JETHRO INTELLIGENCE & SECURITY CORPORATION AND YAKULT PHILS., INC. PETITIONERS, VS. THE HON. SECRETARY OF LABOR AND EMPLOYMENT, FREDERICK GARCIA, GIL CORDERO, LEONIELYN UDALBE, …

Jethro Intelligence and Security Corporation versus the Secretary of Labor and Employment

The Case

This is a petition for review on certiorari brought by Jethro Intelligence and Security Corporation, a security service contractor, and its client Yakult Philippines, against the Secretary of Labor and Employment and several security guards who complained of underpayment of wages and other labor standards benefits. The guards' complaint led to a labor standards inspection at Yakult's plant in Calamba, Laguna, and eventually to a compliance order holding the petitioners jointly and severally liable for a large sum of wage differentials and benefits. The case matters because it draws the boundary between the visitorial and enforcement power of the Secretary of Labor under Article 128 of the Labor Code and the adjudicatory jurisdiction of the Labor Arbiter under Articles 129 and 217, and because it confirms how freely labor tribunals may receive affidavits and relax the technical rules of evidence.

Procedural History

A complaint for underpayment of wages, holiday pay, premium pay for rest day, thirteenth month pay, and night shift differential was filed by security guard Frederick Garcia, later joined by his co-respondents. The Department of Labor and Employment Regional Office conducted an inspection at Yakult's premises and noted several labor standards violations. After hearings, the Regional Director issued an order finding the petitioners jointly and severally liable for the aggregate amount of 809,210 pesos and 16 centavos, and directing them to submit proof of payment within ten calendar days, failing which the entire award would be doubled pursuant to Republic Act Number 8188, with writs of execution and garnishment to follow.

Jethro appealed to the Secretary of Labor and Employment, faulting the Regional Director for basing the computation on Garcia's affidavit instead of the payrolls. The Secretary partially granted the appeal, affirming the order with modification by deleting the penalty of double indemnity and setting aside the writs of execution and garnishment, without prejudice to the issuance of the writs necessary to implement the decision. Jethro's motion for reconsideration was denied.

Jethro then filed a petition for certiorari before the Court of Appeals, insisting that Garcia's affidavit should not have been given evidentiary weight. The Court of Appeals denied the petition, holding that the affidavit had probative weight because under Article 221 of the Labor Code the rules of evidence are not controlling, and that labor tribunals may accept affidavits in lieu of direct testimony. Reconsideration was denied, so the petitioners came to the Supreme Court by petition for review on certiorari.

Facts

Jethro is a security service contractor with a security service contract agreement with Yakult. One of the security guards deployed by Jethro, Frederick Garcia, filed a complaint for underpayment of wages, legal and special holiday pay, premium pay for rest day, thirteenth month pay, and night shift differential. On the basis of that complaint, the Department of Labor and Employment Regional Office conducted an inspection at Yakult's premises in Calamba, Laguna, and noted several labor standards violations, including keeping payrolls and daily time records in the main office, underpayment of wages, overtime pay and other benefits, and non-registration with the Department as required under Department Order Number 18-02.

Hearings were conducted on Garcia's complaint and on the subsequent complaints of his co-respondents. Jethro submitted copies of payrolls covering certain periods, but it failed to submit the daily time records of the claimants from 2002 to June 2004 despite an order for it to do so. The Regional Director then issued the compliance order of September 9, 2004, finding the petitioners jointly and severally liable for the aggregate amount of 809,210 pesos and 16 centavos, representing wage differentials, regular holiday pay, special day premium pay, thirteenth month pay, overtime pay, service incentive leave pay, night shift differential premium, and rest day premium.

On appeal, the Secretary of Labor affirmed with modification, deleting the double indemnity and setting aside the writs already issued. The Court of Appeals denied certiorari, and the case reached the Supreme Court. The petitioners argued that the Secretary had no jurisdiction because the aggregate money claim of each employee exceeded 5,000 pesos under Article 129; that Jethro could not be expected to keep payrolls and daily time records at Yakult's premises since its office is in Quezon City; that the writs of execution and garnishment were improper because the order was not served on their counsel of record and they had filed the required bond; and that Garcia's affidavit should not have been given weight because they were not afforded the opportunity to cross-examine him.

Issues

• Whether or not the Secretary of Labor and Employment has jurisdiction over the case despite the aggregate money claim of each employee exceeding 5,000 pesos under Article 129 of the Labor Code.
• Whether or not the inspection conducted at Yakult's premises was valid, given that Jethro's payrolls and daily time records were kept at its own office in Quezon City.
• Whether or not the writs of execution and garnishment subsequently issued were in order.
• Whether or not Garcia's affidavit may be given evidentiary weight despite the petitioners not having cross-examined him.

Applicable Provisions

Article 128 of the Labor Code, as amended by Republic Act Number 7730, defines the visitorial and enforcement power of the Secretary of Labor, and provides:

Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee exists, the Secretary of Labor and Employment or 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 or his 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 finding 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 provision that sustains the Secretary's jurisdiction notwithstanding Articles 129 and 217, and its exception clause is what the Court examines to see whether the case should have been endorsed to the Labor Arbiter.

