Case Summary (G.R. No. 211563)
Chronology and appeals
SMI filed a Department of Labor and Employment termination report on September 2, 2003. Petitioners were prevented from reporting for work as of October 10, 2003 and were required to sign release/quitclaim memoranda before payment of accrued benefits. Petitioners filed complaints with the Labor Arbiter for non-payment of separation pay, accrued sick and vacation leaves, and 13th month pay. The Labor Arbiter ruled for petitioners (October 17, 2005). The National Labor Relations Commission (NLRC) reversed the award of monetary claims and held them in abeyance pending return of SMI property (August 31, 2010). The Court of Appeals dismissed petitioners’ certiorari petition (January 31, 2012). The Supreme Court denied the petition and affirmed the Court of Appeals decision.
Applicable Law and Authorities
Governing constitutional, statutory, and precedential materials
Because the decision post-dates 1990, the 1987 Philippine Constitution is the applicable constitutional framework. Relevant statutes and authorities cited by the Court include the Labor Code (Arts. 100, 113, 116, 217, and 1701), Presidential Decree No. 851 (13th month pay), Civil Code provisions (Arts. 1706, 1947, 2142), and controlling jurisprudence including Bañez v. Valdevilla, Domondon v. NLRC, Solas v. Power and Telephone Supply Phils., Inc., and related precedents addressing labor tribunal jurisdiction and employer withholding.
Material Facts and the Memorandum of Agreement
MOA terms and contested conditions
The MOA acknowledged SMI’s severe losses and closure, and stated that, under the circumstances, statutory separation pay may not be obligatory; nonetheless, SMI agreed, by way of goodwill, to grant financial assistance computed at 12.625 days per year of service, and committed to pay accrued sick/vacation leave and 13th month pay “less accountabilities.” The MOA further provided that the parties would not conduct concerted action, failing which the grant of financial assistance could be withheld. Petitioners refused to sign release/quitclaim documents and to vacate SMI Village as requested; SMI conditioned release of final benefits on return of property.
Issues Presented
Questions before the Supreme Court
The petition raised, among others: whether monetary claims could be held in abeyance pending turnover of SMI property; whether the Labor Arbiter’s award of 12% interest should stand; whether Teodora Mahilom was entitled to retirement benefits despite findings she retired earlier; and whether Carlito Damian remained entitled to monetary benefits he admittedly had received.
Labor tribunal jurisdiction over property-related questions
NLRC’s competence to adjudicate preliminary property issues
The Court confirmed that labor tribunals (Labor Arbiters and the NLRC) have original and exclusive jurisdiction over claims arising from employer-employee relations (Art. 217) and may preliminarily determine issues relating to property when necessary to resolve labor claims. Precedents (Bañez; Domondon) support inclusion of employer claims or counterclaims connected to termination or other labor issues within labor tribunal jurisdiction. The Court found the return of employer property to be sufficiently connected to petitioners’ claims for separation and other terminal benefits.
Legal basis for clearance procedures and withholding
Statutory and civil-law exceptions permitting withholding
While wages are generally protected from unlawful withholding (Art. 116) and benefits may not be eliminated or diminished (Art. 100), the law recognizes limited exceptions. Article 113 lists authorized deductions; Civil Code Art. 1706 permits withholding of wages for a debt due. Clearance procedures are a common employer practice to secure return of employer property. The MOA’s “less accountabilities” language was construed in its ordinary meaning to include obligations or debts arising from the employer-employee relationship; possession of SMI property by reason of employment constituted such an accountability. Civil Code Art. 1947 (precarium) and the liberality by which SMI allowed occupancy further supported SMI’s prerogative to revoke the privilege and demand return.
Application of equitable principles and precedent
No unjust enrichment; prior cases uphold employer withholding
The Court relied on the equitable principle against unjust enrichment (Civil Code Art. 2142) and cited Solas v. Power and Telephone Supply as precedent recognizing employer rights to apply wages against outstanding employee obligations. The Court held that withholding ter
...continue readingCase Syllabus (G.R. No. 211563)
Procedural Posture and Judicial History
- Petitioners were employees of Solid Mills, Inc. (Solid Mills) and were represented by the National Federation of Labor Unions (NAFLU) as their collective bargaining agent.
- Solid Mills informed employees in September 2003 that it would cease operations effective October 10, 2003, due to serious business losses; Solid Mills filed its Department of Labor and Employment termination report on September 2, 2003.
- A memorandum of agreement dated September 1, 2003 between Solid Mills and NAFLU recognized the closure and set out payment of monetary assistance and accrued benefits, but stated employees “ARE NOT granted separation benefits under the law” because the closure was due to serious business losses; the company, by goodwill, agreed to grant financial assistance “less accountabilities.”
- Solid Mills required employees to vacate SMI Village (a company-owned property occupied by employees and their families) and sent individual notices to vacate; employees were not allowed to report for work by October 10, 2003.
- Solid Mills required employees to sign a memorandum of agreement with release and quitclaim and to vacate SMI Village as a condition for release of vacation and sick leave benefits, 13th month pay, and separation pay; petitioners refused to sign and demanded payment.
