Gutierrez vs. Nawras Manpower Services, Inc. et al.

An illegally dismissed migrant worker is entitled to salaries for the unexpired portion of the employment contract under Section 7 of R.A. 10022 because the phrase “or for three (3) months for every year of the unexpired term, whichever is less” was struck down as unconstitutional; the worker is also entitled to 10% attorney's fees under Article 111(a) of the Labor Code for unlawful withholding of wages and to 6% legal interest under Article 2209 of the Civil Code, but not to a refund of placement fee or 12% interest thereon where no placement fee was actually paid.

Petitioner Ernesto P. Gutierrez was an overseas Filipino worker hired by NAWRAS Manpower Services, Inc. to work as a driver for Al-Adhamain Co. Ltd. in Saudi Arabia. His employment was governed by the Migrant Workers and Overseas Filipinos Act of 1995, as amended by R.A. 10022, particularly Section 7 on termination of overseas employment without just cause and the monetary awards due the worker. Prior jurisprudence, including Sameer Overseas Placement Agency, Inc. vs. Cabiles, had struck down the clause in Section 7 limiting salary recovery to three months for every year of the unexpired term, whichever is less.

Petitioner Ernesto P. Gutierrez, an overseas Filipino worker, was hired by NAWRAS Manpower Services, Inc. to work as Al-Adhamain Co. Ltd.'s “driver vehicle road” in Saudi Arabia for two years. He was offered a monthly salary of SR2,300.00. According to petitioner, his perks included SR300.00 food allowance, free accommodation, two hours' worth of daily overtime, and a service vehicle. He was deployed to Saudi Arabia on July 31, 2013.

Upon arrival, petitioner claimed that he was initially placed on floating status. He received his first salary only in November 2013 and received two months' worth of salary on December 2, 2013. He received a service vehicle on December 3, 2013, but he had to personally shoulder the gasoline expenses going to Al-Adhamain's asphalt plant. On February 15, 2014, the workshop supervisor informed petitioner that he would be transferred to another site and was made to report to Al-Adhamain's administrator. At the administrator's office, he was only given a clearance form. In a meeting with Al-Adhamain's owner, petitioner was told that his contract would be terminated and he would be repatriated as soon as he completed his clearance.

Petitioner then called NAWRAS about the pre-termination of his contract but was refrained from filing a complaint with the Philippine Overseas Labor Office in order to allow NAWRAS to talk to Al-Adhamain. Petitioner thus proceeded to submit the requirements for his clearance in the last week of February 2014. On March 15, 2014, petitioner was given his remaining salary (sans 1-month salary) and a refund of his two months' salary bond. He was then told to book his own flight back to the Philippines and that he would be reimbursed later on. However, of the SR3,100.00 that he spent for the airfare, Al-Adhamain's owner only reimbursed him for SR2,000.00.

Upon repatriation, petitioner filed a complaint for actual illegal dismissal with claims for underpaid overtime pay, unpaid salaries, and transportation expenses, termination pay, damages, and attorney's fees against respondents. Respondents averred that petitioner was validly dismissed because of his poor performance. After petitioner's three-month probationary period, Al-Adhamain informed him of his unsatisfactory performance. Petitioner was thus transferred to a different site to afford him a chance to change his working attitude. They claimed that petitioner was given several chances to change his work attitude to no avail. Despite extending several opportunities for petitioner to improve, petitioner opted to request for his last salary, benefits, termination pay, and return ticket. Lastly, respondents alleged that they complied with the notice and hearing requirement before terminating petitioner's employment.

The Labor Arbiter found petitioner illegally dismissed, rejecting respondents' claim of just cause because they failed to produce evidence supporting it and failed to give any detail on how they measured petitioner's performance to conclude that his work was unsatisfactory. The LA also found that petitioner was only able to work for six months and two weeks of his two-year contract, and that respondents failed to present proof of payment for the airplane ticket. The NLRC and the CA likewise found a dearth of evidence that petitioner's performance equated to gross and habitual neglect of duties. The CA found that petitioner's only evidence for the airfare was an e-ticket absent any indication of how much was paid, and that the LA failed to explain the factual circumstances warranting attorney's fees.

• Application of R.A. 10022: Petitioner averred that Section 7 of R.A. 10022 should not have been applied because it was declared unconstitutional in Sameer Overseas Placement Agency, Inc. vs. Cabiles.
• Monetary Awards: Petitioner prayed for reinstatement of the LA's award of SR40,250.00 salary for the unexpired portion of the contract, SR1,100.00 excess airfare ticket expense, and 10% attorney's fees; petitioner also sought his latest salary for one month, 12% annual interest on his latest salary and on the reimbursement of his placement fee, moral and exemplary damages, and legal interest on the judgment award.