Article 128 also contains a prohibition against obstructing the enforcement orders of the Secretary, which provides:

It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render ineffective the orders of the Secretary of Labor or his duly authorized representatives issued pursuant to the authority granted under this article, and no inferior court or entity shall issue temporary or permanent injunction or restraining order or otherwise assume jurisdiction over any case involving the enforcement orders issued in accordance with this article.

This reinforces the binding effect of compliance orders and explains why the writs of execution could issue.

Article 221 of the Labor Code governs the rules of evidence in labor cases, and provides:

Technical rules are not binding, and the application of technical rules of procedure may be relaxed in labor cases to serve the demand of substantial justice. The rule of evidence prevailing in court of law or equity shall not be controlling in labor cases and it is the spirit and intention of the Labor Code that the Labor Arbiter 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.

This is the basis for giving weight to Garcia's affidavit even without cross-examination.

Ruling

On the first issue, the Court held that the Secretary of Labor correctly assumed jurisdiction. The Court explained that Articles 129 and 217, which give the Labor Arbiter jurisdiction where the aggregate money claims of each employee exceed 5,000 pesos, do not contemplate nor cover the visitorial and enforcement powers of the Secretary, which are defined and set forth in Article 128. The Court quoted the exception clause and held that the case does not come under it, because while Jethro appealed the inspection results and there was a need to examine evidentiary matters, the payrolls it presented were considered in the ordinary course of inspection. The Court recalled the ruling in Ex-Bataan Veterans Security Agency versus Laguesma that to divest the Regional Director of jurisdiction, three elements must be present: that the employer contests the findings and raises issues; that resolving such issues requires the examination of evidentiary matters; and that such matters are not verifiable in the normal course of inspection.

On the second issue, the Court held that the inspection was valid. While the employment records could not be expected to be found at Yakult's premises in Calamba since Jethro's offices are in Quezon City, the records showed that Jethro was given ample opportunity to present its payrolls and other pertinent documents during the hearings and to rectify the violations noted during the ocular inspection, but it failed to do so. The Court also noted that failure to keep payrolls and daily time records at Yakult's premises was not the only violation found; Jethro likewise failed to register as a service contractor with the Department of Labor and Employment under Department Order Number 18-02 and failed to pay the wages and benefits in accordance with the rates prescribed by law.

On the third issue, the Court held that the issuance of the writs of execution and garnishment was in order. The Secretary of Labor, under Article 106 of the Labor Code, exercises quasi-judicial power to the extent necessary to determine violations of labor standards provisions, and may issue compliance orders and writs of execution for their enforcement. The Court also cited Section 5 of Rule V of the Rules on Disposition of Labor Standards Cases in Regional Offices, which provides that the filing of a petition for certiorari shall not stay the execution of the appealed order or decision unless the aggrieved party secures a temporary restraining order from the Court. No temporary restraining order or injunction was issued, so the writs were proper. On the failure to furnish the former counsel a copy of the order, the Court noted that the Secretary had already deleted the double indemnity award and held the earlier writs null and void, rendering the matter moot.

On the fourth issue, the Court held that Garcia's affidavit was properly given weight. The affidavit was not the only basis for the judgment award, since the payrolls for certain periods revealed that the overtime rates were below the required rate. The Court quoted Article 221 and the ruling in Mayon Hotel and Restaurant versus Adana that technical rules are not binding in labor cases. It also noted that the minutes of the July 5, 2004 hearing, at which Jethro's counsel was present, indicated that Garcia's affidavit was presented, so Jethro had the opportunity to controvert its contents but failed. The Court further held that a writ of certiorari corrects errors of jurisdiction, including grave abuse of discretion amounting to lack of jurisdiction, but does not correct a tribunal's evaluation of the evidence and factual findings, especially since factual findings of administrative agencies are generally binding and final so long as they are supported by substantial evidence.

Doctrine

First, the visitorial and enforcement power of the Secretary of Labor under Article 128 of the Labor Code is not covered by Articles 129 and 217, and the phrase "notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary" retains and strengthens the Secretary's power to issue compliance orders based on inspection findings. Second, the Regional Director or the Secretary loses jurisdiction only when the exception clause applies, and to divest them of jurisdiction the employer must show that it contests the findings and raises issues, that resolving those issues requires the examination of evidentiary matters, and that such matters are not verifiable in the normal course of inspection. Third, under Article 221 of the Labor Code, technical rules of evidence are not binding in labor cases, and labor tribunals may accept affidavits in lieu of direct testimony, so the absence of cross-examination does not by itself render an affidavit worthless. Fourth, factual findings of administrative agencies supported by substantial evidence are binding and final, and a writ of certiorari does not correct the evaluation of evidence. Fifth, the filing of a petition for certiorari does not stay execution of the appealed order unless a temporary restraining order or injunction is secured.

Disposition

The petition was denied, and the Court of Appeals decision of January 24, 2006 and its resolution of April 28, 2006 were affirmed, so the Secretary of Labor and the complaining security guards prevailed.

Remember This

The single line worth memorizing is that the visitorial and enforcement power of the Secretary of Labor under Article 128 stands notwithstanding Articles 129 and 217, and is displaced only by the exception clause requiring contested findings supported by documentary proofs not considered in the course of inspection. Examiners like to use this case to test the boundary between the Regional Director's compliance power and the Labor Arbiter's adjudicatory jurisdiction, and to test whether technical rules of evidence, including cross-examination, bind labor tribunals.