LWV Construction Corporation vs. Marcelo B. Dupo

A service award under Article 87 of the Saudi Labor and Workmen Law, computed on the basis of half a month's pay for each of the first five years and one month's pay for each subsequent year, is the same benefit as severance pay where the payroll shows that the amount paid to the employee upon termination of each fixed-term contract corresponds exactly to the Article 87 formula. The Court further held that the prescriptive period for money claims of overseas contract workers is governed by Article 291 of the Labor Code, which provides a three-year period, not by the foreign law's one-year prescriptive period, as foreign procedural laws will not be applied in the forum.

Petitioner LWV Construction Corporation is a domestic corporation that recruits Filipino workers for overseas employment. It hired respondent Marcelo Dupo as Civil Structural Superintendent to work in Saudi Arabia for its principal, Mohammad Al-Mojil Group/Establishment (MMG). The employment relationship was governed by a series of fixed-period overseas employment contracts, each renewable after one year, and the Saudi Labor and Workmen Law governed the terms of employment in Saudi Arabia. The dispute concerned whether Dupo was entitled to a service award or longevity pay under Article 87 of the Saudi Labor Law, and whether his claim was barred by prescription.

Petitioner LWV Construction Corporation, a domestic corporation that recruits Filipino workers, hired respondent Marcelo Dupo as Civil Structural Superintendent to work in Saudi Arabia for its principal, Mohammad Al-Mojil Group/Establishment (MMG). On February 26, 1992, respondent signed his first overseas employment contract, renewable after one year. It was renewed five times on the following dates: May 10, 1993, November 16, 1994, January 22, 1996, April 14, 1997, and March 26, 1998. All were fixed-period contracts for one year. The sixth and last contract stated that respondent's employment starts upon reporting to work and ends when he leaves the work site. Respondent left Saudi Arabia on April 30, 1999 and arrived in the Philippines on May 1, 1999.

On May 28, 1999, respondent informed MMG, through the petitioner, that he needed to extend his vacation because his son was hospitalized, and he also sought a promotion with salary adjustment. In reply, MMG informed respondent that his promotion was subject to management's review; that his services were still needed; that he was issued a plane ticket for his return flight to Saudi Arabia on May 31, 1999; and that his decision regarding his employment must be made within seven days, otherwise MMG "will be compelled to cancel [his] slot." On July 6, 1999, respondent resigned. In his letter to MMG, he stated that he was aware that he still had to do a final settlement with the company and hoped that during his more than seven years of services, as the Saudi Law stated, he was entitled to a long service award.

According to respondent, when he followed up his claim for long service award on December 7, 2000, petitioner informed him that MMG did not respond. On December 11, 2000, respondent filed a complaint for payment of service award against petitioner before the NLRC. In his position paper, respondent averred that under the Law of Saudi Arabia, an employee who rendered at least five years in a company is entitled to a long service award or longevity pay of at least one-half month pay for every year of service, and in excess of five years, one month pay for every year of service, inclusive of all benefits and allowances. He claimed that this benefit was offered to him before he went on vacation, that the offer was "engrained in his mind," and that he reconstructed the computation and arrived at US$12,640.33, exactly the same as the amount previously offered.

For its part, petitioner offered payment and prescription as defenses. Petitioner maintained that MMG pays its workers their service award or severance pay every conclusion of their labor contracts pursuant to Article 87 of the Saudi Labor Law, and that based on the payroll, respondent was already paid his service award or severance pay for his latest (sixth) employment contract. Petitioner added that under Article 13 of the Saudi Labor Law, the action to enforce payment of the service award must be filed within one year from the termination of a labor contract for a specific period, and that the one-year prescriptive period had lapsed because respondent filed his complaint on December 11, 2000, or one year and seven months after his sixth contract ended.

The payroll submitted by petitioner showed that respondent received severance pay of SR2,786 for his sixth employment contract covering the period April 21, 1998 to April 29, 1999. The Supreme Court's computation showed that respondent's severance pay of SR2,786 was his service award under Article 87: Service Award = ½ (SR5,438) + (9 days/365 days) x ½ (SR5,438) = SR2,786.04. The Court noted that respondent's employment contracts expressly stated that his employment ended upon his departure from work, that each year he departed from work and successively new contracts were executed before he reported for work anew, and that his service was not cumulative.