• Valid Dismissal for Poor Performance: Respondents averred that petitioner was validly dismissed because of his poor performance; after his three-month probationary period, Al-Adhamain informed him of his unsatisfactory performance, transferred him to a different site to afford him a chance to change his working attitude, and gave him several chances to improve, but petitioner opted to request his last salary, benefits, termination pay, and return ticket.
• Compliance with Notice and Hearing: Respondents alleged that they complied with the notice and hearing requirement before terminating petitioner's employment.
• Airfare Payment: Respondents countered that it was Al-Adhamain that purchased petitioner's airplane ticket.

• Salary for Unexpired Portion: Whether petitioner is entitled to salary equivalent to the unexpired portion of his employment contract, and whether the CA erred in reducing the award to SR13,800.00 under Section 7 of R.A. 10022.
• Reimbursement for Airfare: Whether petitioner is entitled to reimbursement of SR1,100.00 as excess airfare payment.
• Attorney's Fees: Whether petitioner is entitled to 10% attorney's fees.
• Repayment of Last Salary: Whether petitioner is entitled to repayment of his November 2013 salary.
• 12% Interest on Placement Fee Refund: Whether petitioner is entitled to 12% interest on the alleged refund of his placement fee.
• Moral and Exemplary Damages: Whether petitioner is entitled to moral and exemplary damages.
• Legal Interest on Judgment Award: Whether petitioner is entitled to legal interest on the judgment award.

• Salary for Unexpired Portion: Yes. Petitioner is entitled to salaries for the unexpired portion of his employment contract; the phrase “or for three (3) months for every year of the unexpired term, whichever is less” in Section 7 of R.A. 10022 was struck down in Sameer, so the LA's SR40,250.00 award is reinstated.
• Reimbursement for Airfare: Yes. Petitioner substantiated payment of SR3,100.00 and reimbursement of only SR2,000.00; respondents failed to prove they paid for the ticket, so the SR1,100.00 excess is reinstated.
• Attorney's Fees: Yes. Article 111(a) of the Labor Code allows 10% attorney's fees for unlawful withholding of wages; an express finding of facts and law is necessary, but no showing of malice or bad faith is required.
• Repayment of Last Salary: Yes. The withheld November 2013 salary was improperly deducted as a placement fee; because petitioner never paid a placement fee, the refund directive is actually for repayment of that salary.
• 12% Interest on Placement Fee Refund: No. Petitioner never paid a placement fee, so he is not entitled to a refund or to 12% interest thereon.
• Moral and Exemplary Damages: No. The LA and CA found petitioner's evidence insufficient to prove entitlement; the Court will not disturb these factual findings.
• Legal Interest on Judgment Award: Yes. A 6% per annum legal interest under Article 2209 of the Civil Code is imposed on the SR40,250.00 and SR1,100.00 awards from the filing of the complaint until full payment.

