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RUBEN SERRANO vs. NATIONAL LABOR RELATIONS COMMISSION

This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the National LaborRelations Commission (NLRC) which reversed the decision of the Labor Arbiter and dismissed petitioner Ruben Serranoscomplaint for illegal dismissal and denied his motion for reconsideration. The facts are as follows:

Petitioner was hired by private respondent Isetann Department Store as a security checker to apprehend shoplifters andprevent pilferage of merchandise.[1] Initially hired on October 4, 1984 on contractual basis, petitioner eventually became aregular employee on April 4, 1985. In 1988, he became head of the Security Checkers Section of private respondent.[2]

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security section andengage the services of an independent security agency. For this reason, it wrote petitioner the following memorandum:[3]

October 11, 1991

MR. RUBEN SERRANOP R E S E N T

Dear Mr. Serrano,

......In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of your termination

as Security Section Head effective October 11, 1991.

......Please secure your clearance from this office.

Very truly yours,

TERESITA A. VILLANUEVAHuman Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal, illegal layoffunfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay.[4]

The parties were required to submit their position papers, on the basis of which the Labor Arbiter defined the issues asfollows:[5]

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of wages, nonpayment of salaries, 13thmonth pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding petitioner to have beenillegally dismissed. He ruled that private respondent failed to establish that it had retrenched its security section to prevenor minimize losses to its business; that private respondent failed to accord due process to petitioner; that private

respondent failed to use reasonable standards in selecting employees whose employment would be terminated; thatprivate respondent had not shown that petitioner and other employees in the security section were so inefficient so as to

justify their replacement by a security agency, or that "cost-saving devices [such as] secret video cameras (to monitor andprevent shoplifting) and secret code tags on the merchandise" could not have been employed; instead, the day afterpetitioners dismissal, private respondent employed a safety and security supervisor with duties and functions similar tothose of petitioner.

Accordingly, the Labor Arbiter ordered:[6]

WHEREFORE, above premises considered, judgment is hereby decreed:

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(a)......Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is ordered to pay complainanfull backwages without qualification or deduction in the amount of P 74,740.00 from the time of his dismissal untreinstatement (computed till promulgation only) based on his monthly salary of P4,040.00/month at the time of histermination but limited to (3) three years;

(b)......Ordering the Respondent to immediately reinstate the complainant to his former position as security section heador to a reasonably equivalent supervisorial position in charges of security without loss of seniority rights, privileges andbenefits. This order is immediately executory even pending appeal;

(c)......Ordering the Respondent to pay complainant unpaid wages in the amount of P 2,020.73 and proportionate 13thmonth pay in the amount of P 3,198.30;

(d)......Ordering the Respondent to pay complainant the amount of P 7,995.91 , representing 10% attorneys fees based onthe total judgment award of P 79,959.12 .

All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of merit.

SO ORDERED.

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed the decision of the LaboArbiter and ordered petitioner to be given separation pay equivalent to one month pay for every year of service, unpaidsalary, and proportionate 13th month pay. Petitioner filed a motion for reconsideration, but his motion was denied.

The NLRC held that the phase-out of private respondents security section and the hiring of an independent securityagency constituted an exercise by private respondent of "[a] legitimate business decision whose wisdom we do not intendto inquire into and for which we cannot substitute our judgment"; that the distinction made by the Labor Arbiter between"retrenchment" and the employment of "cost-saving devices" under Art. 283 of the Labor Code was insignificant becausethe company official who wrote the dismissal letter apparently used the term "retrenchment" in its "plain and ordinarysense: to layoff or remove from ones job, regardless of the reason therefor"; that the rule of "reasonable criteria" in theselection of the employees to be retrenched did not apply because all positions in the security section had beenabolished; and that the appointment of a safety and security supervisor referred to by petitioner to prove bad faith onprivate respondents part was of no moment because the position had long been in existence and was separate frompetitioners position as head of the Security Checkers Section.

Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO REPLACE ITSCURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDERTHE LATTER?[7]

Petitioner contends that abolition of private respondents Security Checkers Section and the employment of anindependent security agency do not fall under any of the authorized causes for dismissal under Art. 283 of the LaborCode.

