G.R. No. 197309
October 10, 2012
ACE NAVIGATION CO., INC., VELA INTERNATIONAL MARINE LTD., and/or RODOLFO
PAMINTUAN, Petitioners,
vs.
TEODORICO FERNANDEZ, assisted by GLENITA FERNANDEZ, Respondent.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 which seeks to nullify the decision2 dated
September 22, 2010 and the resolution3 dated May 26,2011 ofthe Court of Appeals (CA) in CA-G.R.
SP No. 112081.
The Antecedents
On October 9, 2008, seaman Teodorico Fernandez (Fernandez), assisted by his wife, Glenita
Fernandez, filed with the National Labor Relations Commission (NLRC) a complaint for disability
benefits, with prayer for moral and exemplary damages, plus attorney’s fees, against Ace Navigation
Co., Inc., Vela International Marine Ltd., and/or Rodolfo Pamintuan (petitioners).
The petitioners moved to dismiss the complaint,4 contending that the labor arbiter had no jurisdiction
over the dispute. They argued that exclusive original jurisdiction is with the voluntary arbitrator or
panel of voluntary arbitrators, pursuant to Section 29 of the POEA Standard Employment Contract
(POEA-SEC), since the parties are covered by the AMOSUP-TCC or AMOSUP-VELA (as later cited
by the petitioners) collective bargaining agreement (CBA). Under Section 14 of the CBA, a dispute
between a seafarer and the company shall be settled through the grievance machinery and
mandatory voluntary arbitration.
Fernandez opposed the motion.5 He argued that inasmuch as his complaint involves a money claim,
original and exclusive jurisdiction over the case is vested with the labor arbiter.
The Compulsory Arbitration Rulings
On December 9, 2008, Labor Arbiter Romelita N. Rioflorido denied the motion to dismiss, holding
that under Section 10 of Republic Act (R.A.) No. 8042, the Migrant Workers and Overseas Filipinos
Act of 1995, the labor arbiter has original and exclusive jurisdiction over money claims arising out of
an employer-employee relationship or by virtue of any law or contract, notwithstanding any provision
of law to the contrary.6
The petitioners appealed to the NLRC, but the labor agency denied the appeal. It agreed with the
labor arbiter that the case involves a money claim and is within the jurisdiction of the labor arbiter, in
accordance with Section 10 of R.A. No. 8042. Additionally, it declared that the denial of the motion to
dismiss is an interlocutory order which is not appealable. Accordingly, it remanded the case to the
labor arbiter for further proceedings. The petitioners moved for reconsideration, but the NLRC
denied the motion, prompting the petitioners to elevate the case to the CA through a petition
for certiorari under Rule 65 of the Rules of Court.
The CA Decision
Through its decision of September 22, 2010,7 the CA denied the petition on procedural and
substantive grounds.
Procedurally, it found the petitioners to have availed of the wrong remedy when they challenged the
labor arbiter’s denial of their motion to dismiss by way of an appeal to the NLRC. It stressed that
pursuant to the NLRC rules,8 an order denying a motion to dismiss is interlocutory and is not subject
to appeal.
On the merits of the case, the CA believed that the petition cannot also prosper. It rejected the
petitioners’ submission that the grievance and voluntary arbitration procedure of the parties’ CBA
has jurisdiction over the case, to the exclusion of the labor arbiter and the NLRC. As the labor arbiter
and the NLRC did, it opined that under Section 10 of R.A. No. 8042, the labor arbiter has the original
and exclusive jurisdiction to hear Fernandez’s money claims.
Further, the CA clarified that while the law9 allows parties to submit to voluntary arbitration other labor
disputes, including matters falling within the original and exclusive jurisdiction of the labor arbiters
under Article 217 of the Labor Code as this Court recognized in Vivero v. Court of Appeals,10 the
parties’ submission agreement must be expressed in unequivocal language. It found no such
unequivocal language in the AMOSUP/TCC CBA that the parties agreed to submit money claims or,
more specifically, claims for disability benefits to voluntary arbitration.