• Salary for Unexpired Portion: The CA reduced the salary award to SR13,800.00 by applying paragraph 5, Section 7 of R.A. 10022, which limits recovery to three months for every year of the unexpired term, whichever is less. However, in Sameer Overseas Placement Agency, Inc. vs. Cabiles, the phrase “or for three (3) months for every year of the unexpired term, whichever is less” under Section 7 of R.A. 10022 was struck down because the same phrase had already been declared unconstitutional in R.A. 8042. The operative clause is “his salaries for the unexpired portion of his employment contract.” Thus, the LA's computation of SR40,250.00 is reinstated.
• Reimbursement for Airfare: Petitioner claimed he paid SR3,100.00 for airfare and was reimbursed only SR2,000.00. Respondents claimed Al-Adhamain purchased the ticket but presented no proof. The LA ordered reimbursement of SR1,100.00; the NLRC affirmed because petitioner attached a ticket receipt and respondents did not comment. The CA reversed because the e-ticket did not show the amount paid. The Supreme Court found petitioner substantiated his claim: respondents kept silent before the NLRC, the NLRC noted the ticket receipt, the LA found no proof of payment by respondents, and the CA decision itself revealed respondents failed to substantiate their claim. The LA and NLRC order to reimburse SR1,100.00 is reinstated.
• Attorney's Fees: In Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union vs. Manila Water Co., Inc., the Court distinguished ordinary and extraordinary attorney's fees. Extraordinary attorney's fees are awarded to the losing party in specific instances under Article 2208 of the Civil Code; paragraph 7 allows them in actions for recovery of wages. In such actions, Article 111(a) of the Labor Code governs: in cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to 10% of the amount of wages recovered. Article 111 is an exception to the general rule of strict construction. Although an express finding of facts and law is necessary, there need not be a showing that the employer acted maliciously or in bad faith when it withheld wages. The required finding is unjustified withholding of lawful wages. Here, it is undisputed that petitioner was not paid lawful wages corresponding to the unexpired portion of the contract; thus, 10% attorney's fees is proper.
• Repayment of Last Salary: Petitioner was not given his November 2013 salary because Al-Adhamain withheld it as his placement fee. The deduction was improper because an illegally dismissed migrant worker is entitled to full reimbursement of placement fee. The LA's directive to refund the placement fee is really one for repayment of petitioner's November 2013 salary because petitioner never paid respondents a placement fee.
• 12% Interest on Placement Fee Refund: The LA, NLRC, and CA incorrectly considered petitioner entitled to a “refund” of placement fee because his November 2013 salary was deducted for that purpose. Since petitioner never paid any placement fee, he is not entitled to a refund and consequently not entitled to 12% interest on the same.
• Moral and Exemplary Damages: Petitioner claimed to have substantially proven wanton, oppressive, and malevolent manner in terminating him. Both the LA and CA found his evidence insufficient to prove entitlement. The Supreme Court does not disturb these factual findings because it is not a trier of facts in petitions for review on certiorari.
• Legal Interest on Judgment Award: In Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc., the Court clarified the imposition of interest previously stated in Nacar vs. Gallery Frames. When the monetary obligation does not constitute a loan or forbearance of money, goods, or credits and there is no stipulation as to payment of interest on damages, a legal interest of 6% per annum under Article 2209 of the Civil Code is imposed. It is reckoned from the date of extrajudicial or judicial demand and continues until full payment. In Hun Hyung Park vs. Eung Won Choi, the Court explained that this compensatory interest will not be subject to further interest under Article 2212 of the Civil Code. Therefore, the SR40,250.00 and SR1,100.00 awards shall earn 6% legal interest from the time the complaint was filed until full payment.

• Illegal Dismissal of Migrant Worker — Salary for Unexpired Portion — An illegally dismissed migrant worker is entitled to salaries for the unexpired portion of the employment contract under Section 7 of R.A. 10022. The phrase “or for three (3) months for every year of the unexpired term, whichever is less” was struck down as unconstitutional in Sameer Overseas Placement Agency, Inc. vs. Cabiles, leaving the unexpired-portion clause as the operative provision. The Court applied this by reinstating the LA's SR40,250.00 award instead of the CA's SR13,800.00.
• Poor Performance as Just Cause — Poor performance, equivalent to inefficiency under Article 282 of the Labor Code, must amount to gross and habitual neglect of duties to be a just cause for dismissal; poor performance does not necessarily equate to gross and habitual neglect. The NLRC and CA found respondents' claim of poor performance unsubstantiated, and the Supreme Court affirmed the finding of illegal dismissal with modification.
• Attorney's Fees in Actions for Recovery of Wages — Under Article 111(a) of the Labor Code, in cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to 10% of the amount of wages recovered. This is an exception to the general rule of strict construction; although an express finding of facts and law is necessary, no showing of malice or bad faith is required. The Court applied this because petitioner was not paid lawful wages for the unexpired portion of his contract.
• Legal Interest on Monetary Awards — When the monetary obligation does not constitute a loan or forbearance of money, goods, or credits and there is no stipulation as to payment of interest on damages, a legal interest of 6% per annum under Article 2209 of the Civil Code is imposed from the date of extrajudicial or judicial demand until full payment. This compensatory interest does not earn further interest under Article 2212. The Court applied this to the SR40,250.00 and SR1,100.00 awards from the filing of the complaint.
• Placement Fee Refund and Interest — An illegally dismissed migrant worker is entitled to full reimbursement of placement fee. However, where no placement fee was actually paid and the amount was merely deducted from salary, the award is actually repayment of salary, and no 12% interest on a placement fee refund is due. The Court applied this because petitioner never paid a placement fee; his November 2013 salary was merely withheld as such.