Petitioner Laid Off for Cause

Petitioners contention has no merit. Art. 283 provides:

Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employeedue to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation ofoperations of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of thisTitle, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) monthbefore the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, theworker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1)month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases ofclosure or cessation of operations of establishment or undertaking not due to serious business losses or financialreverses, the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay foevery year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

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In De Ocampo v. National Labor Relations Commission,[8] this Court upheld the termination of employment of threemechanics in a transportation company and their replacement by a company rendering maintenance and repair services.It held:

In contracting the services of Gemac Machineries, as part of the companys cost-saving program, the services renderedby the mechanics became redundant and superfluous, and therefore properly terminable. The company merely exercisedits business judgment or management prerogative. And in the absence of any proof that the management abused itsdiscretion or acted in a malicious or arbitrary manner, the court will not interfere with the exercise of such prerogative.[9]

InAsian Alcohol Corporation v. National Labor Relations Commission,[10]

the Court likewise upheld the termination oemployment of water pump tenders and their replacement by independent contractors. It ruled that an employers goodfaith in implementing a redundancy program is not necessarily put in doubt by the availment of the services of anindependent contractor to replace the services of the terminated employees to promote economy and efficiency.

Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of promotingefficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimatedetermination of whether services should be performed by its personnel or contracted to outside agencies . . . [Whilethere] should be mutual consultation, eventually deference is to be paid to what management decides." [11]Consequentlyabsent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise o

judgment by an employer.[12]

In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private

respondents real purpose was to avoid payment to the security checkers of the wage increases provided in the collectivebargaining agreement approved in 1990.[13]Such an assertion is not a sufficient basis for concluding that the terminationof petitioners employment was not a bona fide decision of management to obtain reasonable return from its investmentwhich is a right guaranteed to employers under the Constitution. [14] Indeed, that the phase-out of the security sectionconstituted a "legitimate business decision" is a factual finding of an administrative agency which must be accordedrespect and even finality by this Court since nothing can be found in the record which fairly detracts from such finding.[15]

Accordingly, we hold that the termination of petitioners services was for an authorized cause, i.e., redundancy. Hencepursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the rate of one month pay for everyyear of service.

Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the employermust serve "a written notice on the workers and the Department of Labor and Employment at least one (1) month beforethe intended date thereof." In the case at bar, petitioner was given a notice of termination on October 11, 1991. On thesame day, his services were terminated. He was thus denied his right to be given written notice before the termination ofhis employment, and the question is the appropriate sanction for the violation of petitioners right.

To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC,[16] workers in a garment factory weretemporarily laid off due to the cancellation of orders and a garment embargo. The Labor Arbiter found that the workershad been illegally dismissed and ordered the company to pay separation pay and backwages. The NLRC, on the othehand, found that this was a case of retrenchment due to business losses and ordered the payment of separation paywithout backwages. This Court sustained the NLRCs finding. However, as the company did not comply with the 30-daywritten notice in Art. 283 of the Labor Code, the Court ordered the employer to pay the workers P2,000.00 each asindemnity.

The decision followed the ruling in several cases involving dismissals which, although based on any of the just causesunder Art. 282,[17]were effected without notice and hearing to the employee as required by the implementing rules.[18] Asthis Court said: "It is now settled that where the dismissal of one employee is in fact for a just and valid cause and is soproven to be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice andopportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with therequirements of, or for failure to observe, due process."[19]

The rule reversed a long standing policy theretofore followed that even though the dismissal is based on a just cause orthe termination of employment is for an authorized cause, the dismissal or termination is illegal if effected without notice tothe employee. The shift in doctrine took place in 1989 in Wenphil Corp. v. NLRC.[20] In announcing the change, this Coursaid:[21]

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The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority andthe payment of his wages during the period of his separation until his actual reinstatement but not exceeding three (3)years without qualification or deduction, when it appears he was not afforded due process, although his dismissal wasfound to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment, shouldbe re-examined. It will be highly prejudicial to the interests of the employer to impose on him the services of an employeewho has been shown to be guilty of the charges that warranted his dismissal from employment. Indeed, it will demoralizethe rank and file if the undeserving, if not undesirable, remains in the service.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an

investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee musbe for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thusit must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law beforedismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the privaterespondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of theomission committed by the employer.

The fines imposed for violations of the notice requirement have variedfrom P1,000.00[22] to P2,000.00[23] to P5,000.00[24]to P10,000.00.[25]

Need for Reexamining the WenphilDoctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice requirement in light of our

experience during the last decade or so with the Wenphildoctrine. The number of cases involving dismissals without therequisite notice to the employee, although effected for just or authorized causes, suggests that the imposition of fine forviolation of the notice requirement has not been effective in deterring violations of the notice requirement. JusticePanganiban finds the monetary sanctions "too insignificant, too niggardly, and sometimes even too late." On the othehand, Justice Puno says there has in effect been fostered a policy of "dismiss now, pay later" which moneyed employersfind more convenient to comply with than the requirement to serve a 30-day written notice (in the case of termination ofemployment for an authorized cause under Arts. 283-284) or to give notice and hearing (in the case of dismissals for justcauses under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even though there arejust or authorized causes for such dismissal or layoff. Consequently, in their view, the employee concerned should bereinstated and paid backwages.

