Milan vs. NLRC

An employer may withhold a separated employee's terminal pay and benefits pending the employee's return of company property, where the property was granted by virtue of the employment relationship and the parties' agreement expressly provides for release of benefits "less accountabilities," the obligation to return such property being a debt or liability cognizable under Article 1706 of the Civil Code and Article 113 of the Labor Code.

Petitioners were employees of respondent Solid Mills, Inc., represented by the National Federation of Labor Unions (NAFLU) as their collective bargaining agent. As employees, petitioners and their families were allowed to occupy SMI Village, a property owned by Solid Mills, described as an act of liberality conditioned on their vacating the premises whenever the company deemed fit. In September 2003, Solid Mills informed its employees that it would cease operations effective October 10, 2003 due to serious business losses. NAFLU acknowledged the closure and entered into a memorandum of agreement dated September 1, 2003 providing for separation pay, accrued sick and vacation leave benefits, and 13th month pay, all expressly "less accountabilities." The agreement also bound the union not to conduct any concerted action, under pain of withholding the financial assistance.

Petitioners were employees of Solid Mills, Inc., represented by the National Federation of Labor Unions (NAFLU) as their collective bargaining agent. As part of their employment, petitioners and their families were allowed to occupy SMI Village, a property owned by Solid Mills. According to the company, this arrangement was made out of liberality and for the convenience of employees, on the condition that they would vacate the premises whenever the company deemed fit.

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease operations due to serious business losses. On September 1, 2003, NAFLU and Solid Mills executed a memorandum of agreement acknowledging the severe financial losses and the consequent closure. The agreement provided that Solid Mills would grant financial assistance computed at 12.625 days' pay per year of service, payable in equal monthly installments from January 5, 2004 to December 5, 2004, together with accrued sick and vacation leave benefits and 13th month pay — all expressly "less accountabilities." The agreement also stipulated that the union would not conduct any concerted action, otherwise the financial assistance would be withheld. Solid Mills filed its DOLE termination report on September 2, 2003.

Thereafter, Solid Mills, through Alfredo Jingco, sent individual notices to vacate SMI Village to petitioners. By October 10, 2003, petitioners were no longer allowed to report for work. They were required to sign a memorandum of agreement with release and quitclaim before their vacation and sick leave benefits, 13th month pay, and separation pay would be released. Employees who signed were considered to have agreed to vacate SMI Village and to the demolition of houses constructed thereon, as conditions for the release of their benefits. Petitioners refused to sign the documents and demanded payment of their benefits and separation pay, contending that they had already turned over their uniforms and equipment to Solid Mills when operations ceased.

Petitioners filed complaints before the Labor Arbiter for non-payment of separation pay, accrued sick and vacation leaves, and 13th month pay. The Labor Arbiter ruled in their favor, finding that the MOA contained no condition requiring vacation of property before release of benefits and that petitioners' possession of SMI Village was not an "accountability" subject to clearance, characterizing it instead as a civil issue outside the Labor Arbiter's jurisdiction. The NLRC reversed the Labor Arbiter on the monetary awards, holding them in abeyance pending petitioners' turnover of the lots they occupied, finding that Solid Mills was justified in withholding benefits because petitioners' possession of the property arose from their employment and the termination of that relationship made it incumbent upon them to return the property. The Court of Appeals affirmed the NLRC, holding that the grant of property use was a liberality revocable at will, that the employer-employee relationship had ceased, and that the MOA expressly provided for payment "less accountabilities."

• Scope of "Accountabilities": Petitioners argued that the MOA between Solid Mills and NAFLU contains no provision stating that benefits shall be paid only upon return of possession of Solid Mills' property. The phrase "less accountabilities" should not be interpreted to include possession of the property, and the fact that the majority of NAFLU's members were not occupants of the property is evidence that possession was not contemplated in the agreement.
• Limitation to Worksite Accountabilities: Petitioners maintained that "accountabilities" should refer only to obligations incurred by employees while performing their duties at the worksite, such as uniforms and equipment, which they had already returned.
• No Legal Basis for Withholding: Petitioners argued that applicable laws, company practice, or policies do not provide that 13th month pay, sick leave, and vacation leave benefits may be withheld pending satisfaction of liabilities by the employee. The 13th month pay is based on law, specifically Presidential Decree No. 851.
• Jurisdiction: Petitioners contended that the NLRC and the Court of Appeals have no jurisdiction to declare that petitioners' withholding of possession of Solid Mills' property is illegal, as regular courts have jurisdiction over that issue, which is independent from the issue of payment of monetary benefits.
• Entitlement to Interest: Petitioners asserted that because the amount of monetary award was no longer in question, they were entitled to 12% interest per annum.
• Individual Claims of Mahilom and Damian: Petitioners insisted that Teodora Mahilom did not receive her retirement benefits and that Carlito Damian did not receive his separation benefits.