• Nature of the Benefit: Petitioner argued that the benefit granted by Article 87 of the Saudi Labor Law is a service award, which was already paid by MMG each time respondent's contract ended, and that the Labor Arbiter awarded longevity pay although the Saudi Labor Law grants no such benefit.
• Prescription: Petitioner insisted that prescription barred respondent's claim for service award because the complaint was filed one year and seven months after the sixth contract ended, contrary to Article 13 of the Saudi Labor Law, which provides that no case or claim relating to any of the rights provided for under said law shall be heard after the lapse of 12 months from the date of the termination of the contract.
• Error in Applying Article 1155 of the Civil Code: Petitioner alleged that the Court of Appeals erred in ruling that respondent's July 6, 1999 claim interrupted the running of the prescriptive period.
• Error in Applying Article 7 of the Saudi Labor Law: Petitioner argued that the Court of Appeals erred in applying Article 7 of the Saudi Labor and Workmen Law to support its finding that the basis of the service award is longevity pay or length of service rendered by an employee.

• Entitlement to Longevity Pay: Respondent countered that he is entitled to longevity pay under the provisions of the Saudi Labor Law and quoted extensively the decision of the Court of Appeals.
• Existence of the Offer: Respondent pointed out that petitioner has not refuted the Labor Arbiter's finding that MMG offered him longevity pay of US$12,640.33 before his one-month vacation in the Philippines in 1999, and submitted that such offer indeed exists as he sees no reason for MMG to offer the benefit if no law grants it.

• Entitlement to Service Award: Whether the Court of Appeals erred in ruling that respondent is entitled to a service award or longevity pay of US$12,640.33 under the provisions of the Saudi Labor Law.
• Prescription: Whether respondent's claim for service award has prescribed when his complaint was filed on December 11, 2000.
• Applicable Prescriptive Period: Whether the Court of Appeals erred in applying Article 1155 of the Civil Code and Article 7 of the Saudi Labor and Workmen Law.

• Entitlement to Service Award: No. Respondent's service award under Article 87 of the Saudi Labor Law has already been paid, as the severance pay of SR2,786 he received for his sixth employment contract was his service award, computed at half-month's pay plus proportionate pay for the additional nine days of service.
• Prescription: No. Respondent's complaint was filed well within the three-year prescriptive period under Article 291 of the Labor Code, which applies to all money claims of overseas contract workers, not the one-year period under Article 13 of the Saudi Labor Law.
• Applicable Prescriptive Period: The applicable prescriptive period is Article 291 of the Labor Code, not Article 1155 of the Civil Code or Article 7 of the Saudi Labor Law, following the ruling in Cadalin vs. POEA's Administrator that foreign procedural laws will not be applied in the forum.

• Entitlement to Service Award: The Court found that Article 87 of the Saudi Labor Law clearly grants a service award, computed on the basis of half a month's pay for each of the first five years and one month's pay for each of the subsequent years, with the last rate of pay as the basis for computation. The Court noted that respondent called the benefit by different names—long service award and longevity pay—while petitioner claimed that the service award is the same as severance pay. The Court found the answer in the pleadings and evidence: respondent's position paper mentioned how his long service award or longevity pay is computed (half-month's pay per year of service and one-month's pay per year after five years of service), which is the same formula as Article 87. The payroll showed that respondent received severance pay of SR2,786 for his sixth employment contract, and the Court's computation demonstrated that this amount was his service award under Article 87. The Court also noted that respondent's employment contracts expressly stated that his employment ended upon his departure from work, that each year he departed from work and successively new contracts were executed before he reported for work anew, and that his service was not cumulative. Citing Brent School, Inc. vs. Zamora, the Court stated that a fixed term is an essential and natural appurtenance of overseas employment contracts, and that a contract of employment for a definite period terminates by its own terms at the end of such period. The Court also found that respondent was not candid about his claim that he was offered US$12,640.33 as longevity pay, as his categorical assertion about the offer being "engrained in his mind" was a stark departure from his July 6, 1999 letter to MMG where he could only express his hope that he was entitled to a long service award and never mentioned the supposed previous offer. Moreover, respondent's claim that his monthly compensation was SR10,248.92 was belied by the payroll, which showed that he received SR5,438 per month.
• Prescription: The Court held that Article 291 of the Labor Code applies, which provides that all money claims arising from employer-employee relations accruing during the effectivity of the Code shall be filed within three years from the time the cause of action accrued. Citing Cadalin vs. POEA's Administrator, the Court held that Article 291 covers all money claims from employer-employee relationship and is broader in scope than claims arising from a specific law, and is not limited to money claims recoverable under the Labor Code but applies also to claims of overseas contract workers. The Court quoted the ruling in Cadalin that as a general rule, a foreign procedural law will not be applied in the forum, and that procedural matters are governed by the laws of the forum even if the action is based upon a foreign substantive law. The Court also noted that the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has a "borrowing statute," but that Section 48 of the Code of Civil Procedure cannot be enforced ex proprio vigore insofar as it ordains the application of a foreign prescriptive period, as the courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy, and to enforce the one-year prescriptive period of the Amiri Decree would contravene the public policy on the protection to labor. The Court concluded that respondent's complaint was filed well within the three-year prescriptive period under Article 291 of the Labor Code, but that this point had already been mooted by the finding that respondent's service award had been paid, albeit the payroll termed such payment as severance pay.