The CA also took note of the POEA-SEC11 which provides in its Section 29 that in cases of claims
and disputes arising from a Filipino seafarer’s employment, the parties covered by a CBA shall
submit the claim or dispute to the original and exclusive jurisdiction of the voluntary arbitrator or
panel of voluntary arbitrators. The CA explained that the relevant POEA-SEC provisions should
likewise be qualified by the ruling in the Vivero case, the Labor Code, and other applicable laws and
jurisprudence.
In sum, the CA stressed that the jurisdiction of voluntary arbitrators is limited to the seafarers’ claims
which do not fall within the labor arbiter’s original and exclusive jurisdiction or even in cases where
the labor arbiter has jurisdiction, the parties have agreed in unmistakable terms (through their CBA)
to submit the case to voluntary arbitration.
The petitioners moved for reconsideration of the CA decision, but the appellate court denied the
motion, reiterating its earlier pronouncement that on the ground alone of the petitioners’ wrong
choice of remedy, the petition must fail.
The Petition
The petitioners are now before this Court praying for a reversal of the CA judgment on the following
grounds:
1. The CA committed a reversible error in disregarding the Omnibus Implementing Rules and
Regulations (IRR) of the Migrant Workers and Overseas Filipinos Act of 1995,12 as amended by R.A.
No. 10022,13 mandating that "For OFWs with collective bargaining agreements, the caseshall be
submitted for voluntary arbitration in accordance with Articles 261 and 262 of the Labor Code."14
The petitioners bewail the CA’s rejection of the above argument for the reason that the remedy they
pursued was inconsistent with the 2005 Revised Rules of Procedure of the NLRC.
Citing Municipality of Sta. Fe v. Municipality of Aritao,15 they argue that the "dismissal of a case for
lack of jurisdiction may be raised at any stage of the proceedings."
In any event, they posit that the IRR of R.A. No. 10022 is in the nature of an adjective or procedural
law which must be given retroactive effect and which should have been applied by the CA in
resolving the present case.
2. The CA committed a reversible error in ruling that the AMOSUP-VELA CBA does not contain
unequivocal wordings for the mandatory referral of Fernandez’s claim to voluntary arbitration.
The petitioners assail the CA’s failure to explain the basis "for ruling that no explicit or unequivocal
wordings appeared on said CBA for the mandatory referral of the disability claim to
arbitration."16 They surmise that the CA construed the phrase "either party may refer the case to a
MANDATORY ARBITRATION COMMITTEE" under Section 14.7(a) of the CBA as merely
permissive and not mandatory because of the use of the word "may." They contend that
notwithstanding the use of the word "may," the parties unequivocally and unmistakably agreed to
refer the present disability claim to mandatory arbitration.
3. The CA committed a reversible error in disregarding the NLRC memorandum prescribing the
appropriate action for complaints and/or proceedings which were initially processed in the grievance
machinery of existing CBAs. In their motion for reconsideration with the CA, the petitioners
manifested that the appellate court’s assailed decision had been modified by the following directive
of the NLRC:
As one of the measures being adopted by our agency in response to the Platform and Policy
Pronouncements on Labor Employment, you are hereby directed to immediately dismiss the
complaint and/or terminate proceedings which were initially processed in the grievance machinery
as provided in the existing Collective Bargaining Agreements (CBAs) between parties, through the
issuance of an Order of Dismissal and referral of the disputes to the National Conciliation Mediation
Board (NCMB) for voluntary arbitration.
FOR STRICT COMPLIANCE.17
4. On July 31, 2012,18 the petitioners manifested before the Court that on June 13, 2012, the Court’s
Second Division issued a ruling in G.R. No. 172642, entitled Estate of Nelson R. Dulay, represented
by his wife Merridy Jane P. Dulay v. Aboitiz Jebsen Maritime, Inc., and General Charterers,
Inc., upholding the jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators over a
seafarer’s money claim. They implore the Court that since the factual backdrop and the issues
involved in the case are similar to the present dispute, the Dulay ruling should be applied to this case
and which should accordingly be referred to the National Conciliation and Mediation Board for
voluntary arbitration.