• Unsatisfied Accountability: Respondents countered that petitioners' failure to turn over Solid Mills' property constituted an unsatisfied accountability for which petitioners' benefits could rightfully be withheld.
• Ordinary Meaning of "Accountability": Respondents argued that "accountability" should be given its natural and ordinary meaning — "a state of being liable or responsible" or "obligation" — and that the agreement with NAFLU merely stated "accountabilities" without qualification, making petitioners' distinction between worksite and non-worksite accountabilities baseless.
• Removal of Interest: Respondents maintained that removal of the 12% interest per annum award was proper because Solid Mills was justified in withholding the monetary claims.
• Teodora Mahilom's Claim: Respondents argued that Teodora Mahilom had no cause of action for retirement benefits, having retired more than a decade before Solid Mills' closure and already received her retirement benefits in 1991. Her claim was not included in the complaint before the Labor Arbiter and was improperly raised for the first time on appeal. In any case, the claim was asserted long after the three-year prescriptive period under Article 291 of the Labor Code.
• Carlito Damian's Claim: Respondents argued that it would be unjust to allow Carlito Damian to receive monetary benefits again, as he admittedly already received them from Solid Mills.

• Jurisdiction: Whether the NLRC and the Court of Appeals have jurisdiction to determine the issue of petitioners' possession of Solid Mills' property in relation to the release of their monetary claims.
• Withholding of Benefits: Whether payment of petitioners' monetary claims was properly held in abeyance pending their compliance with accountabilities — specifically, the turnover of the lots they occupied at SMI Village.
• Interest: Whether the deletion of the 12% per annum interest imposed by the Labor Arbiter was proper.
• Teodora Mahilom's Claim: Whether Teodora Mahilom is entitled to retirement benefits despite the findings that she had already retired and received her benefits.
• Carlito Damian's Claim: Whether Carlito Damian is entitled to his monetary benefits from Solid Mills.

• Jurisdiction: Yes. Labor tribunals have jurisdiction to preliminarily determine the parties' rights over property when necessary to resolve claims arising from the employer-employee relationship, pursuant to Article 217 of the Labor Code.
• Withholding of Benefits: No. Petitioners' benefits were properly withheld. The obligation to return employer property granted by virtue of employment constitutes an "accountability" under the MOA and a "debt due" under Article 1706 of the Civil Code, authorizing withholding under Article 113 of the Labor Code.
• Interest: No. Petitioners are not entitled to 12% interest because their benefits were properly withheld due to their refusal to return Solid Mills' property.
• Teodora Mahilom's Claim: No. Teodora Mahilom already retired and received her retirement benefits before Solid Mills' closure, and her claim was not included in the complaint before the Labor Arbiter.
• Carlito Damian's Claim: No. Carlito Damian already received his terminal benefits, as found by both the NLRC and the Court of Appeals, and may no longer claim them again.

• Jurisdiction: Article 217 of the Labor Code grants Labor Arbiters original and exclusive jurisdiction over claims arising from employer-employee relations, and the NLRC exclusive appellate jurisdiction over cases decided by Labor Arbiters. Claims arising from the employer-employee relationship are not limited to claims by employees; employers may also have claims against employees arising from the same relationship. In Bañez vs. Valdevilla, the Court held that Article 217 applies with equal force to an employer's claim for damages against a dismissed employee where the basis arises from or is necessarily connected with the fact of termination. This was cited in Domondon vs. NLRC, where the Court ruled that the transfer of ownership of a vehicle assigned to an employee was connected to his separation and arose from the employer-employee relationship, thus falling within the Labor Arbiter's jurisdiction. In this case, Solid Mills' claim for the return of its property is sufficiently connected to petitioners' claim for benefits and is intertwined with the employer-employee relationship, because petitioners occupied the property by virtue of their status as employees. The issue is therefore properly within labor tribunals' jurisdiction.