Validity of Petitioners Layoff Not Affected by Lack of Notice

We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the sanction of fine for anemployers disregard of the notice requirement. We do not agree, however, that disregard of this requirement by anemployer renders the dismissal or termination of employment null and void. Such a stance is actually a reversion to thediscredited pre-Wenphilrule of ordering an employee to be reinstated and paid backwages when it is shown that he hasnot been given notice and hearing although his dismissal or layoff is later found to be for a just or authorized cause. Suchrule was abandoned in Wenphilbecause it is really unjust to require an employer to keep in his service one who is guilty,for example, of an attempt on the life of the employer or the latters family, or when the employer is precisely retrenchingin order to prevent losses.

The need is for a rule which, while recognizing the employees right to notice before he is dismissed or laid off, at thesame time acknowledges the right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to

terminate employment for any of the authorized causes mentioned in Arts. 283-284. If the Wenphilrule imposing a fine onan employer who is found to have dismissed an employee for cause without prior notice is deemed ineffective in deterringemployer violations of the notice requirement, the remedy is not to declare the dismissal void if there are just or validgrounds for such dismissal or if the termination is for an authorized cause. That would be to uphold the right of theemployee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the payment to theemployee of full backwages from the time of his dismissal until the court finds that the dismissal was for a just cause. Butotherwise, his dismissal must be upheld and he should not be reinstated. This is because his dismissal is ineffectual.

For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-savingdevice, but the employer did not give him and the DOLE a 30-day written notice of termination in advance, then thetermination of his employment should be considered ineffectual and he should be paid backwages. However, the

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termination of his employment should not be considered void but he should simply be paid separation pay as provided inArt. 283 in addition to backwages.

Justice Puno argues that an employers failure to comply with the notice requirement constitutes a denial of theemployees right to due process. Prescinding from this premise, he quotes the statement of Chief Justice ConcepcioninVda. de Cuaycong v. Vda. de Sengbengco [26]that "acts of Congress, as well as of the Executive, can deny due processonly under the pain of nullity, and judicial proceedings suffering from the same flaw are subject to the same sanction, anystatutory provision to the contrary notwithstanding." Justice Puno concludes that the dismissal of an employee withounotice and hearing, even if for a just cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283-

284, is a nullity. Hence, even if just or authorized causes exist, the employee should be reinstated with full back pay. Onthe other hand, Justice Panganiban quotes from the statement in People v. Bocar[27] that "[w]here the denial of thefundamental right of due process is apparent, a decision rendered in disregard of that right is void for lack of jurisdiction."

Violation of Notice Requirement Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the State, which isnot the case here. There are three reasons why, on the other hand, violation by the employer of the notice requiremencannot be considered a denial of due process resulting in the nullity of the employees dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to theexercise of private power, such as the termination of employment under the Labor Code. This is plain from the text of Art.III, 1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or property without due process of law. . . ." The

reason is simple: Only the State has authority to take the life, liberty, or property of the individual. The purpose of the DueProcess Clause is to ensure that the exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the power of organizedsociety are brought to bear upon the individual. This is obviously not the case of termination of employment under Art.283. Here the employee is not faced with an aspect of the adversary system. The purpose for requiring a 30-day writtennotice before an employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there isnone. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity todetermine whether economic causes do exist justifying the termination of his employment.

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with DueProcess Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak ofnotice and hearing as the essence of procedural due process. Thus, compliance by the employer with the notice

requirement before he dismisses an employee does not foreclose the right of the latter to question the legality of hisdismissal. As Art. 277(b) provides, "Any decision taken by the employer shall be without prejudice to the right of theworker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National LaboRelations Commission."

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact thatArt. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the employeremployee relationship the right to terminate their relationship by giving notice to the other one month in advance. In lieu ofnotice, an employee could be laid off by paying him a mesada equivalent to his salary for one month.[28] This provision wasrepealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052,otherwise known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law wasamended by R.A. No. 1787 providing for the giving of advance notice or the payment of compensation at the rate of one-half month for every year of service.[29]

The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which was togive the employer the opportunity to find a replacement or substitute, and the employee the equal opportunity to look foranother job or source of employment. Where the termination of employment was for a just cause, no notice was requiredto be given to the employee. [30]It was only on September 4, 1981 that notice was required to be given even where thedismissal or termination of an employee was for cause. This was made in the rules issued by the then Minister of Laborand Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later when the noticerequirement was embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot bethat the former regime denied due process to the employee. Otherwise, there should now likewise be a rule that, in casean employee leaves his job without cause and without prior notice to his employer, his act should be void instead ofsimply making him liable for damages.