The Case for Fernandez
In compliance with the Court’s directive,19 Fernandez filed on October 7, 2011 his Comment20 (on the
Petition) with the plea that the petition be dismissed for lack of merit. Fernandez presents the
following arguments:
1. The IRR of the Migrant Workers and Overseas Filipinos Act of 1995 (R.A. No. 8042), as
amended by R.A. No. 10022,21 did not divest the labor arbiters of their original and exclusive
jurisdiction over money claims arising from employment, for nowhere in said IRR is there
such a divestment.
2. The voluntary arbitrators do not have jurisdiction over the present controversy as can be
deduced from Articles 261 and 262 of the Labor Code. Fernandez explains that his complaint
does not involve any "unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement [nor] from the interpretation or
enforcement of company personnel policies[.]"22 As he never referred his claim to the
grievance machinery, there is no "unresolved grievance" to speak of. His complaint involves
a claim for compensation and damages which is outside the voluntary arbitrator’s jurisdiction
under Article 261. Further, only disputes involving the union and the company shall be
referred to the grievance machinery and to voluntary arbitration, as the Court held in Sanyo
Philippines Workers Union-PSSLU v. Cañizares23 and Silva v. CA.24
3. The CA correctly ruled that no unequivocal wordings appear in the CBA for the mandatory
referral of Fernandez’s disability claim to a voluntary arbitrator.
The Court’s Ruling
We first rule on the procedural question arising from the labor arbiter’s denial of the petitioners’
motion to dismiss the complaint. On this point, Section 6, Rule V of The 2005 Revised Rules of
Procedure of the NLRC provides:
On or before the date set for the mandatory conciliation and mediation conference, the respondent
may file a motion to dismiss. Any motion to dismiss on the ground of lack of jurisdiction, improper
venue, or that the cause of action is barred by prior judgment, prescription, or forum shopping, shall
be immediately resolved by the Labor Arbiter through a written order. An order denying the motion to
dismiss, or suspending its resolution until the final determination of the case, is not appealable.
[underscoring ours]
Corollarily, Section 10, Rule VI of the same Rules states:
Frivolous or Dilatory Appeals. – No appeal from an interlocutory order shall be entertained. To
discourage frivolous or dilatory appeals, including those taken from interlocutory orders, the
Commission may censure or cite in contempt the erring parties and their counsels, or subject them
to reasonable fine or penalty.
In Indiana Aerospace University v. Comm. on Higher Educ.,25 the Court declared that "[a]n order
denying a motion to dismiss is interlocutory"; the proper remedy in this situation is to appeal after a
decision has been rendered. Clearly, the denial of the petitioners’ motion to dismiss in the present
case was an interlocutory order and, therefore, not subject to appeal as the CA aptly noted.
The petition’s procedural lapse notwithstanding, the CA proceeded to review the merits of the case
and adjudged the petition unmeritorious. We find the CA’s action in order. The Labor Code itself
declares that "it is the spirit and intention of this Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily
and objectively and without regard to technicalities of law or procedure, all in the interest of due
process."26
We now address the focal question of who has the original and exclusive jurisdiction over
Fernandez’s disability claim — the labor arbiter under Section 10 of R.A. No. 8042, as amended, or
the voluntary arbitration mechanism as prescribed in the parties’ CBA and the POEA-SEC?
The answer lies in the State’s labor relations policy laid down in the Constitution and fleshed out in
the enabling statute, the Labor Code. Section 3, Article XIII (on Social Justice and Human Rights) of
the Constitution declares:
xxxx
The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.
Article 260 of the Labor Code (Grievance machinery and voluntary arbitration) states:
The parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the
mutual observance of its terms and conditions. They shall establish a machinery for the adjustment
and resolution of grievances arising from the interpretation or implementation of their Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies.
Article 261 of the Labor Code (Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators),
on the other hand, reads in part:
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies[.]
Article 262 of the Labor Code (Jurisdiction over other labor disputes) declares:
The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties, shall also
hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks.