• Withholding of Benefits: As a general rule, employers are prohibited from withholding wages under Article 116 of the Labor Code, and from eliminating or diminishing benefits under Article 100. However, Article 113 of the Labor Code provides exceptions permitting wage deductions, and Article 1706 of the Civil Code authorizes the withholding of wages for debts due. "Debt" refers to any obligation due from the employee to the employer, including any accountability, and is not limited to uniforms and equipment. The MOA between Solid Mills and NAFLU expressly provided that the release of benefits shall be "less accountabilities." The ordinary meaning of "accountability" — obligation or debt — does not limit its scope to obligations incurred at the worksite. As long as the debt or obligation was incurred by virtue of the employer-employee relationship, it is included in the employee's accountabilities subject to clearance procedures. Petitioners' possession of SMI Village arose from their employment; Solid Mills allowed the use of its property out of liberality, and under Article 1947 of the Civil Code, the bailor may demand the thing at will when the use is merely tolerated by the owner. When the employer-employee relationship ceased, the return of the property became an obligation or liability on the part of the employees. In Solas vs. Power and Telephone Supply Phils., Inc., the Court recognized the employer's right to withhold salary where the employee was indebted to the employer. The withholding does not renounce the obligation to pay but merely subjects it to the condition that the employees return properties belonging to the employer, consistent with the equitable principle against unjust enrichment under Article 2142 of the Civil Code. Accountabilities of employees are personal and need not be uniform among all employees.

• Interest: Because petitioners' benefits were properly withheld due to their refusal to return Solid Mills' property, there was no unlawful withholding that would justify an award of interest. The NLRC and the Court of Appeals correctly deleted the 12% interest per annum imposed by the Labor Arbiter.

• Teodora Mahilom's Claim: Both the NLRC and the Court of Appeals found that Teodora Mahilom already retired long before Solid Mills' closure and had already received her retirement benefits. These findings, especially when affirmed by the Court of Appeals, are binding on the Supreme Court, which is not a trier of facts. Moreover, her claim for retirement benefits was not included in her complaint before the Labor Arbiter and therefore may not be raised for the first time on appeal.

• Carlito Damian's Claim: Both the NLRC and the Court of Appeals found that Carlito Damian already received his terminal benefits, having executed an affidavit to that effect. The fact that Solid Mills had not yet demolished his house in SMI Village is not evidence that he did not receive his benefits. Absent any showing that the NLRC and the Court of Appeals misconstrued these facts, the findings stand.

• Jurisdiction of Labor Tribunals Over Employer's Claims — Article 217 of the Labor Code applies not only to claims by employees but also to claims by employers arising from or necessarily connected with the employer-employee relationship. A claim need only be sufficiently connected to the labor issue and arise from the employer-employee relationship for labor tribunals to have jurisdiction. Applied in this case: Solid Mills' claim for return of its property was connected to petitioners' claim for benefits and arose from the employer-employee relationship, because petitioners occupied the property by virtue of their employment.

• Clearance Procedures — Requiring clearance before the release of last payments to separated employees is a standard procedure sanctioned by law. As an exception to the general prohibition against withholding wages (Article 116, Labor Code) and diminishing benefits (Article 100, Labor Code), the employer may withhold wages for debts due under Article 1706 of the Civil Code and make authorized deductions under Article 113 of the Labor Code. "Debt" includes any obligation due from the employee to the employer, not limited to uniforms and equipment. Applied in this case: The obligation to return employer property granted by virtue of employment is a debt or accountability that may be subject to clearance procedures.

• Scope of "Accountabilities" — "Accountability," in its ordinary sense, means obligation or debt. It is not limited to obligations incurred at the worksite. As long as the debt or obligation was incurred by virtue of the employer-employee relationship, it is included in the employee's accountabilities subject to clearance. Accountabilities are personal and need not be uniform among all employees. Applied in this case: Petitioners' possession of SMI Village, granted by virtue of employment, constituted an accountability under the MOA's "less accountabilities" clause.

• Precarium / Tolerated Use — Under Article 1947 of the Civil Code, the bailor may demand the thing at will when the use of the thing is merely tolerated by the owner, constituting a precarium. Applied in this case: Petitioners' possession of SMI Village was merely tolerated by Solid Mills out of liberality, making the arrangement a precarium that the employer could terminate at will. Upon cessation of the employer-employee relationship, the return of the property became an obligation on the part of the employees.

• Unjust Enrichment as Basis for Withholding — Under Article 2142 of the Civil Code, certain lawful, voluntary, and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. Applied in this case: Employees who do not assert any claim over the employer's property may not simultaneously take all benefits of employment while withholding possession of the employer's property for no rightful reason.

• Binding Nature of Factual Findings — Findings of the NLRC, especially when affirmed by the Court of Appeals, are binding upon the Supreme Court, which is not a trier of facts. Applied in this case: The findings that Teodora Mahilom already received her retirement benefits and that Carlito Damian already received his terminal benefits were binding.