- Petitioners filed complaints with the Labor Arbiter for non-payment of separation pay and accrued benefits; Solid Mills argued the complaints were premature because petitioners had not vacated its property.
- Labor Arbiter Renaldo O. Hernandez ruled for petitioners on October 17, 2005, ordering Solid Mills to pay separation pay (12.625 days per year of service), pro-rated 13th month pay for 2003, accrued vacation and sick leaves with 12% interest p.a. from date of filing (December 8, 2003), and other specific awards; some complaints were dismissed for settlement or failure to prosecute.
- Solid Mills appealed to the National Labor Relations Commission (NLRC). The NLRC affirmed the Labor Arbiter in part (paragraph 3) but reversed paragraphs 1 and 2, holding monetary claims in abeyance pending compliance with accountabilities by turning over the lots occupied in SMI Village.
- Petitioners moved for partial reconsideration with the NLRC (denied November 30, 2010) and filed a certiorari petition with the Court of Appeals which dismissed the petition on January 31, 2012; the Court of Appeals agreed with NLRC that Solid Mills’ allowance of temporary dwellings was liberality revocable at will and that benefits could be withheld pending turnover of property.
- Petitioners filed the present petition to the Supreme Court raising errors allegedly committed by the Court of Appeals and NLRC; the Supreme Court denied the petition and affirmed the Court of Appeals’ decision.
Factual Background: Employment, SMI Village Occupancy, and Closure
- Petitioners were Solid Mills employees represented by NAFLU; Solid Mills allowed petitioners and their families to occupy SMI Village, a property owned by the company.
- Solid Mills described the occupancy as an act “out of liberality and for the convenience of its employees” and asserted it was on the condition that employees would vacate the premises anytime the company deems fit.
- Solid Mills ceased operations on October 10, 2003 due to alleged irreversible and serious business losses; NAFLU recognized this closure in the memorandum of agreement dated September 1, 2003.
- After cessation of operations, Solid Mills sent individual notices to vacate SMI Village; petitioners were barred from reporting to work as of October 10, 2003.
The September 1, 2003 Memorandum of Agreement (MOA)
- The MOA acknowledged Solid Mills’ substantial and irreversible financial losses and its intention to cease operations on October 10, 2003; it recognized employees would be dismissed effective that date.
- The MOA explicitly stated that under Article 283 of the Labor Code, separation pay is granted for closures not due to serious business losses, and that because Solid Mills experienced serious business losses employees ARE NOT granted separation benefits under the law.
- Despite this, the company “by way of goodwill and in the spirit of generosity” agreed to grant financial assistance to union members, to be computed as 12.625 days pay for every year of service and disbursed in equal monthly installments from January 5, 2004 to December 5, 2004 (first check due January 5, 2004).
- The MOA committed to pay accrued sick and vacation leave benefits and 13th month pay “less accountabilities” and provided a schedule for distribution; the MOA contained a clause binding the parties not to conduct any concerted action of whatsoever kind, otherwise the grant of financial assistance would be withheld.
- The MOA did not expressly state a condition that benefits would be paid only upon return of possession of Solid Mills’ property.
Labor Arbiter Ruling and Reasoning
- The Labor Arbiter found that Solid Mills illegally withheld petitioners’ benefits and separation pay; petitioners’ right to payment was vested by law and contract.
- The Labor Arbiter concluded the MOA did not state any condition requiring petitioners to vacate Solid Mills’ property before benefits could be paid.
- The Labor Arbiter held petitioners’ possession of SMI Village should not be construed as “accountabilities” subject to clearance procedures and observed that such possession was not by virtue of any employer-employee accountability but rather a civil issue outside the Labor Arbiter’s jurisdiction.
- The dispositive portion ordered Solid Mills to pay the remaining complainants (nineteen specified employees and two others with partial prior payments) their separation pay (12.625 days per year), pro-rated 13th month pay for 2003, accrued vacation and sick leaves, plus 12% interest per annum from the date of filing (December 8, 2003) until actual payment and/or finality; certain complaints were dismissed with or without prejudice as noted.
National Labor Relations Commission (NLRC) Decision and Rationale
- The NLRC affirmed the Labor Arbiter’s disposition only in part (paragraph 3) but reversed and set aside paragraphs 1 and 2 of the Labor Arbiter’s decision.
- The NLRC held that the complainants’ monetary claims in the form of separation pay, accrued 13th month pay for 2003, accrued vacation and sick leave pays are held in abeyance pending compliance with their accountabilities to respondent company by turning over the lots they occupied at SMI Village, Sucat, Muntinlupa City.
- The NLRC noted that some complainants were already paid their separation pay and benefits and that one complainant (Teodora Mahilom) had already retired long before Solid Mills’ closure and had been given retirement benefits.
- The NLRC found that because petitioners failed to vacate Solid Mills’ property, Solid Mills was justified in withholding their benefits; it emphasized that Solid Mills granted the occupancy p