Further, the POEA-SEC, which governs the employment of Filipino seafarers, provides in its Section
29 on Dispute Settlement Procedures:
In cases of claims and disputes arising from this employment, the parties covered by a
collective bargaining agreement shall submit the claim or dispute to the original and
exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators. If the parties
are not covered by a collective bargaining agreement, the parties may at their option submit the
claim or dispute to either the original and exclusive jurisdiction of the National Labor Relations
Commission (NLRC), pursuant to Republic Act (RA) 8042 otherwise known as the Migrant Workers
and Overseas Filipinos Act of 1995 or to the original and exclusive jurisdiction of the voluntary
arbitrator or panel of voluntary arbitrators. If there is no provision as to the voluntary arbitrators to be
appointed by the parties, the same shall be appointed from the accredited voluntary arbitrators of the
National Conciliation and Mediation Board of the Department of Labor and Employment. [emphasis
ours]
We find merit in the petition.
Under the above-quoted constitutional and legal provisions, the voluntary arbitrator or panel of
voluntary arbitrators has original and exclusive jurisdiction over Fernandez’s disability claim. There is
no dispute that the claim arose out of Fernandez’s employment with the petitioners and that their
relationship is covered by a CBA — the AMOSUP/TCC or the AMOSUP-VELA CBA. The CBA
provides for a grievance procedure for the resolution of grievances or disputes which occur during
the employment relationship and, like the grievance machinery created under Article 261 of the
Labor Code, it is a two-tiered mechanism, with voluntary arbitration as the last step.
1âw phi 1
Contrary to the CA’s reading of the CBA’s Article 14, there is unequivocal or unmistakable language
in the agreement which mandatorily requires the parties to submit to the grievance procedure any
dispute or cause of action they may have against each other. The relevant provisions of the CBA
state:
14.6 Any Dispute, grievance, or misunderstanding concerning any ruling, practice, wages or
working conditions in the COMPANY or any breach of the Contract of Employment, or any
dispute arising from the meaning or application of the provisions of this Agreement or a
claim of violation thereof or any complaint or cause of action that any such Seaman may
have against the COMPANY, as well as complaints which the COMPANY may have against
such Seaman shall be brought to the attention of the GRIEVANCE RESOLUTION COMMITTEE
before either party takes any action, legal or otherwise. Bringing such a dispute to the
Grievance Resolution Committee shall be unwaivable prerequisite or condition precedent for
bringing any action, legal or otherwise, in any forum and the failure to so refer the dispute
shall bar any and all legal or other actions.
14.7a) If by reason of the nature of the Dispute, the parties are unable to amicably settle the
dispute, either party may refer the case to a MANDATORY ARBITRATION COMMITTEE. The
MANDATORY ARBITRATION COMMITTEE shall consist of one representative to be designated by
the UNION, and one representative to be designated by the COMPANY and a third member who
shall act as Chairman and shall be nominated by mutual choice of the parties. xxx
h) Referral of all unresolved disputes from the Grievance Resolution Committee to the
Mandatory Arbitration Committee shall be unwaivable prerequisite or condition precedent for
bringing any action, claim, or cause of action, legal or otherwise, before any court, tribunal,
or panel in any jurisdiction. The failure by a party or seaman to so refer and avail oneself to
the dispute resolution mechanism contained in this action shall bar any legal or other action.
All parties expressly agree that the orderly resolution of all claims in the prescribed manner
served the interests of reaching settlements or claims in an orderly and uniform manner, as
well as preserving peaceful and harmonious labor relations between seaman, the Union, and
the Company.27 (emphases ours)
What might have caused the CA to miss the clear intent of the parties in prescribing a grievance
procedure in their CBA is, as the petitioners’ have intimated, the use of the auxiliary verb "may" in
Article 14.7(a) of the CBA which, to reiterate, provides that "if by reason of the nature of the
Dispute, the parties are unable to amicably settle the dispute, either party may refer the case
to a MANDATORY ARBITRATION COMMITTEE."28
While the CA did not qualify its reading of the subject provision of the CBA, it is reasonable to
conclude that it viewed as optional the referral of a dispute to the mandatory arbitration committee
when the parties are unable to amicably settle the dispute.