• Fixed-Term Overseas Employment Contracts — A fixed term is an essential and natural appurtenance of overseas employment contracts, and a contract of employment for a definite period terminates by its own terms at the end of such period. The Court applied this doctrine to hold that respondent's successive one-year contracts were separate and distinct, and his service was not cumulative, so the service award for each contract was computed separately.
• Application of Foreign Procedural Law — As a general rule, a foreign procedural law will not be applied in the forum; procedural matters, such as service of process, joinder of actions, period and requisites for appeal, are governed by the laws of the forum even if the action is based upon a foreign substantive law. The Court applied this doctrine to hold that the three-year prescriptive period under Article 291 of the Labor Code, not the one-year period under Article 13 of the Saudi Labor Law, governed respondent's claim.
• Public Policy on Protection to Labor — The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy; to enforce a one-year prescriptive period of a foreign law would contravene the public policy on the protection to labor. The Court applied this doctrine in declining to apply the Saudi one-year prescriptive period.

• "Article 87 clearly grants a service award." — This statement identifies the controlling provision of the Saudi Labor Law and frames the Court's analysis of whether the benefit had been paid.
• "The payroll submitted by petitioner showed that respondent received severance pay of SR2,786 for his sixth employment contract covering the period April 21, 1998 to April 29, 1999. The computation below shows that respondent's severance pay of SR2,786 was his service award under Article 87." — This passage demonstrates the Court's method of verifying that the amount paid as severance pay exactly matched the Article 87 formula, establishing that the service award had already been paid.
• "As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law." — This quotation from Cadalin vs. POEA's Administrator states the controlling doctrine on the non-application of foreign procedural laws, which the Court applied to determine the applicable prescriptive period.
• "To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor." — This passage articulates the public policy basis for refusing to apply the foreign one-year prescriptive period, reinforcing the application of the three-year period under Article 291 of the Labor Code.

• Brent School, Inc. vs. Zamora, G.R. No. 48494, February 5, 1990, 181 SCRA 702 — Cited as controlling precedent for the doctrine that a fixed term is an essential and natural appurtenance of overseas employment contracts, and that a contract of employment for a definite period terminates by its own terms at the end of such period.
• Cadalin vs. POEA's Administrator, G.R. Nos. 104776 and 104911-14, December 5, 1994, 238 SCRA 721 — Cited as controlling precedent for the ruling that Article 291 of the Labor Code covers all money claims from employer-employee relationship, is broader in scope than claims arising from a specific law, and applies also to claims of overseas contract workers, and for the doctrine that foreign procedural laws will not be applied in the forum.
• Degamo vs. Avantgarde Shipping Corp., G.R. No. 154460, November 22, 2005, 475 SCRA 671 — Cited as reiterating the ruling in Cadalin vs. POEA's Administrator that Article 291 of the Labor Code applies to claims of overseas contract workers.

• Article 87, Saudi Labor and Workmen Law — Grants a service award to a workman where the term of a labor contract concluded for a specified period comes to an end, computed on the basis of half a month's pay for each of the first five years and one month's pay for each of the subsequent years, with the last rate of pay as the basis for computation. The Court applied this provision to determine that the severance pay respondent received was his service award.
• Article 13, Saudi Labor and Workmen Law — Provides that no complaint shall be heard after the lapse of twelve months from the date of termination of the contract. The Court declined to apply this provision, holding that the applicable prescriptive period was Article 291 of the Labor Code.
• Article 72, Saudi Labor and Workmen Law — Provides that a labor contract concluded for a specified period shall terminate upon the expiry of its term, and if both parties continue to enforce the contract thereafter, it shall be considered renewed for an unspecified period. The Court cited this provision to support its finding that respondent's successive fixed-term contracts terminated upon their expiry.
• Article 291, Labor Code — Provides that all money claims arising from employer-employee relations accruing during the effectivity of the Code shall be filed within three years from the time the cause of action accrued. The Court applied this provision to hold that respondent's complaint was filed well within the prescriptive period.
• Section 48, Code of Civil Procedure — Provides that if by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippine Islands. The Court noted that this "borrowing statute" cannot be enforced ex proprio vigore insofar as it ordains the application of a foreign prescriptive period that would contravene the public policy on the protection to labor.

• Justice Conchita Carpio Morales
• Justice Minita V. Chico-Nazario
• Justice Teresita J. Leonardo-De Castro
• Justice Arturo D. Brion