Serrano v. NLRC

SERRANO V. NATIONAL LABOR RELATIONS COMMISSION AND ISETANN DEPARTMENT STORE

27 January 2000 | Mendoza | Special civil action in the SC, Certiorari

FACTS
Ruben Serrano was hired by Isetann Dept. Store as a security checker

1984 – Contractual; 1985 – Regular; 1988 – Head of Security Checkers

In 1991, as a cost-cutting measure, Isetann decided to phase out the entire security section and engage the services of an independent security agency.

Isetann sent a memo to Serrano on 11 Oct 1991, reiterating their verbal notice of termination effective on the same day.

Serrano filed a complaint on 3 Dec 1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, nonpayment of salary and overtime pay


Labor Arbiter held that Serrano was illegally dismissed

• Failed to establish that the cause of retrenchment is to minimize losses
• Did not accord due process to Serrano
• Did not use reasonable standards in selecting employees to be terminated
• Did not show employees’ inefficiency so as to justify their replacement
• The day after Serrano’s dismissal, Isetann hired another person as a safety and security supervisor
• Isetann ordered to pay backwages, reinstatement, unpaid wages, 13th month pay, attorney’s fees

NLRC reversed Labor Arbiter’s decision upon Isetann’s appeal

• Phase-out of security section, hiring of agency is a legitimate business decision
• Labor Arbiter’s distinction between retrenchment and employment of cost-saving devices insignificant
• Reasonable criteria does not apply because the entire Security Section was abolished
• No bad faith in appointing a supervisor because it was separate from Serrano’s position as Security Checkers head
• Isetann ordered to give separation pay, unpaid salary, 13th month pay
• Serrano’s MfR denied

ISSUE AND HOLDING

WON the abolition of the Security Checkers section and the employment of an independent security agency falls under any of the authorized causes for dismissal under Article 283 of the Labor Code - YES, authorized cause is redundancy; Serrano should be given separation pay at the rate of one-month pay for every year of service (Art. 283)

DISCUSSION

Art. 283 provides that one month before intended date, written notice must be served on the workers and DOLE

Authorized causes under Art. 283 (Closure of establishment and reduction of personnel)

Installation of labor-saving devices Redundancy	Separation pay at the rate of at least one-month pay or one-month pay for every year of service (whichever is higher)
Retrenchment to prevent losses Closing or cessation of operations	Separation pay at the rate of at least one-month pay or half-month pay for every year of service (whichever is higher)

Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the employer’s exercise of judgment.
That the phase-out constituted a legitimate business decision is a factual finding of NLRC.

History of policies

When there is just cause but no due process (requirements of notice and opportunity to be heard)
Before: Dismissal is illegal
The shift took place in Wenphil Corp. v. NLRC

• Highly prejudicial to the employer’s interests to reinstate an employee who has been shown to be guilty of the charges that warranted his dismissal
• Dismissal must be for just or authorized cause and after due process

Now: Dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due process (Sebuguero v. NLRC)

• Fines imposed range from P1,000 to P10,000

Reexamining Wenphil doctrine

• J. Panganiban – Monetary sanctions are too insignificant, niggardly, late
• J. Puno – “Dismiss now, pay later” policy convenient for moneyed employers
• In their opinion, such dismissal is void and employee should be reinstated and paid backwages

Remedy – pay full backwages from dismissal until determination that dismissal was for a just cause BUT STILL, dismissal must be upheld

Why violation of the notice requirement cannot be considered a denial of due process resulting in the nullity of dismissal
Due process clause is a limitation on governmental powers and DOES NOT APPLY to the exercise of private power

a. Only the state has authority to take life, liberty, property
b. Purpose of clause is to ensure that the exercise of this power is consistent with civilized methods

