STORCK PRODUCT MFG., CORP., PETITIONER, VS. HON. SECRETARY OF LABOR AND EMPLOYMENT, DOLE REGIONAL DIRECTOR MAXIMO LIM AND 100 EMPLOYEES OF STORCK PRODUCT MFG. CORP., RESPONDENTS.

Storck Product Manufacturing versus Secretary of Labor and Employment

The Case

This is a petition for certiorari brought by Storck Product Manufacturing Corporation against the Secretary of Labor and Employment, the Acting Secretary of Labor, and Regional Director Maximo Lim, together with one hundred employees of the company. Storck asks the Supreme Court to annul three orders: the Regional Director's compliance order directing it to pay wage differentials and holiday pay, the Secretary's order dismissing its appeal, and the Acting Secretary's order denying reconsideration. The case matters because it draws the dividing line between two powers of the labor department that students constantly confuse — the visitorial and enforcement power under Article 128 of the Labor Code, and the adjudicatory power under Article 129 — and fixes where an appeal from each properly lies.

Procedural History

On July 10, 2003, an employee, Jeffrey Corcuera, filed a complaint for underpayment of wages, non-payment of holiday pay, non-payment of overtime pay, non-payment of night shift differential, and non-remittance of Social Security System premiums. A labor inspection followed. On October 14, 2004, Regional Director Maximo Lim issued an order directing Storck to pay its affected employees the aggregate amount of 408,000 pesos representing underpayment of wages and other salary-related benefits. Storck appealed, and the Regional Office endorsed the appeal to the Office of the Secretary of Labor. The Secretary dismissed the appeal for lack of merit, and the Acting Secretary denied Storck's motion for reconsideration. Storck then filed this petition for certiorari under Rule 65, and the Supreme Court dismissed the petition and affirmed the assailed orders.

Facts

On July 10, 2003, Jeffrey Corcuera filed a complaint against Storck for underpayment of wages, non-payment of holiday pay, non-payment of overtime pay, non-payment of night shift differential premium, and non-remittance of Social Security System premiums. Six days later, the Regional Office conducted an inspection at Storck's premises. The inspection yielded findings of record-keeping violations, underpayment of wages, non-payment of holiday pay, inadequate personal protective equipment, no anti-sexual harassment policy, no Committee on Decorum and Investigation, and no posted copy of Republic Act 7877.

These findings were set out in a Notice of Inspection Results, which was received by and explained to Storck's personnel staff, Resty Cipres. Storck was directed to effect restitution within five days from receipt, or to submit any questions relating to the findings to the Regional Office. Storck did neither. The labor enforcement officer also found, from the payrolls covering the period from May 26 to June 1, 2003, that ninety-nine employees were either unpaid or underpaid. A subpoena duces tecum was later issued, but Storck instead submitted release and quitclaims for two employees.

The Regional Office conducted a summary hearing to give Storck another chance to refute the findings, but Storck failed to appear and presented no controverting evidence. The Regional Director then adopted the findings of the labor inspector and issued the order of October 14, 2004. Storck appealed, insisting that its appeal lay with the National Labor Relations Commission under Article 129, and that the Regional Director had no factual basis for the computation and should not have included the ninety-nine other employees.

Issues

• Whether or not the Secretary of Labor and Employment acted with grave abuse of discretion in taking cognizance of Storck's appeal from the Regional Director's order, instead of the appeal being resolved by the National Labor Relations Commission.
• Whether or not the Regional Director's findings and monetary award had factual basis, given that the order did not show how the liability was computed.
• Whether or not the ninety-nine other employees should have been excluded, considering that only one employee initiated the complaint.

Applicable Provisions

Article 128, paragraph b, of the Labor Code, as amended, provides:

Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in the cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment and his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

This is the source of the visitorial and enforcement power, and it is the provision under which the Regional Director issued the compliance order and the Secretary entertained the appeal.

The same Article 128, paragraph b, further provides:

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this Article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.

This fixes the appeal route: an order issued under the visitorial power goes to the Secretary of Labor, not to the National Labor Relations Commission.

Ruling

On the first issue, the Court held that the Secretary committed no grave abuse of discretion in taking cognizance of the appeal. The case stemmed from a complaint inspection under the visitorial powers of the Secretary under Article 128, and an order issued under that Article is appealable to the Secretary. Article 129, on the other hand, refers to the adjudicatory power of Regional Directors — the power to hear and decide claims for recovery of wages, simple money claims, and other benefits — and it is an order issued under that adjudicatory power that is appealed to the National Labor Relations Commission. The Court stressed that there is a whale of a difference between the two articles: under Article 128 the presence of an employer-employee relationship is a condition sine qua non, which is to say an indispensable condition, while Article 129 deals with small money claims arising from severed employer-employee relations. On the claim of grave abuse of discretion, the Court held that the record showed nothing capricious, despotic, or tainted by passion, prejudice, or personal hostility.

On the second issue, the Court held that the findings had factual basis. Storck was furnished the Notice of Inspection Results and directed to effect restitution or raise questions within five days, but it did neither. It failed to appear at the summary hearing and presented no controverting evidence. Its failure to speak when it ought to speak was a waiver, and the findings became final and conclusive against it.

On the third issue, the Court held that the inclusion of the ninety-nine other employees was proper. A labor inspection does not confine itself to the complainant's allegation but inquires into the employer's compliance with labor standards and covers all workers similarly situated. The Court quoted its earlier ruling:

The justification for the award to this group of employees who were not signatories to the complaint is that the visitorial and enforcement powers given to the Secretary of Labor is relevant to and exercisable over establishments, not over the individual members/employees, because what is sought to be achieved by its exercise is the observance of, and/or compliance by, such firm/establishment with the labor standards regulations. Necessarily, in case of an award resulting from a violation of labor legislation by such establishment, the entire members/employees should benefit therefrom.

Doctrine

First, the visitorial and enforcement power under Article 128 of the Labor Code is distinct from the adjudicatory power under Article 129. An order issued by the Regional Director under Article 128 is appealed to the Secretary of Labor and Employment; an order issued in the exercise of adjudicatory power under Article 129 is appealed to the National Labor Relations Commission.

Second, the visitorial power operates over the establishment, not over individual employees. Once an inspection uncovers a labor standards violation, the resulting award benefits all similarly situated employees, even those who did not sign or join the complaint.

Third, an employer who is given notice of inspection findings and the opportunity to contest them, yet fails to appear or submit controverting evidence, waives its right to refute those findings, which then become final and conclusive.

Disposition

The Supreme Court dismissed the petition for lack of merit, affirmed the assailed orders, and denied the prayer for a temporary restraining order or preliminary injunction, with no costs.

Remember This

Memorize the line: Article 128 orders go to the Secretary of Labor, Article 129 orders go to the National Labor Relations Commission. Examiners use this case to test jurisdiction over appeals from Regional Director orders and the rule that a single complaining employee can trigger an award in favor of the entire workforce.