MANUEL L. FERNANDEZ, PETITIONER, VS. GROLIER INTERNATIONAL, INC., THE MINISTER OF LABOR, AND THE NATIONAL LABOR RELATIONS COMMISSION, RESPONDENTS.

Fernandez versus Grolier International

The Case

This is Manuel Fernandez against Grolier International, Incorporated, the Minister of Labor, and the National Labor Relations Commission. Fernandez asks the Supreme Court to reconsider its earlier decision, which had affirmed the dismissal of his complaint for lack of jurisdiction and on the ground of prescription. The case matters because the Court, on a second and hard look, corrects itself. It teaches that prescription is a defense that is waived when not pleaded, that substantial justice prevails over a technical defense, and that the corporate separation between a Philippine branch and a foreign office of the same multinational employer will not defeat a worker's claim where the employment relationship was never truly severed.

Procedural History

Fernandez filed a complaint with the Ministry of Labor and Employment. The Labor Arbiter dismissed it, and the National Labor Relations Commission affirmed the dismissal on the grounds of prescription and lack of jurisdiction. Fernandez elevated the matter to the Supreme Court, which initially affirmed the public respondents in a decision rendered in 1986. Fernandez then filed a motion for reconsideration, followed by a supplement to that motion. On reconsideration, the Court granted the motion, reversed and set aside the orders of the public respondents, and ruled for Fernandez.

Facts

Fernandez began working with Grolier International, Incorporated in the Philippines on the first of July, 1964, and rose to become Comptroller and Executive Administrator. On the twenty-seventh of June, 1974, he left for Sydney, Australia, where he worked with Grolier Society, Limited of Australia from the first of July, 1974 to the third of February, 1975, at an annual salary of 8,000 Australian dollars. Grolier International is based in New York, and its Philippine and Australian offices were both managed by the same person, Managing Director Ronald Besaw. It was Besaw who transferred Fernandez to Sydney to replace an accountant who had resigned, and who made it appear, to facilitate the travel and exit permit, that Fernandez would attend a series of conferences that did not exist.

Fernandez returned to Manila on the third of February, 1975 to follow up his immigration papers, which both he and the company treated as a condition for his transfer. His bid for immigration status was not approved in February 1975, and the denial became final in May 1976. As late as September 1975, Besaw was still following up the immigration papers with the Australian Embassy, and in that correspondence he referred to Fernandez as one of the company's executives in the Philippines. It was only in May 1976, three months before the complaint was filed, that Fernandez was dismissed after the Australian authorities finally ruled that he could not enter Australia as an immigrant.

At the hearing, the private respondent relied entirely on lack of jurisdiction, presenting no evidence, and its factual version rested on an affidavit of Ronald Besaw, who was never presented as a witness. No resignation papers were ever signed, and no reason for termination appears on the record.

Issues

• Whether or not the defense of prescription was waived when the private respondent failed to specifically plead it in its position paper.
• Whether or not Fernandez resigned from his employment when he left for Australia, or whether his employment abroad was a continuation of his Philippine employment entitling him to reinstatement and separation benefits.
• Whether or not the Labor Arbiter's finding of prescription was sound, considering when Fernandez was actually dismissed.

Applicable Provisions

The Court cited the rule on waiver of the statute of limitations as applied in Director of Lands versus Dano, which held:

Inasmuch as petitioner had never pleaded the statute of limitations, he is deemed to have waived the same.

This governs the first issue, because the private respondent never expressly invoked prescription in its pleadings.

The Court also addressed the citation of Article 281 of the Labor Code of the Philippines, which the petitioner insisted had no relevance to the case. The provision reads:

Article 281. Probationary employment. Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.

This bears on the case only to show that the probationary employment rule has no application to Fernandez, who had served the company since 1964.

Ruling

On the first issue, the Court held that prescription, not having been expressly invoked in the pleadings, was waived. While exceptions exist, the Court ruled that where considerations of substantial justice come in, it is better to resolve the issues on the basic merits of the case instead of applying the rule on prescription which the private respondent waived when it was not pleaded.

On the third issue, the Court found the finding of prescription not indubitable. Fernandez was not dismissed on the third of February, 1975 when he flew back from Australia. Both parties treated the return to Manila as a condition precedent to the approval of his immigration papers, and he remained a Grolier employee. He was dismissed only in May 1976, three months before the complaint was filed, so the action had not prescribed.

On the second issue, the Court ruled that Fernandez did not resign when he left for Sydney or when he returned to Manila. Although the Manila and Sydney offices are different juridical entities, the separate incorporation is dictated by requirements of law and convenience, and as far as the mother multinational corporation is concerned, the two offices are merely marketing arms of the same employer under unified management. There was never a contract of employment between Fernandez and Grolier of Australia; the Philippine employment contract sufficed to cover his seven months in Sydney. His services were terminated only when it became final that the Australian authorities would not approve his transfer as an immigrant worker.

Doctrine

First, the defense of prescription is waived if not expressly pleaded, and where substantial justice is at stake, the court will resolve the case on its merits rather than on a waived technical defense. Second, the separate juridical personality of a Philippine branch and a foreign office of the same multinational employer will not defeat a labor claim where the employee was transferred by the same management, under the same employment contract, with no resignation and no new contract with the foreign entity. Third, the employment relationship is not severed by a temporary return to Manila pending immigration approval; dismissal occurs only when the transfer finally fails.

Disposition

The motion for reconsideration was granted; the orders of the public respondents were reversed and set aside; and the private respondent was ordered to reinstate Fernandez with full backwages from the third of February, 1975 but not exceeding three years, without qualification or deduction, or to pay separation pay if reinstatement is no longer possible, and to reimburse him 6,646.65 pesos as return fare from Sydney to Manila.

Remember This

Memorize this line: prescription not pleaded is prescription waived, and substantial justice outweighs a technical defense. Examiners use this case on the waiver of prescription in labor proceedings and on the piercing of corporate separation between branches of a multinational employer.