Notice and hearing are required under the due process clause before the power of the organized society is brought to bear upon the individual

a. This is NOT the case of termination of employee – no adversary system here (there is no charge against the employee)
b. Purpose of 30-day written notice is to give employee time to prepare for the eventual job loss, and for DOLE to determine WON economic causes exist to justify his termination
c. Even in cases of dismissal under Article 282[1], purpose of notice and hearing is NOT to comply with the due process clause in the Constitution; Compliance with notice requirement does not foreclose right of employee to question the legality of his dismissal

d. History of related laws

1. Art. 302 of Spanish Code of Commerce – employee/employer can terminate relationship by giving one month notice; in lieu of notice, mesada (one month pay) could be given to employee
2. NCC 2270 – repealed Art. 302 of Spanish Code of Commerce
3. RA 1052 (Termination Pay Law) – revived mesada
4. RA 1787 – amended RA 1052 by providing for giving of advance notice or payment of compensation (1/2 month per year of service)
5. Rules implementing BP 130, RA 6715 (amending NCC 277(b) – notice required even when the dismissal was for cause

Employer CANNOT be expected to be an impartial judge of his own cause

Also the case for termination for a just cause under Article 282

J. Puno disputes this as he says that many cases have been won by employees before grievance committees manned by impartial judges of the company

Grievance machinery is DIFFERENT – established by agreement of employer, employees and is composed of representatives from both sides

If the violation of the notice requirement is not a denial of due process, what is it?
Mere failure to observe a procedure for the termination of employment, which makes the termination merely ineffectual

What makes a dismissal of an employee illegal?
Only the absence of a just cause for termination as provided in Article 279

Basis	Authorized cause	Notice	Reinstate	Kind of pay
Art. 283	P	Î	Î	Separation pay, backwages
Art. 283	Î	Î	P	Backwages
Art. 282	P	Î	Î	Backwages from termination until it is determined that there is just cause

DISPOSITIVE PORTION

Petition granted. NLRC resolution modified. Isetann is ordered to:

• Pay separation pay equivalent to one month pay per year of service
• Unpaid salary
• Proportionate 13^th month pay
• Full backwages from termination until this decision becomes final

Case remanded to Labor Arbiter to determine computation of monetary awards to Serrano.

OPINIONS [2]

Separate Opinion – Bellosillo

• Prefers to call indemnity or penalty as disturbance compensation
• Proposes that amount of the award be uniform and rational and not arbitrary

Dissenting Opinion – Puno

• Wenphil did not change ruling that violation of the pre-dismissal notice requirement is an infringement of due process
• Submits a return to the pre-Wenphil rule where a reasonless violation of the notice requirement makes the dismissal illegal and results in the employee’s reinstatement

• One undesirable effect of Wenphil is to compel employees to seek relief against illegal dismissals with DOLE (whereas before, a remedy can be sought before the employer) and oftentimes, they do not know why they were dismissed in the first place
• Dilution of the rule has been abused by employers who followed the “dismiss now, pay later” strategy
• An employee under Article 283 has a stronger claim to the right to a pre-dismissal notice and hearing (rather than post facto dismissal hearing)
• Disagrees with majority opinion that due process requirement does not apply to the exercise of private power; private due process is a settled norm in administrative law

Separate Opinion – Vitug

• A just or authorized cause and a written notice are required concurrently but not equipollent in their consequence in terminating an employer-employee relationship
• Where there is no just or authorized cause, reinstatement and payment of backwages would be proper. Damages might also be awarded if dismissal is attended by bad faith of employer. Separation pay can substitute for reinstatement if such reinstatement is not feasible.
• Employer must be made to pay corresponding damages for failure to comply with notice requirement

Separate Opinion – Panganiban

• Notice requirement finds basis not only in the Labor Code but also in the due process clause of the Constitution
• When the employee is dismissed without due process, he is illegally dismissed. He is entitled to backwages and reinstatement.
• The Labor Code grants the dismissed employee the right to be notified as well as the right to be heard.

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[1] Causes under Article 282 are (1) serious misconduct or willful disobedience, (2) gross and habitual neglect of duties, (3) fraud or breach of trust, (4) commission of crime against employer or immediate family member or authorized representatives, and (5) other analogous causes.

