G.R. No. 252035 - Cathay Pacific Steel Corp. vs. Commission on Audit

Petitioner Romeo Villaruel initiated the case by filing a complaint with the NLRC (National Labor Relations Commission) on February 15, 1999, seeking payment of separation pay and service incentive leave against Yeo Han Guan, doing business as Yuhans Enterprises.
The Labor Arbiter rendered a decision on November 27, 2000, granting separation pay and service incentive leave in favor of the petitioner.
The NLRC, through its Third Division on March 31, 2003, affirmed the Labor Arbiter’s decision, dismissing respondent’s appeal.
The Court of Appeals (CA) modified the award by deleting the separation pay but upheld the service incentive leave award after a petition for certiorari was filed by the respondent.
Subsequent to the CA decision, petitioner’s Motion for Reconsideration was filed but eventually denied by the CA in a resolution dated August 2, 2005.

Petitioner alleged that he was first employed in June 1963 as a machine operator by Ribonette Manufacturing Company, an enterprise later renamed several times and eventually operating under the name Yuhans Enterprises, which was owned and managed by respondent Yeo Han Guan.
Despite the company’s multiple name changes (with the latest being in 1993), petitioner maintained continuous employment, asserting that his service from 1963 until his health crisis in October 1998 should be recognized for the computation of separation pay.
In October 1998, petitioner fell ill, was confined in a hospital, and upon recovery, when he reported for work, he was denied the opportunity to continue or be assigned lighter duties. Instead, he was offered a sum corresponding only to his employment period from 1993 to 1999.
Petitioner further contended that not only was he entitled to separation pay for his entire period of service, but he also sought service incentive leave (computed for three years) and attorney’s fees.

Respondent argued that petitioner’s employment was effective only from March 1, 1993, and that his subsequent non-reporting to work after recovery constituted a voluntary act.
It asserted that petitioner was not terminated or dismissed by the company but, by not returning to work, effectively resigned.
The respondent emphasized that the case did not involve an allegation of illegal dismissal, as evidenced by the absence of a prayer for reinstatement and petitioner’s own manifest disinterest in resuming his duties.

Both lower tribunals—the Labor Arbiter and the NLRC—granted separation pay to petitioner without adequately discussing or resolving whether the termination was employer-initiated or voluntary.
The CA observed that the petitioner’s pleadings and actions (including his rejection of a return-to-work offer) point to a voluntary severance of employment.
There was a consistent record of petitioner’s long service without any derogatory record or misconduct noted, and he had not indicated any desire for reinstatement.
The continuous operation of the business under the same ownership, despite the name changes, was also considered by the court in determining the nature of the employment relationship.

Whether the petitioner was actually terminated (dismissed by the employer) or resigned voluntarily.
Whether the petitioner is entitled to separation pay under Article 284 of the Labor Code considering that the award of such pay applies only in cases of employer-initiated termination due to disease.
Whether the burden of proof concerning disease-related termination was correctly allocated and applied by the lower tribunals.
Whether the Court of Appeals erred in modifying the award by deleting the separation pay while upholding the service incentive leave award.
Whether the grant of financial assistance, as an equitable measure of social and compassionate justice, is justified under the circumstances even though separation pay was not warranted.