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The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due ProcessClause is that the employer cannot really be expected to be entirely an impartial judge of his own cause. This is also thecase in termination of employment for a just cause under Art. 282 ( i.e., serious misconduct or willful disobedience by theemployee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of trust of theemployer, commission of crime against the employer or the latters immediate family or duly authorized representatives, orother analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won by employeesbefore the grievance committees manned by impartial judges of the company." The grievance machinery is, however,

different because it is established by agreement of the employer and the employees and composed of representativesfrom both sides. That is why, in Batangas Laguna Tayabas Bus Co. v. Court of Appeals ,[31]which Justice Puno cites, iwas held that "Since the right of [an employee] to his labor is in itself a property and that the labor agreement between himand [his employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation of hisproperty without due process of law." But here we are dealing with dismissals and layoffs by employers alone, without theintervention of any grievance machinery. Accordingly in Montemayor v. Araneta University Foundation,[32] although aprofessor was dismissed without a hearing by his university, his dismissal for having made homosexual advances on astudent was sustained, it appearing that in the NLRC, the employee was fully heard in his defense.

Lack of Notice Only Makes Termination Ineffectual

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be followed before aright granted to a party can be exercised. Others are simply an application of the Justinian precept, embodied in the Civil

Code,[33]

to act with justice, give everyone his due, and observe honesty and good faith toward ones fellowmen. Such isthe notice requirement in Arts. 282-283. The consequence of the failure either of the employer or the employee to live upto this precept is to make him liable in damages, not to render his act (dismissal or resignation, as the case may be) void.The measure of damages is the amount of wages the employee should have received were it not for the termination of hisemployment without prior notice. If warranted, nominal and moral damages may also be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employers failure to comply with the noticerequirement does not constitute a denial of due process but a mere failure to observe a procedure for the termination ofemployment which makes the termination of employment merely ineffectual. It is similar to the failure to observe theprovisions of Art. 1592, in relation to Art. 1191, of the Civil Code [34]in rescinding a contract for the sale of immovableproperty. Under these provisions, while the power of a party to rescind a contract is implied in reciprocal obligationsnonetheless, in cases involving the sale of immovable property, the vendor cannot exercise this power even though thevendee defaults in the payment of the price, except by bringing an action in court or giving notice of rescission by means

of a notarial demand.[35]

Consequently, a notice of rescission given in the letter of an attorney has no legal effect, and thevendee can make payment even after the due date since no valid notice of rescission has been given.[36]

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make thedismissal of an employee illegal. This is clear from Art. 279 which provides:

Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employeeexcept for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitledto reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, andto his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up tothe time of his actual reinstatement.[37]

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and, therefore, the

employee should be reinstated and paid backwages. To contend, as Justices Puno and Panganiban do, that even if thetermination is for a just or authorized cause the employee concerned should be reinstated and paid backwages would beto amend Art. 279 by adding another ground for considering a dismissal illegal. What is more, it would ignore the fact thatunder Art. 285, if it is the employee who fails to give a written notice to the employer that he is leaving the service of thelatter, at least one month in advance, his failure to comply with the legal requirement does not result in making hisresignation void but only in making him liable for damages.[38] This disparity in legal treatment, which would result from theadoption of the theory of the minority cannot simply be explained by invoking President Ramon Magsaysays motto that"he who has less in life should have more in law." That would be a misapplication of this noble phrase originally fromProfessor Thomas Reed Powell of the Harvard Law School.

Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,[39] in support of his view that an illegal dismissal results noonly from want of legal cause but also from the failure to observe "due process." The Pepsi-Cola case actually involved a

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dismissal for an alleged loss of trust and confidence which, as found by the Court, was not proven. The dismissal wastherefore, illegal, not because there was a denial of due process, but because the dismissal was without cause. Thestatement that the failure of management to comply with the notice requirement "taints the dismissal with illegality" wasmerely a dictum thrown in as additional grounds for holding the dismissal to be illegal.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the payment ofbackwages for the period when the employee is considered not to have been effectively dismissed or his employmentterminated. The sanction is not the payment alone of nominal damages as Justice Vitug contends.

Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either for anauthorized or just cause can result in an injustice to the employer. For not giving notice and hearing before dismissing anemployee, who is otherwise guilty of, say, theft, or even of an attempt against the life of the employer, an employer will beforced to keep in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force." [40]But so does it declare that it "recognizesthe indispensable role of the private sector, encourages private enterprise, and provides incentives to neededinvestment."[41]The Constitution bids the State to "afford full protection to labor."[42] But it is equally true that "the law, inprotecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer." [43]And it isoppression to compel the employer to continue in employment one who is guilty or to force the employer to remain inoperation when it is not economically in his interest to do so.