[2] For this part, I will only take note of discussions different from what has been presented in the majority opinion.

Ang Tibay v. CIR

ANG TIBAY and NATIONAL WORKERS’ BROTHERHOOD v. COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION, INC. 

27 February 1940 | Laurel 

Decision on motion for reconsideration and on motion for new trial 

Remember this case for

The cardinal primary requirements of due process in administrative proceedings

Characterization of the CIR 

Facts

An MfR was filed by the Solicitor-General on behalf of respondent CIR. National Labor Union on the other hand prays for the remanding of the case to CIR for a new trial. Ang Tibay filed an opposition for both the motion for reconsideration of CIR and the motion for a new trial by the National Labor Union (NLU). 

Toribio Teodoro owns and operates Ang Tibay, a leather company which supplies the Philippine Army. NLU avers that employer Toribio Teodoro (of the National Workers’ Brotherhood [NWB] of Ang Tibay) made a false claim that there was a shortage of leather soles in Ang Tibay, making it necessary for him to lay off workers. NLU alleges that such claim was unsupported by the Bureau of Customs records and the accounts of native dealers of leather. Such was just a scheme adopted to discharge all the members of the NLU from work. Hence, they say that Teodoro was guilty of unfair labor practice for discriminating against NLU and unjustly favoring NWB. 

As regards the exhibits attached to this case, NLU says that these are so inaccessible to the respondents that even with the exercise of due diligence they could not be expected to have obtained them and offered as evidence in the CIR. In addition, the attached documents and exhibits are of such far-reaching importance and effect that their admission would necessarily mean the modification and reversal of the judgment rendered herein. 

Resolution and Disposition 

The court observed that, except as to the alleged agreement between the Ang Tibay and the NWB, the record is barren and does not satisfy the thirst for a factual basis upon which to predicate a conclusion of law [see Primary cardinal requirements below]. Therefore, in the interest of justice, a new trial should commence giving the movant the opportunity to present new evidence. 

MfR denied. Motion for new trial granted. Case remanded to CIR. 

Characterization of CIR 

• Special court whose functions are stated in CA No. 103 
• More of an administrative board than a part of the integrated judicial system 
• Function is more active, affirmative, dynamic 
• Exercises judicial / quasi-judicial functions in the determination of disputes between employers and employees 
• Has jurisdiction over the entire PH re: matters concerning employer-employee, landlord-tenant/farm-laborer relations 
• Can take cognizance of industrial or agricultural dispute causing or likely to cause a strike or lockout provided that
• The number of employees involved exceeds 30
• Such dispute is submitted to the Court by the Labor Sec. or by any / both of the parties to the controversy and certified by Labor Sec. as proper to be dealt with by the court
• Investigates and studies all pertinent facts related to the industry concerned when directed by the PH President 
• There is a mingling of executive and judicial functions, a departure from the rigid doctrine of the separation of governmental powers 

In Goseco v. CIR, the Court said that CA 103 requires CIR to “act according to justice and equity and substantial merits of the case, without regard to technicalities or legal forms and shall not be bound by any technicalities or legal forms and shall not be bound by any technical rules of legal evidence but may inform its mind in such manner as it may deem just and equitable.” 

HOWEVER, this does NOT mean that CIR can entirely ignore or disregard the fundamental and essential requirements of due process in trials and investigations of an administrative character. 

Cardinal primary requirements of due process in administrative proceedings

1. Right to a hearing, including the right to present one’s own case and submit evidence in support thereof 
2. Tribunal must consider the evidence presented 
3. Decision must have something to support itself 
4. Evidence must be substantial
1. It must be relevant as a reasonable mind might accept it as adequate to support a conclusion
2. The rules of evidence shall not be controlling so that the mere admission of matter which would be deemed incompetent in judicial proceedings would not invalidate the administrative order
3. Mere uncorroborated hearsay or rumor does NOT constitute substantial evidence 
5. Decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected
1. On boards of inquiry
1. They may be appointed for the purpose of investigating and determining the facts in any given case
2. Their report and decision are only advisory
3. CIR may refer any industrial or agricultural dispute to a board of inquiry, fiscal, justice of the peace, any public official but such delegation shall not affect the exercise of the Court itself or any of its powers
6. CIR or any of its judges must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate in arriving at the decision
7. CIR should render its decision in such a manner that the parties can know the issues involved and the reasons for the decisions rendered.

