Matunog & Associates

that law may be just



Doctrine of operative fact explained

A seaman was illegally dismissed and awarded by the Labor Arbiter his salaries for the unexpired portion of his contract for a period of nine months. On appeal, the NLRC modified the award to only three months following RA 8042, but on reconsideration it was restored to nine months. The Court of Appeals modified the decision of the NLRC and reverted the award to only three months following RA 8042. While the case was pending with the Supreme Court, the high tribunal ruled in Serrano v. Gallant Maritime Services, Inc., G.R. No. 167614, March 24, 2009, 582 SCRA 254, that the 5th paragraph of Sec. 10, RA 8042 is null and void for being contrary to Sec. 1, Art. III, and Sec. 3, Art. XIII of the Constitution. What then is the effect of Serrano to this case? The Supreme Court ruled:

“We have already spoken. Thus, this case should not be different from Serrano.

“As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all. The general rule is supported by Article 7 of the Civil Code, which provides: Art. 7.   Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary.

“The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters Products, Inc. v. Fertiphil Corporation, we held: ‘The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration.’

“The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it.

“Following Serrano, we hold that this case should not be included in the aforementioned exception. After all, it was not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that principals/employers and recruitment/manning agencies may violate an OFW’s security of tenure which an employment contract embodies and actually profit from such violation based on an unconstitutional provision of law.”

Yap v. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, May 30, 2011


Loss of trust and confidence must be performance-related to justify dismissal

A manager was dismissed on the ground of loss of trust and confidence because of losses incurred by a unit that was no longer under his responsibility. The Supreme Court ruled:

“Loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility or trust and confidence.  He must be invested with confidence on delicate matters, such as custody handling or care and protection of the property and assets of the employer.  And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue to work for the employer.

“From the findings of both the Labor Arbiter and the NLRC it is clear that James did nothing wrong when he handed over to Marciana the envelope containing the applications of persons under the referred accounts of Jorge who were later found to be fictitious.  As the records now stand, James was no longer connected with the VISA Credit Card Unit when the 67 applications for VISA card were approved.  At such time, he was already the Head of the Marketing and Operations of the Jewelry Department.  His act therefore of forwarding the already accomplished applications to the VISA Credit Card Unit is proper as he is not in any position to act on them.  The processing and verification of the identities of the applicants would have been done by the proper department, which is the VISA Credit Card Unit.  Therefore, it is incumbent upon Marciana as Unit Head to have performed her duties.  As correctly observed by the Labor Arbiter, Keppel had gone too far in blaming James for the shortcomings and imprudence of Marciana.  The invocation of Keppel of the loss of trust and confidence as ground for James’s termination has therefore no basis at all.

“Having shown that Keppel failed to discharge its burden of proving that James’s dismissal is for a just cause, we have no other recourse but to declare that such dismissal based on the ground of loss of trust and confidence was illegal.  This is in consonance with the constitutional guarantee of security of tenure.”

Jerusalem v. Keppel Monte Bank, et al., G.R. No. 169564, April 6, 2011, First Division

No refund of salaries even if reinstatement is reversed

In this case, the Labor Arbiter ruled the dismissal of an employee and ordered reinstatement pending appeal. The employer‘s appeal was denied by the NLRC. However the Court of Appeals declared the dismissal valid, but allowed the employee to receive salaries up to the time the court reversed the Labor Arbiter and the NLRC.

The employer went to the Supreme Court to annul the award of salaries, and to order the refund the salaries the employee received pendente lite.

The Supreme Court ruled against the employer. The Supreme Court reiterated the principle that reinstatement pending appeal necessitates that it must be immediately self-executory without need for a writ of execution during the pendency of the appeal, if the law is to serve its noble purpose, and any attempt on the part of the employer to evade or delay its execution should not be allowed.  Furthermore, the high tribunal likewise restated its ruling that an order for reinstatement entitles an employee to receive his accrued backwages from the moment the reinstatement order was issued up to the date when the same was reversed by a higher court without fear of refunding what he had received.

Pfizer v. Velasco, G.R. No. 177467, March 9, 2011.

What is the difference between “facilities” and “supplements” in computing wages?

In SLL v. NLRC, G.R. No. 172161, March 2, 2011, citing Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,[22] “facilities” and “supplements” were distinguished from one another in this wise:

“Supplements,” therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. “Facilities,” on the other hand, are items of expense necessary for the laborer‘s and his family’s existence and subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers’ basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is given.

Corporate officers not liable for illegal dismissal

In a dismissal from employment which the courts ruled to be illegal, the employee sought to hold the President of the company solidarily liable for his backwages and separation pay. Reiterating its decision in MAM Realty Development Corporation v. National Labor Relations Commission (314 Phil. 838 [1995]), the Supreme Court ruled that “obligations incurred by [corporate officers], acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent.” As such, they should not be generally held jointly and solidarily liable with the corporation. The Court, however, cited circumstances when solidary liabilities may be imposed, as exceptions:

1. When directors and trustees or, in appropriate cases, the officers of a corporation

(a) vote for or assent to [patently] unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons.

2. When the director or officer has consented to the issuance of watered stock or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation.

4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.

The general rule is grounded on the theory that a corporation has a legal personality separate and distinct from the persons comprising it. To warrant the piercing of the veil of corporate fiction, the officer’s bad faith or wrongdoing must be established clearly and convincingly as bad faith is never presumed.

(Harpoon Marine Services, Inc. v. Francisco, G.R. No. 167751, March 2, 2011)

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