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination of employment wasdue to an authorized cause, then the employee concerned should not be ordered reinstated even though there is failure tocomply with the 30-day notice requirement. Instead, he must be granted separation pay in accordance with Art. 283, towit:

In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall beentitled to a separation pay equivalent to at least his one (1) month pay or to at least one month for every year of service,whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations oestablishment or undertaking not due to serious business losses or financial reverses, the separation pay shall beequivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Afraction of at least six months shall be considered one (1) whole year.

If the employees separation is without cause, instead of being given separation pay, he should be reinstated. In eithecase, whether he is reinstated or only granted separation pay, he should be paid full backwages if he has been laid offwithout written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed forany of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstatedHowever, he must be paid backwages from the time his employment was terminated until it is determined that thetermination of employment is for a just cause because the failure to hear him before he is dismissed renders thetermination of his employment without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED byordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1) monthpay for every year of service, his unpaid salary, and his proportionate 13th month pay and, in addition, full backwagesfrom the time his employment was terminated on October 11, 1991 up to the time the decision herein becomes final. Fothis purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and othemonetary awards to petitioner.

SO ORDERED.

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JENNY AGABON vs. NATIONAL LABOR RELATIONS COMMISSION

This petition for review seeks to reverse the decision[1] of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental andconstruction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installerson January 2, 1992[2] until February 23, 1999 when they were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims[3] and on December 28, 1999, theLabor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetaryclaims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly,respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.932. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from dateof hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for theyears 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabons13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or theaggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100(P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDREDTWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C.Nicolas, OIC, Research and Computation Unit, NCR.

SO ORDERED.[4]

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work,and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiterwere also denied for lack of evidence.[5]

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals.The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned theiemployment but ordered the payment of money claims. The dispositive portion of the decision reads:WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as itdismissed petitioners money claims. Private respondents are ordered to pay petitioners holiday pay for four (4)regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to paythe balance of petitioner Virgilio Agabons 13th month pay for 1998 in the amount of P2,150.00.

SO ORDERED.[6]

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.[7]

Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless theyagreed to work on a pakyawbasis when they reported for duty on February 23, 1999. They did not agree on thisarrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also claimthat private respondent did not comply with the twin requirements of notice and hearing.[8]

Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work.[9] Infact, private respondent sent two letters to the last known addresses of the petitioners advising them to report for work.Private respondents manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell himabout the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work. Howeverpetitioners did not report for work because they had subcontracted to perform installation work for another company.Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted, petitionersstopped reporting for work and filed the illegal dismissal case.[10]

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It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but evenfinality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed by theCourt of Appeals.[11] However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, thereviewing court may delve into the records and examine for itself the questioned findings.[12]

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners dismissal was for a just cause.They had abandoned their employment and were already working for another employer.To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer togive the employee the opportunity to be heard and to defend himself.[13] Article 282 of the Labor Code enumerates the

just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawfuorders of his employer or the latters representative in connection with the employees work; (b) gross and habitual neglecby the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or hisduly authorized representative; (d) commission of a crime or offense by the employee against the person of his employeror any immediate member of his family or his duly authorized representative; and (e) other causes analogous to theforegoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.[14] It is a form of neglecof duty, hence, a just cause for termination of employment by the employer. [15] For a valid finding of abandonment, thesetwo factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) aclear intention to sever employer-employee relationship, with the second as the more determinative factor which ismanifested by overt acts from which it may be deduced that the employees has no more intention to work. The intent to

discontinue the employment must be shown by clear proof that it was deliberate and unjustified.[16]In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company.Subcontracting for another company clearly showed the intention to sever the employer-employee relationship withprivate respondent. This was not the first time they did this. In January 1996, they did not report for work because theywere working for another company. Private respondent at that time warned petitioners that they would be dismissed if thishappened again. Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employeerelationship. The record of an employee is a relevant consideration in determining the penalty that should be meted out tohim.[17]

In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately absented from work without leave opermission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job.We should apply that rule with more reason here where petitioners were absent because they were already working in

another company.The law imposes many obligations on the employer such as providing just compensation to workers, observance of theprocedural requirements of notice and hearing in the termination of employment. On the other hand, the law alsorecognizes the right of the employer to expect from its workers not only good performance, adequate work and diligencebut also good conduct[19] and loyalty. The employer may not be compelled to continue to employ such persons whosecontinuance in the service will patently be inimical to his interests.[20]