Dumlao v. COMELEC

DUMLAO, IGOT, SALAPANTAN, JR. v. COMELEC

22 January 1980 | Melencio-Herrera

Petition for prohibition with preliminary injunction and/or restraining order

Petitioners

Dumlao – former Nueva Vizcaya governor who filed a CoC for the position of Governor in the forthcoming elections (30 Jan 1980)

Igot – taxpayer, qualified voter, member of the Bar

Salapantan – taxpayer, qualified voter

Points of contention

Dumlao questions the constitutionality of BP 52, Sec. 4, par. 1 as discriminatory and contrary to the equal protection and due process clauses

Dumlao also alleges that such provision is directed against him and that the classification is based on purely arbitrary grounds (class legislation)

• Any retired elective provincial city or municipal official who has received payment of the retirement benefits to which he is entitled under the law, and who shall have been 65 years of age at the commencement of the term of office to which he seeks to be elected shall not be qualified to run for the same elective local office from which he has retired

As for Igot and Salapantan, they assail the validity of BP 52, Sec. 4, par. 2

• Any person who has committed any act of disloyalty to the State […] shall not be qualified to be a candidate for any of the offices covered by this Act […] provided that a judgment of conviction for any of the aforementioned crimes shall be conclusive evidence of such fact and the filing of charges for the commission of such crimes before a civil court or military tribunal after preliminary investigation shall be prima facie evidence of such fact.

Resolution

The procedural aspect

Petition suffers from basic procedural infirmities so it is traditionally unacceptable for judicial resolution

• Misjoinder of parties and actions (interest of Dumlao alien to that of Igot and Salapantan; they contest different provisions; nature of joining suit different)
• Out of the four requisites for the exercise of judicial review (SALE – standing, actual case, lis mota, earliest opportunity), only the requisite of raising the issue at the earliest opportunity was complied with

Actual case and controversy

• Dumlao has not been adversely affected by the application of provision as there is no petition has been filed seeking his disqualification
• In effect, his petition is one seeking an advisory opinion
• His case is within COMELEC’s primary jurisdiction (sole judge of contests relating to qualifications…)

Proper party

• It was only during the hearing (not in their petition) that Igot is said to be a Councilor candidate
• Neither Igot nor Salapantan has been convicted / charged with acts of disloyalty, and they have not been disqualified from being candidates (generated grievance only)
• As regards the petition being a taxpayer’s suit
• Statutory provisions do not directly involve public fund disbursement
• The two did not allege that their tax money is being misappropriated
• Neither do they seek to restraint COMELEC from wasting public funds through the enforcement of an invalid law
• Institution of taxpayer’s suit is no assurance of judicial review

Unavoidability of constitutional question

• This case is not an appropriate case for either of the petitioners because there is no cause of action; hence, the necessity for resolving the issue of constitutionality is absent

The substantive viewpoint

THEY HAVE RESOLVED TO RULE ON TWO OF THE CHALLENGED PROVISIONS THOUGH

• Paramount public interest involved
• Proximity of the elections (case decided 22 Jan; elections on 30 Jan)

Regarding Dumlao’s contentions

Dumlao’s contention that the provision is against him personally is BELIED by the fact that several petitions for the disqualification of other candidates have been filed with the COMELEC

Equal protection is subject to rational classification

• Employees 65 y/o (they are subject to compulsory retirement) have been classified differently from the younger ones (for purposes of public service)
• Reason to disqualify from same office: retired employee has already declared himself tired and unavailable from the same gov’t work but by virtue of a change of mind, he would like to assume same post
• Purpose of the law: to allow emergence of younger blood in local gov’t