We find this a strained interpretation of the CBA provision. The CA read the provision separately, or
in isolation of the other sections of Article 14, especially 14.7(h), which, in clear, explicit language,
states that the "referral of all unresolved disputes from the Grievance Resolution Committee
to the Mandatory Arbitration Committee shall be unwaivable prerequisite or condition
precedent for bringing any action, claim, or cause of action, legal or otherwise, before any
court, tribunal, or panel in any jurisdiction"29 and that the failure by a party or seaman to so
refer the dispute to the prescribed dispute resolution mechanism shall bar any legal or other
action.
Read in its entirety, the CBA’s Article 14 (Grievance Procedure) unmistakably reflects the parties’
agreement to submit any unresolved dispute at the grievance resolution stage to mandatory
voluntary arbitration under Article 14.7(h) of the CBA. And, it should be added that, in compliance
with Section 29 of the POEA-SEC which requires that in cases of claims and disputes arising from a
seafarer’s employment, the parties covered by a CBA shall submit the claim or dispute to the original
and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators.
Since the parties used unequivocal language in their CBA for the submission of their disputes to
voluntary arbitration (a condition laid down in Vivero for the recognition of the submission to
voluntary arbitration of matters within the original and exclusive jurisdiction of labor arbiters), we find
that the CA committed a reversible error in its ruling; it disregarded the clear mandate of the CBA
between the parties and the POEA-SEC for submission of the present dispute to voluntary
arbitration.
Consistent with this finding, Fernandez’s contention — that his complaint for disability benefits is a
money claim that falls within the original and exclusive jurisdiction of the labor arbiter under Section
10 of R.A. No. 8042 — is untenable. We likewise reject his argument that he never referred his claim
to the grievance machinery (so that no unresolved grievance exists as required under Article 261 of
the Labor Code), and that the parties to the case are not the union and the employer.30 Needless to
state, no such distinction exists in the parties’ CBA and the POEA-SEC.
It bears stressing at this point that we are upholding the jurisdiction of the voluntary arbitrator or
panel of voluntary arbitrators over the present dispute, not only because of the clear language of the
parties’ CBA on the matter; more importantly, we so uphold the voluntary arbitrator’s jurisdiction, in
recognition of the State’s express preference for voluntary modes of dispute settlement, such as
conciliation and voluntary arbitration as expressed in the Constitution, the law and the rules.
In this light, we see no need to further consider the petitioners’ submission regarding the IRR of the
Migrant Workers and Overseas Filipinos Act of 1995, as amended by R.A. No. 10022, except to note
that the IRR lends further support to our ruling.
In closing, we quote with approval a most recent Court pronouncement on the same issue, thus –
It is settled that when the parties have validly agreed on a procedure for resolving grievances
and to submit a dispute to voluntary arbitration then that procedure should be strictly
observed.31 (emphasis ours)
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and
resolution of the Court of Appeals are SET ASIDE. Teodorico Fernandez's disability claim
is REFERRED to the Grievance Resolution Committee of the parties' collective bargaining
agreement and/or the Mandatory Arbitration Committee, if warranted.
SO ORDERED.
G.R. No. 182295
June 26, 2013
7K CORPORATION, Petitioner,
vs.
EDDIE ALBARICO, Respondent.
DECISION
SERENO, CJ.:
This is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court, asking
the Court to determine whether a voluntary arbitrator in a labor dispute exceeded his jurisdiction in
deciding issues not specified in the submission agreement of the parties. It assails the
Decision1 dated 18 September 2007 and the Resolution2 dated 17 March 2008 of the Court of
Appeals (CA).3
FACTS
When he was dismissed on 5 April 1993, respondent Eddie Albarico (Albarico) was a regular
employee of petitioner 7K Corporation, a company selling water purifiers. He started working for the
company in 1990 as a salesman.4 Because of his good performance, his employment was
regularized. He was also promoted several times: from salesman, he was promoted to senior sales
representative and then to acting team field supervisor. In 1992, he was awarded the President’s
Trophy for being one of the company’s top water purifier specialist distributors.