• "An employer is allowed to withhold terminal pay and benefits pending the employee's return of its properties." — This is the opening sentence of the decision, stating the core ruling in concise form and establishing the central legal proposition that governs the entire case.

• "As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raised and must arise from an employer-employee relationship for the labor tribunals to have jurisdiction." — This passage articulates the jurisdictional test for labor tribunals over employer's claims, extending Article 217 of the Labor Code beyond employee-initiated claims and establishing that the nexus to the employer-employee relationship is the controlling criterion.

• "The law does not sanction a situation where employees who do not even assert any claim over the employer's property are allowed to take all the benefits out of their employment while they simultaneously withhold possession of their employer's property for no rightful reason." — This passage frames the equitable rationale for permitting withholding of benefits, grounding the ruling in the principle against unjust enrichment and the reciprocal obligations of labor and capital.

• "The preferential treatment given by our law to labor, however, is not a license for abuse. It is not a signal to commit acts of unfairness that will unreasonably infringe on the property rights of the company. Both labor and employer have social utility, and the law is not so biased that it does not find a middle ground to give each their due." — This passage articulates the Court's balancing of labor protection with property rights, clarifying that the constitutional preference for labor does not authorize employees to act unfairly toward employers.

• Bañez vs. Valdevilla, 387 Phil. 601 (2000) — Controlling precedent on the jurisdictional point. The Court held that Article 217 of the Labor Code applies with equal force to an employer's claim for damages against a dismissed employee where the basis arises from or is necessarily connected with the fact of termination. Followed in this case to establish that Solid Mills' claim for return of property falls within labor tribunals' jurisdiction.

• Domondon vs. National Labor Relations Commission, 508 Phil. 541 (2005) — Followed. The Court there ruled that the transfer of ownership of a vehicle assigned to an employee was connected to his separation and arose from the employer-employee relationship, thus falling within the Labor Arbiter's jurisdiction. Applied to support the conclusion that the return of employer property is a claim arising from the employer-employee relationship.

• Solas vs. Power and Telephone Supply Phils., Inc., et al., 585 Phil. 513 (2008) — Followed. The Court recognized the employer's right to withhold an employee's salary where the employee was indebted to the employer, supporting the proposition that an employer may withhold wages for debts due.

• Andaya vs. National Labor Relations Commission and International Ham & Sausage Manufacturing Co., Inc., 502 Phil. 151 (2005) — Cited for the doctrine that findings of the NLRC, especially when affirmed by the Court of Appeals, are binding upon the Supreme Court, which is not a trier of facts.

• Article 217, Labor Code — Defines the jurisdiction of Labor Arbiters (original and exclusive) and the NLRC (appellate) over claims arising from employer-employee relations. Applied to establish that both employee and employer claims connected to the employment relationship fall within labor tribunals' jurisdiction.

• Article 116, Labor Code — Prohibits the withholding of wages and kickbacks. Cited as the general rule against which the employer's withholding of benefits must be evaluated.

• Article 100, Labor Code — Prohibits the elimination or diminution of benefits. Cited as a complementary general rule protecting employee benefits.

• Article 113, Labor Code — Enumerates the exceptions under which an employer may make deductions from wages. Applied as a statutory basis for clearance procedures permitting withholding of wages under authorized circumstances.

• Article 1706, Civil Code — Provides that withholding of wages, except for a debt due, shall not be made by the employer. Applied to authorize the withholding of terminal benefits where the employee owes a debt or obligation to the employer, including the duty to return employer property.

• Article 1947, Civil Code — Provides that the bailor may demand the thing at will when the use is merely tolerated by the owner, constituting a precarium. Applied to characterize petitioners' possession of SMI Village as a precarium that Solid Mills could terminate at will.

• Article 2142, Civil Code — Establishishes the juridical relation of quasi-contract to prevent unjust enrichment. Applied as the equitable basis for requiring employees to return employer property as a condition for release of benefits.

• Article 1701, Labor Code — Provides that neither capital nor labor shall act oppressively against the other. Cited in the closing passage to underscore the balance between labor protection and property rights.

• Article 291, Labor Code — Provides a three-year prescriptive period for money claims arising from employer-employee relations. Cited by respondents regarding Teodora Mahilom's claim, which was asserted long after the prescriptive period.

• Presidential Decree No. 851 — The law mandating 13th month pay. Cited by petitioners as the legal basis for their 13th month pay claim, which they argued could not be withheld.

Carpio (Chairperson), Velasco, Jr., Del Castillo, and Mendoza, JJ., concurred. No separate concurring opinions were written.