After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissawere observed.The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementingthe Labor Code:

Standards of due process: requirements of notice. In all cases of termination of employment, the followingstandards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving tosaid employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if theemployee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidencepresented against him; and

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(c) A written notice of termination served on the employee indicating that upon due consideration of all thecircumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employees last known address.Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based onauthorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A terminationfor an authorized cause requires payment of separation pay. When the termination of employment is declared illegalreinstatement and full backwages are mandated under Article 279. If reinstatement is no longer possible where thedismissal was unjust, separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee twowritten notices and a hearing or opportunity to be heard if requested by the employee before terminating the employmenta notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing oropportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under

Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices30 days prior to the effectivity of his separation.From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 ofthe Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process wasobserved; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is withou

just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but dueprocess was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled toreinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and otherbenefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actualreinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should notinvalidate the dismissal. However, the employer should be heldliable for non-compliance with the procedurarequirements of due process.The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established tha

the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the noticerequirements and instead argued that sending notices to the last known addresses would have been useless becausethey did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the lawmandates the twin notice requirements to the employees last known address.[21] Thus, it should be held liable for non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings onemployment termination in the light ofSerrano v. National Labor Relations Commission.[22]

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989case ofWenphil Corp. v. National Labor Relations Commission,[23] we reversed this long-standing rule and held that thedismissed employee, although not given any notice and hearing, was not entitled to reinstatement and backwagesbecause the dismissal was for grave misconduct and insubordination, a just ground for termination under Article 282. Theemployee had a violent temper and caused trouble during office hours, defying superiors who tried to pacify him. Weconcluded that reinstating the employee and awarding backwages may encourage him to do even worse and will rendera mockery of the rules of discipline that employees are required to observe.[24] We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right toreturn to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to aninvestigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee musbe for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thusit must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law beforedismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private

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respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of theomission committed by the employer.[25]

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due processrequirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. Thisbecame known as the Wenphilor Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by theemployer of the notice requirement in termination for just or authorized causes was not a denial of due process that wilnullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time otermination until it is judicially declared that the dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphildoctrine in Serrano was the significant number of cases involvingdismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of thenotice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time odismissal until the time the Court finds the dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to dismiss now and pay later by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code whichstates:

ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services

of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissedfrom work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his fullbackwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the timehis compensation was withheld from him up to the time of his actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified or authorized causes provided bylaw. Payment of backwages and other benefits, including reinstatement, is justified only if the employee wasunjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisithe doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on

moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to acivilized society as conceived by our entire history. Due process is that which comports with the deepest notions of whais fair and right and just.[26] It is a constitutional restraint on the legislative as well as on the executive and judicial powersof the government provided by the Bill of Rights.Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid andauthorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal.Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amendedotherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos9 and 10.[27] Breaches of these due process requirements violate the Labor Code. Therefore statutory due

process should be differentiated from failure to comply with constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil oradministrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protectsemployees from being unjustly terminated without just cause after notice and hearing.In Sebuguero v. National Labor Relations Commission,[28] the dismissal was for a just and valid cause but the employeewas not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanctionshould be in the nature of indemnification or penalty, and depends on the facts of each case and the gravity of theomission committed by the employer.

In Nath v. National Labor Relations Commission,[29] it was ruled that even if the employee was not given due process, thefailure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause, albeitwithout dueprocess, did not entitle the employee to reinstatement, backwages, damages and attorneys fees.

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Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations Commission[30] which opinion he reiterated in Serrano, stated:

C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it wouldnot be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing,however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer mustbe deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be pointedout that the notice to be given and the hearing to be conducted generally constitute the two-part due process requirementof law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in certainsituations where to undertake the above steps would be no more than a useless formality and where, accordingly, it wouldnot be imprudent to apply the res ipsa loquiturrule and award, in lieu of separation pay, nominal damages to theemployee. x x x.[31]

After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believethat in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, thebetter rule is to abandon the Serrano doctrine and to follow Wenphilby holding that the dismissal was for just cause buimposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doingso, this Court would be able to achieve a fair result by dispensing justice not just to employees, but to employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutorydue process may have far-reaching consequences.This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by

invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but aprocedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing othreatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where seriousbusiness losses demand that operations be ceased in less than a month. Invalidating the dismissal would not servepublic interest. It could also discourage investments that can generate employment in the local economy.The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. Thecommitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, asin this case.[32] Certainly, an employer should not be compelled to pay employees for work not actually performed and infact abandoned.The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance ormalfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the

laborer authorizes neither oppression nor self-destruction of the employer.[33]