In April of 1993, the chief operating officer of petitioner 7K Corporation terminated Albarico’s
employment allegedly for his poor sales performance.5 Respondent had to stop reporting for work,
and he subsequently submitted his money claims against petitioner for arbitration before the
National Conciliation and Mediation Board (NCMB). The issue for voluntary arbitration before the
NCMB, according to the parties’ Submission Agreement dated 19 April 1993, was whether
respondent Albarico was entitled to the payment of separation pay and the sales commission
reserved for him by the corporation.6
While the NCMB arbitration case was pending, respondent Albarico filed a Complaint against
petitioner corporation with the Arbitration Branch of the National Labor Relations Commission
(NLRC) for illegal dismissal with money claims for overtime pay, holiday compensation, commission,
and food and travelling allowances.7 The Complaint was decided by the labor arbiter in favor of
respondent Albarico, who was awarded separation pay in lieu of reinstatement, backwages and
attorney’s fees.8
On appeal by petitioner, the labor arbiter’s Decision was vacated by the NLRC for forum shopping
on the part of respondent Albarico, because the NCMB arbitration case was still pending.9 The
NLRC Decision, which explicitly stated that the dismissal was without prejudice to the pending
NCMB arbitration case,10 became final after no appeal was taken.
On 17 September 1997, petitioner corporation filed its Position Paper in the NCMB arbitration
case.11 It denied that respondent was terminated from work, much less illegally dismissed. The
corporation claimed that he had voluntarily stopped reporting for work after receiving a verbal
reprimand for his sales performance; hence, it was he who was guilty of abandonment of
employment. Respondent made an oral manifestation that he was adopting the position paper he
submitted to the labor arbiter, a position paper in which the former claimed that he had been illegally
dismissed.12
On 12 January 2005, almost 12 years after the filing of the NCMB case, both parties appeared in a
hearing before the NCMB.13 Respondent manifested that he was willing to settle the case amicably
with petitioner based on the decision of the labor arbiter ordering the payment of separation pay in
lieu of reinstatement, backwages and attorney’s fees. On its part, petitioner made a countermanifestation that it was likewise amenable to settling the dispute. However, it was willing to pay
only the separation pay and the sales commission according to the Submission Agreement dated 19
April 1993.14
The factual findings of the voluntary arbitrator, as well as of the CA, are not clear on what happened
afterwards. Even the records are bereft of sufficient information.
On 18 November 2005, the NCMB voluntary arbitrator rendered a Decision finding petitioner
corporation liable for illegal dismissal.15 The termination of respondent Albarico, by reason of alleged
poor performance, was found invalid.16 The arbitrator explained that the promotions, increases in
salary, and awards received by respondent belied the claim that the latter was performing poorly.17 It
was also found that Albarico could not have abandoned his job, as the abandonment should have
been clearly shown. Mere absence was not sufficient, according to the arbitrator, but must have
been accompanied by overt acts pointing to the fact that the employee did not want to work
anymore. It was noted that, in the present case, the immediate filing of a complaint for illegal
dismissal against the employer, with a prayer for reinstatement, showed that the employee was not
abandoning his work. The voluntary arbitrator also found that Albarico was dismissed from his work
without due process.
However, it was found that reinstatement was no longer possible because of the strained
relationship of the parties.18 Thus, in lieu of reinstatement, the voluntary arbitrator ordered the
corporation to pay separation pay for two years at ₱4,456 for each year, or a total amount of ₱8,912.
Additionally, in view of the finding that Albarico had been illegally dismissed, the voluntary arbitrator
also ruled that the former was entitled to backwages in the amount of ₱90,804.19 Finally, the
arbitrator awarded attorney’s fees in respondent’s favor, because he had been compelled to file an
action for illegal dismissal.20
Petitioner corporation subsequently appealed to the CA, imputing to the voluntary arbitrator grave
abuse of discretion amounting to lack or excess of jurisdiction for awarding backwages and
attorney’s fees to respondent Albarico based on the former’s finding of illegal dismissal.21 The
arbitrator contended that the issue of the legality of dismissal was not explicitly included in the
Submission Agreement dated 19 April 1993 filed for voluntary arbitration and resolution. It prayed
that the said awards be set aside, and that only separation pay of ₱8,912.00 and sales commission
of ₱4,787.60 be awarded.