Absent is a showing of the clear invalidity of the questioned provision

It is within the competence of the legislature to prescribe qualifications for candidates provided they are reasonable

Regarding Igot and Salapantan’s contentions

Accused shall be presumed innocent until the contrary is proved; accusation ≠ guilt

Challenged provision (BP 52, Sec. 4, par. 2) contravenes constitutional presumption of innocence because candidate is disqualified on the ground alone that charges have been filed against him

• He is placed in the same category as a person ALREADY CONVICTED of a crime

Although the filing of charges is just prima facie evidence (can be rebutted by contrary proof), there is “clear and present danger” considering that elections was just 8 days away (no more time to offer proof to overcome prima facie evidence)

It is best that evidence pro and con of acts of disloyalty be aired before the Courts rather than before an administrative body (like COMELEC)

Legislative/administrative determination of guilt should not be allowed to be substituted for a judicial determination

Disposition

BP 52, Sec. 4, par. 1 VALID à This is the provision challenged by Dumlao

Portion of BP 52, Sec. 4, par. 2 declared NULL AND VOID for being violative of presumption of innocence à This is the provision challenged by Igot and Salapantan

“…the filing of charges for the commission of such crimes before a civil court or military tribunal after preliminary investigation shall be prima facie evidence of such fact"

Opinions

Concurring: Barredo

Sec. 9(1), Art. XII-C [Bona fide candidates for any public office shall be free from any form of harassment and discrimination] is more expensive than the equal protection clause

Concurring: Aquino

BP 52, Sec. 4, par. 2 is VALID, being similar to certain presumptions in RPC 217, 315 as amended by RA 4885

Concurring: Abad Santos

A judgment of conviction (as provided in BP 52, Sec. 4, par. 2) should be one which is final and appealable

Concurring: Fernando

Provision is moreover tainted with arbitrariness and therefore is violative of the due process clause

Dissenting: Teehankee

Dissents insofar as it upholds the discriminatory and arbitrary provision of BP 52, Sec. 4 (special disqualification

Persons similarly situated are not similarly treated (a retired officer running for another position is allowed to run)

Mentioned purpose (infusing new blood in local gov’t) is not rational nor reasonable

Disqualification / non-disqualification and consequent classification as old / new blood cannot hinge on such an irrelevant question of WON they have received retirement benefits

Disqualification violative of equal protection clause as well as Sec. 9(1), Art. XII-C (see Barredo’s concurring opinion)

Yu Cong Eng v. Trinidad

Yu Cong Eng v. Trinidad

7 June 1926 | Taft | Certiorari to the Supreme Court of the Philippine Islands

Facts

Act No. 2972 (An act to provide in what languages account books shall be kept, and to establish penalties for its violation), also known as the “Chinese Bookkeeping Act,” was passed by the Philippine Legislature and approved in 1921. It provides:

• Section 1. It shall be unlawful for any person, company, or partnership or corporation engaged in commerce, industry or any other activity for the purpose of profit in the Philippine Islands, in accordance with existing law, to keep its account books in any language other than English, Spanish, or any local dialect.
• Section 2. Any person violating the provisions of this act shall, upon conviction, be punished by a fine of not more than ten thousand pesos, or by imprisonment for not more than two years, or both.

Yu Cong Eng, a Chinese merchant, keeps the books of account of his lumber business in Chinese, as he cannot read, write nor understand English, Spanish, or any local dialect. He was arrested for violating Act No. 2972, and his books were seized.

Trial was about to proceed when Yu Cong Eng and another petitioner Co Liam (on behalf of all other Chinese merchants in the Philippines) filed a petition against the fiscal, the collector of internal revenue, and the presiding judge.