It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if therequirements of due process were complied with, would undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clauseof the Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminentJustice Jose P. Laurel observed, social justice must be founded on the recognition of the necessity ointerdependence among diverse units of a society and of the protection that should be equally and evenlyextended to all groups as a combined force in our social and economic life, consistent with the fundamental andparamount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about thegreatest good to the greatest number.[34]

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases.Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances.Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and dispense

justice with an even hand in every case:We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether hebe a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tiltthe balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. Butnever is it justified to give preference to the poor simply because they are poor, or reject the rich simply becausethey are rich, for justice must always be served for the poor and the rich alike, according to the mandate of thelaw.[35]

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Justice in every case should only be for the deserving party. It should not be presumed that every case of illegadismissal would automatically be decided in favor of labor, as management has rights that should be fully respected andenforced by this Court. As interdependent and indispensable partners in nation-building, labor and management needeach other to foster productivity and economic growth; hence, the need to weigh and balance the rights and welfare ofboth the employee and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify thedismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of hisstatutory rights, as ruled in Reta v. National Labor Relations Commission.[36] The indemnity to be imposed should bestiffer to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in the Serrano ruling.The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, takinginto special consideration the gravity of the due process violation of the employer.Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated orinvaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for anyloss suffered by him.[37]

As enunciated by this Court in Viernes v. National Labor Relations Commissions,[38]an employer is liable to pay indemnityin the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer failsto comply with the requirements of due process. The Court, after considering the circumstances therein, fixed theindemnity at P2,590.50, which was equivalent to the employees one month salary. This indemnity is intended not topenalize the employer but to vindicate or recognize the employees right to statutory due process which was violated bythe employer.[39]

The violation of the petitioners right to statutory due process by the private respondent warrants the payment of indemnityin the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, takinginto account the relevant circumstances.[40] Considering the prevailing circumstances in the case at bar, we deem itproper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations ofthe statutory due process rights of employees. At the very least, it provides a vindication or recognition of thisfundamental right granted to the latter under the Labor Code and its Implementing Rules.

Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners holiday pay, serviceincentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners money claims. Private respondent is liable for petitionersholiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege nonpayment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee toprove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and othesimilar documents which will show that overtime, differentials, service incentive leave and other claims of workers havebeen paid are not in the possession of the worker but in the custody and absolute control of the employer.[41]

In the case at bar, if private respondent indeed paid petitioners holiday pay and service incentive leave pay, it could haveeasily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did notexcept with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in theyears disputed.[42] Allegations by private respondent that it does not operate during holidays and that it allows itsemployees 10 days leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, ifailed to discharge the onus probandithereby making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabons 13 th month pay, we find thesame to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in theform of the 13th month pay to employees not already receiving the same [43] so as to further protect the level of real wagesfrom the ravages of world-wide inflation.[44] Clearly, as additional income, the 13 th month pay is included in the definitionof wage under Article 97(f) of the Labor Code, to wit:

(f) Wage paid to any employee shall mean the remuneration or earnings, however

designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task,piece , or commission basis, or other method of calculating the same, which is payable by an employer toan employee under a written or unwritten contract of employment for work done or to be done, or for

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services rendered or to be rendered and includes the fair and reasonable value, as determined by theSecretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to theemployee

from which an employer is prohibited under Article 113 [45]of the same Code from making any deductions without theemployees knowledge and consent. In the instant case, private respondent failed to show that the deduction of the SSSloan and the value of the shoes from petitioner Virgilio Agabons 13 th month pay was authorized by the latter. The lack oauthority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one of his moneyclaims against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the privaterespondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount ofP6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio

Agabons thirteenth month pay for 1998 in the amount of P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January23, 2003, in CA-G.R. SP No. 63017, finding that petitioners Jenny and Virgilio Agabon abandoned their work, andordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in theamount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance ofVirgilio Agabons thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with the MODIFICATION thaprivate respondent Riviera Home Improvements, Inc. is furtherORDERED to pay each of the petitioners the amount ofP30,000.00 as nominal damages for non-compliance with statutory due process.

No costs.SO ORDERED.

GSIS vs. RAOET

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In this Petition for Review on Certiorari,[1]petitioner Government Service Insurance System (GSIS) seeks to seaside the Court of Appeals (CA) Decision[2] dated February 3, 2003 in CA-G.R. SP. No. 72820, which overturned and seaside the July 24, 2002 decision [3] of the Employees Compensation Commission (ECC) in ECC Case No. GM-13079-302and granted respondent Jean Raoets (respondent) claim for income benefits arising from her husbands death.

