DANIEL SANCHEZ ET AL., PLAINTIFFS AND APPELLEES, VS. HARRY LYONS CONSTRUCTION, INC., ET AL., DEFENDANTS AND APPELLANTS.

Sanchez versus Harry Lyons Construction

The Case

This is a labor and commercial law case in which a group of employees — a warehouseman, a carpenter-foreman, and several guards — sued their corporate employers to collect one month's advance pay, the so-called mesada, after they were dismissed without previous notice. The employers resisted on two grounds: that the employees were not the kind of workers entitled to the mesada, and that in any event the employees had expressly waived it in their contracts of employment. The case matters because the Supreme Court used it to fix two enduring rules — that the mesada under Article 302 of the Code of Commerce extends to commercial employees generally and not only to factors and shop clerks, and that a waiver of that benefit, made in advance by the employee, is void as contrary to public policy.

Procedural History

The case began in the Municipal Court of Manila, where the employees filed a complaint for the sum they claimed as one month's advance pay. The parties entered into a stipulation of facts, and on that stipulation the Municipal Court rendered judgment for the plaintiffs. The defendants moved for reconsideration, and when that was denied they appealed to the Court of First Instance of Manila. That court, submitting the case on the same agreed facts, also decided for the plaintiffs, ordering the two corporate defendants to pay the various sums with legal interest and dividing the costs between them. From that judgment the defendants appealed to the Supreme Court purely upon a question of law.

Facts

The plaintiffs were employed by two corporations, Material Distributors, Incorporated, and Harry Lyons Construction, Incorporated, in positions such as warehouseman, carpenter-foreman, and guard. Their contracts of employment fixed their compensation either at a monthly rate or at a daily rate of five pesos, but in none of them was any special period or term of employment agreed upon.

Each contract contained a clause in which the employee agreed that the employment could be terminated at any time without previous notice, that wages would be computed only up to the date of termination, and that the employee expressly waived the benefit of Article 302 of the Code of Commerce and of any other law, ruling, or custom requiring notice of discharge or payment of salary after termination.

On December 31, 1947, the defendants dismissed the plaintiffs without giving them one month's previous notice. Each plaintiff demanded one month's salary, and the defendants refused. Hence the action.

Issues

• Whether or not the plaintiffs, both those paid on a monthly basis and those paid on a daily basis, are entitled to the benefits granted by Article 302 of the Code of Commerce.
• Whether or not the plaintiffs' waiver, made in advance in their contracts of employment, of the benefits of Article 302 is legal and valid.

Applicable Provisions

Article 302 of the Code of Commerce provides:

Article 302. In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may cancel it, advising the other party thereof one month in advance. The factor or shop clerk shall be entitled, in such case, to the salary due for said month.

This is the very provision under which the plaintiffs claim one month's pay, and the Court construes it to reach commercial employees beyond factors and shop clerks.

Article II, Section 5 of the Philippine Constitution provides:

The promotion of social justice to insure the well-being and economic security of all the people should be the concern of the State.

This supplies the public policy that invalidates the advance waiver.

Article XIV of the Philippine Constitution provides:

The State shall afford protection to labor, especially to working women and minors, and shall regulate the relations between landowner and tenant, and between labor and capital in industry and in agriculture.

This is the second constitutional anchor the Court invokes, directing that Article 302 be applied in consonance with the protection of labor.

Ruling

On the first issue, the Court held that the plaintiffs are entitled to the mesada. It drew from Article 302 the settled doctrine that in a mercantile contract of service in which no special time is fixed, either party may cancel the contract upon one month's notice, and that when such notice is not given, not only the factor or shop clerk but any employee discharged without cause is entitled to an indemnity of one month's salary. The Court found it beyond doubt that the plaintiffs were commercial employees rendering service as warehousemen, carpenter-foreman, and guards, and that no special time was fixed in their contracts. It rejected the argument that the word "temporary" or the daily basis of pay fixed a term, reasoning that the daily basis is for the computation of pay and is not necessarily the period of employment.

On the second issue, the Court held the advance waiver void as contrary to public policy. It acknowledged that the mesada is for the bilateral benefit of employer and employee, but held that this does not save a waiver made in advance by the employee. Reading Article 302 in consonance with the constitutional provisions on social justice and the protection of labor, the Court observed that in employment bargaining the employer stands on higher footing than the employee, because there is greater supply than demand for labor and because the need for employment arises from vital and even desperate necessity. It therefore presumed that an employee who waives in advance a benefit granted by law does so not in his own interest or through generosity but under the forceful intimidation of urgent need, and hence could not have acted freely and voluntarily.

Doctrine

First, under Article 302 of the Code of Commerce, where no special time is fixed in a mercantile contract of service, either party may cancel it upon one month's notice, and if that notice is not given, any commercial employee discharged without cause — not only a factor or shop clerk — is entitled to one month's salary as indemnity. The manner of computing pay, whether monthly or daily, does not by itself fix a special time of employment.

Second, a waiver made in advance by an employee of the benefits granted by Article 302 is void as contrary to public policy, because the employer stands on higher footing in bargaining and the law must raise labor to equal footing and shield it from abuses born of necessity. Article 302 must be applied in consonance with the constitutional guarantees of social justice and the protection of labor.

Disposition

The Supreme Court affirmed the decision of the lower court, with costs against the appellants, so the employees recovered their one month's pay with legal interest.

Remember This

The one line to memorize: the mesada under Article 302 belongs to any commercial employee, and an advance waiver of it is void as against public policy. Examiners use this case to test the scope of Article 302 beyond factors and shop clerks, and to test whether a labor benefit may be waived in advance — the answer being no.