• "In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, or any unauthorized deductions from the migrant worker's salary, the worker shall be entitled to the full reimbursement [of] his placement fee and the deductions made with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less." — This is the text of Section 7 of R.A. 10022 as quoted by the CA; the Supreme Court later held the “whichever is less” clause unconstitutional, leaving the unexpired-portion clause operative.
• "In Sameer, this Court struck down the phrase “or for three (3) months for every year of the unexpired term, whichever is less” under Section 7 of R.A. 10022 because the same phrase was already declared unconstitutional in R.A. 8042 or the Migrant Workers and Overseas Filipinos Act of 1995." — This states the ratio for reinstating the full salary for the unexpired portion of the contract.
• "In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of wages recovered." — This is Article 111(a) of the Labor Code, the basis for awarding 10% attorney's fees.
• "When the monetary obligation does not constitute a loan or forbearance of money, goods, or credits and there is no stipulation as to the payment of interest on the damages, a legal interest of 6% per annum under Article 2209 of the Civil Code shall be imposed." — This defines the legal interest applied to the monetary awards from the filing of the complaint until full payment.

• Sameer Overseas Placement Agency, Inc. vs. Cabiles, 740 Phil. 403 (2014) — Controlling precedent; struck down the phrase “or for three (3) months for every year of the unexpired term, whichever is less” in Section 7 of R.A. 10022, entitling petitioner to salaries for the full unexpired portion of his contract.
• Serrano vs. Gallant Maritime Services, Inc., 601 Phil. 245 (2009) — Cited as the prior declaration of unconstitutionality of the same phrase in R.A. 8042, which Sameer relied upon.
• Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union vs. Manila Water Co., Inc., 676 Phil. 262 (2011) — Differentiated ordinary and extraordinary attorney's fees; held that in actions for recovery of wages, an express finding of facts and law is necessary but no showing of malice or bad faith is required.
• Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc., G.R. No. 225433, August 28, 2019 — Clarified the imposition of legal interest; where the obligation is not a loan or forbearance and no stipulation exists, 6% per annum under Article 2209 applies from demand until full payment.
• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Cited in relation to the Court's clarification of interest; previously stated the imposition of interest.
• Hun Hyung Park vs. Eung Won Choi, G.R. No. 220826, March 27, 2019 — Explained that compensatory interest is not subject to further interest under Article 2212 of the Civil Code.
• Mitsubishi Motors Phils. Corp. vs. Chrysler Phils. Labor Union, 477 Phil. 241 (2004) — Cited by the NLRC for the rule that poor performance, equivalent to inefficiency, must amount to gross and habitual neglect of duties to be a just cause for dismissal.
• Eastern Overseas Employment Center, Inc. vs. Bea, 512 Phil. 749 (2005) — Cited by the NLRC for the clarification that poor performance does not necessarily equate to gross and habitual neglect of duties.

• Section 7, Republic Act No. 10022 — Governs termination of overseas employment without just, valid, or authorized cause; provides for full reimbursement of placement fee with 12% interest and salaries for the unexpired portion or three months for every year, whichever is less. The Court held the “whichever is less” clause unconstitutional per Sameer, leaving the unexpired-portion clause operative.
• Article 282, Labor Code — Defines just causes for termination, including gross and habitual neglect of duties; cited in relation to poor performance as inefficiency. The NLRC and CA found respondents failed to show gross and habitual neglect.
• Article 111(a), Labor Code — In cases of unlawful withholding of wages, the culpable party may be assessed attorney's fees equivalent to 10% of the amount of wages recovered. Applied to award 10% attorney's fees.
• Article 2208, Civil Code — Allows recovery of attorney's fees in actions for recovery of wages under paragraph 7. Cited as basis for extraordinary attorney's fees.
• Article 2209, Civil Code — Provides for 6% legal interest per annum where the obligation is payment of a sum of money and the debtor incurs delay, absent stipulation. Applied to the SR40,250.00 and SR1,100.00 awards from filing of complaint.
• Article 2212, Civil Code — Interest due shall earn legal interest from the time it is judicially demanded. Explained in Hun Hyung Park that compensatory interest is not subject to further interest.
• Republic Act No. 8042 (Migrant Workers and Overseas Filipinos Act of 1995) — The phrase in Section 7 of R.A. 10022 was already declared unconstitutional in R.A. 8042 per Serrano, as cited in Sameer.
• Rule 45, Rules of Court — Petition for Review on Certiorari; the Court is not a trier of facts, so it did not disturb the factual findings on moral and exemplary damages.
• Rule 65, Rules of Court — Respondents elevated the NLRC resolution to the CA via Petition for Certiorari.

Leonen (Chairperson), Lazaro-Javier, and Zalameda, JJ., concur. Gesmundo, J., on official leave.