The CA affirmed the Decision of the voluntary arbitrator, but eliminated the award of attorney’s fees
for having been made without factual, legal or equitable justification.22 Petitioner’s Motion for Partial
Reconsideration was denied as well.23
Hence, this Petition.
ISSUE
The issue before the Court is whether the CA committed reversible error in finding that the voluntary
arbitrator properly assumed jurisdiction to decide the issue of the legality of the dismissal of
respondent as well as the latter’s entitlement to backwages, even if neither the legality nor the
entitlement was expressedly claimed in the Submission Agreement of the parties.
The Petition is denied for being devoid of merit.
DISCUSSION
Preliminarily, we address petitioner’s claim that under Article 217 of the Labor Code, original and
exclusive jurisdiction over termination disputes, such as the present case, is lodged only with the
labor arbiter of the NLRC.24
Petitioner overlooks the proviso in the said article, thus:
Art. 217. Jurisdiction of the Labor Arbiters and the Commission.
a. Except as otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or nonagricultural:
xxxx
2. Termination disputes;
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement. (Emphases supplied)
Thus, although the general rule under the Labor Code gives the labor arbiter exclusive and original
jurisdiction over termination disputes, it also recognizes exceptions. One of the exceptions is
provided in Article 262 of the Labor Code. In San Jose v. NLRC,25 we said:
The phrase "Except as otherwise provided under this Code" refers to the following exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters . . .
xxxx
(c) Cases arising from the interpretation or implementation of collective bargaining agreement and
those arising from the interpretation or enforcement of company procedure/policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitrator as may be provided in said agreement.
B. Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks. (Emphasis supplied)
We also said in the same case that "the labor disputes referred to in the same Article 262 of the
Labor Code can include all those disputes mentioned in Article 217 over which the Labor Arbiter has
original and exclusive jurisdiction."26
From the above discussion, it is clear that voluntary arbitrators may, by agreement of the parties,
assume jurisdiction over a termination dispute such as the present case, contrary to the assertion of
petitioner that they may not.
We now resolve the main issue. Petitioner argues that, assuming that the voluntary arbitrator has
jurisdiction over the present termination dispute, the latter should have limited his decision to the
issue contained in the Submission Agreement of the parties – the issue of whether respondent
Albarico was entitled to separation pay and to the sales commission the latter earned before being
terminated.27 Petitioner asserts that under Article 262 of the Labor Code, the jurisdiction of a
voluntary arbitrator is strictly limited to the issues that the parties agree to submit. Thus, it contends
that the voluntary arbitrator exceeded his jurisdiction when he resolved the issues of the legality of
the dismissal of respondent and the latter’s entitlement to backwages on the basis of a finding of
illegal dismissal.
According to petitioner, the CA wrongly concluded that the issue of respondent’s entitlement to
separation pay was necessarily based on his allegation of illegal dismissal, thereby making the issue
of the legality of his dismissal implicitly submitted to the voluntary arbitrator for resolution.28 Petitioner
argues that this was an erroneous conclusion, because separation pay may in fact be awarded even
in circumstances in which there is no illegal dismissal.
We rule that although petitioner correctly contends that separation pay may in fact be awarded for
reasons other than illegal dismissal, the circumstances of the instant case lead to no other
conclusion than that the claim of respondent Albarico for separation pay was premised on his
allegation of illegal dismissal. Thus, the voluntary arbitrator properly assumed jurisdiction over the
issue of the legality of his dismissal.
True, under the Labor Code, separation pay may be given not only when there is illegal dismissal. In
fact, it is also given to employees who are terminated for authorized causes, such as redundancy,
retrenchment or installation of labor-saving devices under Article 28329 of the Labor Code.
