PNOC-ENERGY DEVELOPMENT CORPORATION, PETITIONER, VS. NATIONAL LABOR RELATIONS COM­MISSION (THIRD DIVISION) AND DANILO MERCADO, RESPONDENTS.

PNOC-Energy Development Corporation versus National Labor Relations Commission and Danilo Mercado

The Case

This is a petition for certiorari brought by the Philippine National Oil Company-Energy Development Corporation, which I shall call PNOC-EDC, against the National Labor Relations Commission and its employee Danilo Mercado. PNOC-EDC asks the Supreme Court to set aside the Resolution of the National Labor Relations Commission which affirmed the decision of the Labor Arbiter ordering Mercado's reinstatement and the payment of various monetary claims. The case matters because it settles two questions every labor practitioner must know: whether employees of a government-owned or controlled corporation incorporated under the General Corporation Law fall under the Civil Service or under the Labor Code, and what the Constitution in force at the time of the decision has to do with that answer.

Procedural History

Danilo Mercado filed a complaint for illegal dismissal, retirement benefits, separation pay, and unpaid wages against PNOC-EDC before the Regional Arbitration Branch Number Seven of the National Labor Relations Commission in Cebu City. PNOC-EDC answered with a Position Paper and Motion to Dismiss, arguing that the Labor Arbiter and the Commission had no jurisdiction over the case because it was a government-owned and controlled corporation governed by the Civil Service Law. Labor Arbiter Vito J. Minoria ruled in favor of Mercado, ordering his reinstatement with full back wages, the payment of his personal share in his savings account, moral and exemplary damages, attorney's fees, and his proportionate thirteenth month pay for 1985. PNOC-EDC appealed to the National Labor Relations Commission, which dismissed the appeal for lack of merit and affirmed the Labor Arbiter's decision. PNOC-EDC then came to the Supreme Court by petition for certiorari.

Facts

Danilo Mercado was first employed by PNOC-EDC on August 13, 1979. He held various positions, from clerk to general clerk to shipping clerk, at its Cebu office until he was transferred to its establishment at Palimpinon, Dumaguete, Oriental Negros on September 5, 1984. His last salary was 1,585 pesos a month basic pay plus 800 pesos living allowance. On June 30, 1985, he was dismissed.

The dismissal rested on alleged serious acts of dishonesty. PNOC-EDC claimed that on April 12, 1985, Mercado was ordered to purchase 1,400 pieces of nipa shingles for a total price of 1,680 pesos, but withdrew the shingles while paying only 1,000 pesos and appropriated the 680-peso balance; that the supplier gave a 70-peso discount which he did not report; and that on March 28, 1985, he was instructed to contract the fabrication of rubber stamps for 28 pesos and 66 centavos, paid only 20 pesos, and kept the 8-peso and 66-centavo balance. PNOC-EDC also charged him with being absent without leave on June 5, 1985, and going on vacation leave without prior leave on June 15, 1985.

On September 23, 1985, Mercado filed his complaint. The Labor Arbiter found that the accusations of dishonesty and the alleged violations of company rules were not supported by evidence. The supplier, Mrs. Leonardo Nodado, explained in her affidavit that the total purchase price of 1,680 pesos was in fact paid by Mercado as agreed. The alleged discount and the alleged appropriation of 8 pesos and 66 centavos were likewise unsupported. The Labor Arbiter found Mercado's explanations satisfactory, and these findings were never contradicted by PNOC-EDC.

Issues

• Whether or not matters of employment affecting PNOC-EDC, a government-owned and controlled corporation, are within the jurisdiction of the Labor Arbiter and the National Labor Relations Commission.
• Whether or not the Labor Arbiter and the National Labor Relations Commission were justified in ordering the reinstatement of Mercado, the payment of his savings and proportionate thirteenth month pay, and the payment of damages and attorney's fees.

Applicable Provisions

The 1973 Constitution provided:

The Civil Service embraces every branch, agency, subdivision and instrumentality of the government including government-owned or controlled corporations.

This is the provision PNOC-EDC invoked to argue that it was governed by the Civil Service Law and outside the Labor Code.

The 1987 Constitution provides:

The Civil Service embraces all branches, subdivision, instrumentalities and agencies of the Government, including government-owned or controlled corporations with original charters.

This is the provision the Court applied, because it is the Constitution in place at the time of the decision, and it limits Civil Service coverage to corporations with original charters.

Ruling

On the first issue, the Court held that the question had already been settled in an earlier case involving the same petitioner and the same issue. The doctrine that employees of government-owned or controlled corporations, whether created by special law or formed as subsidiaries under the General Corporation Law, are governed by the Civil Service Law and not by the Labor Code has been supplanted by the present Constitution. The Court stated the new test:

Thus, under the present state of the law, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation, such that government corporations created by special charter are subject to its provisions while those incorporated under the General Corporation Law are not within its coverage.

PNOC-EDC, having been incorporated under the General Corporation Law, is a government-owned or controlled corporation whose employees are subject to the Labor Code. The fact that the case arose while the 1973 Constitution was still in effect does not deprive the Commission of jurisdiction, because it is the 1987 Constitution that governs, being the Constitution in place at the time of the decision. The decision of the Commission was promulgated on July 3, 1987, so the case falls squarely under that ruling.

On the second issue, the Court held that the requirements of due process are satisfied when the parties are given an opportunity to submit position papers. What the fundamental law abhors is not the absence of previous notice but the absolute lack of opportunity to ventilate a party's side. There is no denial of due process where the party submitted its position paper and filed its motion for reconsideration, and the motion for reconsideration cured whatever irregularity might have been committed below. The Court also reiterated that findings of administrative agencies which have acquired expertise are accorded not only respect but even finality, and that judicial review does not go so far as to evaluate the sufficiency of the evidence but is limited to issues of jurisdiction or grave abuse of discretion. On the merits, while loss of trust or breach of confidence is a valid ground for dismissing an employee, such loss or breach must have some basis. Here the accusations had no basis, and the Labor Arbiter's findings were never contradicted.

Doctrine

Under the present state of the law, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation. Government corporations created by special charter are subject to the Civil Service Law, while those incorporated under the General Corporation Law are not within its coverage and their employees are governed by the Labor Code. It is the Constitution in place at the time of the decision that governs the question of jurisdiction. Due process is satisfied when parties are given the opportunity to submit position papers, and a motion for reconsideration cures whatever irregularity may have been committed in the proceedings below. Loss of trust or breach of confidence is a valid ground for dismissal only if it has some basis.

Disposition

The petition was denied and the Resolution of the National Labor Relations Commission was affirmed, with the modification that moral damages were reduced to 10,000 pesos and exemplary damages reduced to 5,000 pesos.

Remember This

Memorize the test: the manner of creation determines Civil Service coverage, so corporations with original charters are covered while those incorporated under the General Corporation Law are governed by the Labor Code. Examiners use this case to test jurisdiction over government-owned and controlled corporations and the effect of the 1987 Constitution on pending labor cases.