The respondents husband, Francisco M. Raoet (Francisco), entered government service on July 16, 1974 as an

Engineer Trainee at the National Irrigation Administration (NIA). On July 5, 1978, he was appointed as Junior CiviEngineer, and on April 22, 1981, he rose to the rank of Irrigation Engineer B. On August 1, 1998, he was promoted to theposition of Engineer A the position he held until his death on May 5, 2001. As Engineer A, Francisco supervised theimplementation of construction activities of Lateral E and E-1. He was also tasked to review and check the structural planand the facilities.[4]

In 2000, Francisco was diagnosed with Hypertension, Severe, Stage III, Coronary Artery Disease, and he was

confined at the Region I Medical Center from July 16 to July 25, 2000.[5] As the GSIS considered this a work-relatedcondition, Francisco was awarded 30 days Temporary Total Disability benefits, plus reimbursement of medical expensesincurred during treatment.

On May 5, 2001, Francisco was rushed to the Dr. Marcelo M. Chan Memorial Hospital because he was vomitingblood.[6] He was pronounced dead on arrival at the hospital. His death certificate listed the causes of his death asfollows:

CAUSES OF DEATH

Immediate cause: Cardiac Arrest

Antecedent cause: Acute Massive HemorrhageUnderlying cause: T/C Bleeding Peptic Ulcer Disease

The respondent, as widow, filed with the GSIS on May 24, 2001 a claim for income benefits accruing from thedeath of her husband, pursuant to Presidential Decree No. 626 (P.D. 626), as amended. On August 31, 2001, the GSISdenied the claim on the ground that the respondent did not submit any supporting documents to show that Franciscosdeath was due to peptic ulcer.

On appeal, the ECC affirmed the findings of the GSIS in its decision of July 24, 2002. According to the ECC, it

could not determine if Franciscos death was compensable due to the absence of documents supporting the respondents

claim. Since Francisco had no prior history of consultation relating to peptic ulcer and no autopsy was performed toascertain the cause of his death, the ECC could not conclude that Bleeding Peptic Ulcer Disease was the reason for hisdemise.

The respondent elevated the case to the CA through a Petition for Review. She cited the following supporting

grounds:1. Employees Compensation Commission failed to consider that peptic ulcer is an on and off disease

which does not need confinement in a hospital or clinic or submission to a Doctor of Medicinebecause it can be cured by self-medication.

2. The Employees Compensation Commission failed to consider also that there were medicaltreatment of Francisco Raoet of occupational and compensable diseases other than peptic ulcer asshown by the medical f indings of certificates, Xerox copies of which are attached to this petition.

The CA reversed[8]the ECC decision. The appellate court held that while the Amended Rules on Employees

Compensation does not list peptic ulcer as an occupational disease, Franciscos death should be compensablesince its immediate cause was cardiac arrest. Thus, the CA ordered the GSIS to pay the respondents claim for deathbenefits under P.D. 626, as amended.

The GSIS, this time, appealed through the present petition, raising the following issues:I. Whether or not the CA was correct in reversing the decision of the ECC and the GSIS denying the

respondents claim for income benefit under P.D. 626, as amended, for the death of her husband,Francisco.

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II. Whether or not the ailmentAcute Massive Hemorrhage t/c Bleeding Peptic Ulcer Disease, whichcaused the death of the late Francisco, is work-connected or whether there was any proof to showthat the risk of contracting the same was increased by factors attendant to his employment.

The GSIS reasons out that since the cause of Franciscos death was peptic ulcer, a disease not included

in the occupational diseases listed in Annex A of the Amended Rules on Employees Compensation, proofmust be shown that the risk of contracting the disease was increased by his working conditions. The respondenfailed to present any such evidence to support her claim apart from her bare allegations. In fact, Franciscos medicarecords disclose that he did not consult his doctors regarding peptic ulcer. Since no autopsy was performed to ascertainthe cause of death, no assurance exists that Bleeding Peptic Ulcerwas indeed the cause of his death.

The GSIS further argues that Franciscos other ailments, i.e., his hypertension and coronary artery disease, had

already been awarded the maximum benefits commensurate to the degree of his disability when he was granted 30 daysTemporary Total Disability benefits, plus reimbursement of medical expenses incurred in the treatment of theseillnesses. Thus, no death benefit for the same diseases can be claimed.

The GSIS also points out that the employees compensation trust fund is presently empty, and claims on this fundare being paid by the GSIS from advances coming from its other funds. Accordingly, the GSIS argues that the trust fundwould suffer if benefits are paid to claimants who are not entitled under the law.

In contrast, the respondent claims that the issues the GSIS raised are essentially questions of fact which t