Additionally, jurisprudence holds that separation pay may also be awarded for considerations of
social justice, even if an employee has been terminated for a just cause other than serious
misconduct or an act reflecting on moral character.30 The Court has also ruled that separation pay
may be awarded if it has become an established practice of the company to pay the said benefit to
voluntarily resigning employees31 or to those validly dismissed for non-membership in a union as
required in a closed-shop agreement.32
The above circumstances, however, do not obtain in the present case. There is no claim that the
issue of entitlement to separation pay is being resolved in the context of any authorized cause of
termination undertaken by petitioner corporation. Neither is there any allegation that a consideration
of social justice is being resolved here. In fact, even in instances in which separation pay is awarded
in consideration of social justice, the issue of the validity of the dismissal still needs to be resolved
first. Only when there is already a finding of a valid dismissal for a just cause does the court then
award separation pay for reason of social justice. The other circumstances when separation pay
may be awarded are not present in this case.
1âw phi 1
The foregoing findings indisputably prove that the issue of separation pay emanates solely from
respondent’s allegation of illegal dismissal. In fact, petitioner itself acknowledged the issue of illegal
dismissal in its position paper submitted to the NCMB.
Moreover, we note that even the NLRC was of the understanding that the NCMB arbitration case
sought to resolve the issue of the legality of the dismissal of the respondent. In fact, the identity of
the issue of the legality of his dismissal, which was previously submitted to the NCMB, and later
submitted to the NLRC, was the basis of the latter’s finding of forum shopping and the consequent
dismissal of the case before it. In fact, petitioner also implicitly acknowledged this when it filed before
the NLRC its Motion to Dismiss respondent’s Complaint on the ground of forum shopping. Thus, it is
now estopped from claiming that the issue before the NCMB does not include the issue of the
legality of the dismissal of respondent. Besides, there has to be a reason for deciding the issue of
respondent’s entitlement to separation pay. To think otherwise would lead to absurdity, because the
voluntary arbitrator would then be deciding that issue in a vacuum. The arbitrator would have no
basis whatsoever for saying that Albarico was entitled to separation pay or not if the issue of the
legality of respondent’s dismissal was not resolve first.
Hence, the voluntary arbitrator correctly assumed that the core issue behind the issue of separation
pay is the legality of the dismissal of respondent. Moreover, we have ruled in Sime Darby Pilipinas,
Inc. v. Deputy Administrator Magsalin33 that a voluntary arbitrator has plenary jurisdiction and
authority to interpret an agreement to arbitrate and to determine the scope of his own authority when
the said agreement is vague — subject only, in a proper case, to the certiorari jurisdiction of this
Court.
Having established that the issue of the legality of dismissal of Albarico was in fact necessarily –
albeit not explicitly – included in the Submission Agreement signed by the parties, this Court rules
that the voluntary arbitrator rightly assumed jurisdiction to decide the said issue.
Consequently, we also rule that the voluntary arbitrator may award backwages upon a finding of
illegal dismissal, even though the issue of entitlement thereto is not explicitly claimed in the
Submission Agreement. Backwages, in general, are awarded on the ground of equity as a form of
relief that restores the income lost by the terminated employee by reason of his illegal dismissal.34
In Sime Darby we ruled that although the specific issue presented by the parties to the voluntary
arbitrator was only "the issue of performance bonus," the latter had the authority to determine not
only the issue of whether or not a performance bonus was to be granted, but also the related
question of the amount of the bonus, were it to be granted. We explained that there was no
indication at all that the parties to the arbitration agreement had regarded "the issue of performance
bonus" as a two-tiered issue, of which only one aspect was being submitted to arbitration. Thus, we
held that the failure of the parties to limit the issues specifically to that which was stated allowed the
arbitrator to assume jurisdiction over the related issue.
Similarly, in the present case, there is no indication that the issue of illegal dismissal should be
treated. as a two-tiered issue whereupon entitlement to backwages must be determined separately.
Besides, "since arbitration is a final resort for the adjudication of disputes," the voluntary arbitrator in
the present case can assume that he has the necessary power to make a final settlement.35 Thus,
we rule that the voluntary arbitrator correctly assumed jurisdiction over the issue of entitlement of
respondent Albarico to backwages on the basis of the former's finding of illegal dismissal.
WHEREFORE, premises considered, the instant Petition is DENIED. The 18 September 2007
Decision and 17 March 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 92526, are
hereby AFFIRMED.
SO ORDERED.