the remedy.