Arguments

• By the petitioner
• Even if he would employ a bookkeeper who could keep his books in English or Spanish, he would have no means of verifying the correctness of the books. If he would employ a translator or interpreter, he might be at the mercy of his employees if they might cheat and defraud him. According to the Act, he is prohibited from even keeping a duplicate set of accounts in his own language and he will be compelled to remain in total ignorance of the status of his business.
• The enforcement of the Act would drive several Chinese merchants out of business (They do 60% of the business in the country).
• The enforcement of the Act would deprive the Chinese merchants of their liberty and property without due process of law, and deny them the equal protection of the laws.
• Under the treaty in force between US and China, petitioners are entitled to the same rights, privileges, and immunities as the citizens and subjects of Great Britain and Spain.

• By the respondent
• The law is valid and necessary, and it is only the exercise of proper legislative power. Due to the inability of internal revenue officials to check the books of the Chinese merchants, the treasury loses large sums of money corresponding to taxes.

Pronouncements of the Philippine Court

• A literal translation of the Act makes it unlawful for any Chinese merchant to keep his account books in languages other than those listed
• Another interpretation of the Act is that the Chinese merchant may keep his account books in Chinese, but he has to keep another set of books in the prescribed languages
• A third construction is that the law only intended to require the keeping of such books to facilitate governmental inspection of the same for tax purposes. However, the law does not specify what kinds of books shall be kept.
• The Act is not unconstitutional under the Court’s construction of the law. A literal interpretation would render it unconstitutional, so the Court made a reasonable construction to preserve the law.

A writ of certiorari was filed before the U.S. Supreme Court to review the Philippine Supreme Court’s decision denying an original petition for prohibition against the enforcement of criminal prosecution of Act No. 2972, on the ground of its invalidity.


Issues

• WON the PH SC made a valid construction of Act No. 2972. NO
• WON Act No. 2972 is unconstitutional. YES

Issue # 1

WON the PH SC made a valid construction of Act No. 2972. NO

It is the duty of a court in considering the validity of an act to give it such reasonable construction as can be reached to bring it within the fundamental law. However, a court may not exercise legislative functions to save the law from conflict with constitutional limitation.

What the court did was to change a penal prohibitive law to a mandatory law of great indefiniteness to conform to what the court assumes was, or ought to have been, the purpose of the legislature, and which in the change would avoid a conflict with constitutional restriction. Such strained construction, in order to make a law conform to a constitutional limitation, cannot be sustained.

“It would certainly be dangerous if the legislature could set a net large enough to catch all possible offenders, and leave it to the courts to step inside and say who could be rightfully detained and who should be set at large. This would, to some extent, substitute the judicial for the legislative department of the government.” (US v. Reese)

Issue # 2

WON Act No. 2972 is unconstitutional. YES

The law is invalid because it deprives Chinese persons of their liberty and property without due process of law, and denies them the equal protection of the laws.

Guarantees equivalent to the due process and equal protection clauses of the 14^th Amendment were extended to the PH; hence, said guarantees are to be interpreted as meaning what the provisions meant at the time when Congress made them applicable to the PH. (Serra v. Mortiga, citing Kepner v. US)

PH government may make every reasonable requirement of its taxpayers to keep records of their transactions. However, it is NOT within the police power of the legislature to prohibit Chinese merchants from maintaining a set of books in Chinese.

To justify the state in interposing its authority in behalf of the public, 1) the interests of the public require such interference and 2) the means are necessary for the accomplishment of the purpose, and not oppressive upon individuals. The determination as to what is a proper exercise of the legislature’s police power is subject to the courts’ supervision. (Lawton v. Steel)

We are likely thus to trespass on the provision of the Bill of Rights that the accused is entitled to demand the nature and cause of the accusation against him, and to violate the principle that a statute which requires the doing of an act so indefinitely described that men must guess at its meaning violates due process of law.

Act No. 2972 deprives the Chinese merchants of something indispensable to the carrying on of their business, and is obviously intended to affect them (as distinguished from the rest of the community) is a denial of the equal protection of the laws.

JUDGMENT REVERSED. ACT NO. 2972 IS INVALID.