NEECO I Employees Association vs. NLRC

Substantial compliance with the cash or surety bond requirement may perfect an employer’s appeal in a labor case despite the bond’s late transmittal, where the bond was dated on the last day for appeal, forwarded the following day during the holiday season, and honestly believed sufficient; the Court may relax the reglementary period to serve substantial justice. The ruling further affirms that illegal dismissal tainted with unfair labor practice warrants moral and exemplary damages, though the amounts may be reduced based on the parties’ financial and social positions, and that backwages run until actual reinstatement minus retirement pay received, with any excess treated as refundable advances.

Petitioners were permanent employees of respondent Nueva Ecija I Electric Cooperative, Inc. (NEECO I) and members of the NEECO I Employees Association, a labor organization established for the mutual aid and protection of its members; petitioner Rodolfo Jimenez was its president. NEECO I is an electric cooperative under the general supervision and control of the National Electrification Administration (NEA), with management vested in its Board of Directors; respondent Patricio dela Peña was its general manager on detail from NEA. The legal backdrop includes the Labor Code’s requirement, as amended by Republic Act No. 6715, that an employer’s appeal from a Labor Arbiter’s monetary award be perfected only upon posting a cash or surety bond, and the NLRC rules governing the computation of that bond.

Petitioners Reynaldo Fajardo, Ernesto Marin, Ever Guevarra, Petronilo Baguisa, Victorino Carillo, and Erdie Javate were permanent employees of respondent Nueva Ecija I Electric Cooperative, Inc. (NEECO I). They were members of petitioner NEECO I Employees Association, a labor organization established for the mutual aid and protection of its members, and petitioner Rodolfo Jimenez was its president. NEECO I is an electric cooperative under the general supervision and control of the National Electrification Administration (NEA), with management vested in its Board of Directors; respondent Patricio dela Peña was its general manager on detail from NEA.

On February 7, 1987, the Board of Directors adopted Policy No. 3-33, which set the guidelines for NEECO I’s retirement benefits. On October 28, 1987, all regular employees were ordered by NEECO I to accomplish Form 87, which were applications for either retirement, resignation, or separation from service. On August 21, 1991, Erdie Javate was terminated from employment allegedly due to misappropriation of funds and dishonesty; he was not paid separation or retirement benefits. On October 5, 1991 and February 28, 1992, the applications of Petronilo Baguisa and Ever Guevarra, respectively, were approved, and they were paid the appropriate separation pay.

These successive events, followed by the promotion of certain union officers to supervisory rank, caused apprehension in the labor association. They were considered as harassment threatening the union members and circumventing the employees’ security of tenure. On February 29, 1992, to strengthen and neutralize management’s arbitrary moves, the union held a “snap election” of officers. Reynaldo Fajardo was elected Treasurer, while Evaristo Guevarra, Victorino Carillo, and Ernesto Marin were elected Public Relations Officers for Jaen, Gapan A, and Gapan B, respectively.

On March 3, 1992, the labor association passed a resolution withdrawing the applications for retirement of all its members, except those who were willing to avail themselves of retirement benefits. The resolution claimed the members’ right to be protected under the security of tenure clause of the Labor Code and stated that no employee shall be retired without his or her consent or the approval of the union; copies were furnished to NEECO I PS/AGM Patricio S. dela Peña for information and appropriate action. On March 4, March 17, and April 7, 1992, petitioners Ernesto Marin, Reynaldo Fajardo, and Victorino Carillo were compulsorily retired by management. They received their separation pay under protest on March 16, March 18, and April 15, 1992, respectively.

On March 29, 1992, petitioners and Erdie Javate instituted a complaint for illegal dismissal and damages with the NLRC Regional Arbitration Branch in San Fernando. They alleged that they were purposely singled out for retirement from a listing of employees who were made to submit retirement forms, even if they were not on top of the list, because they were union officers, past officers, or active members of the association. They further claimed that their acceptance of the money offered by NEECO I did not constitute estoppel or waiver, since their acceptances were with vehement objections and without prejudice to all their rights resulting from an illegal dismissal. Javate averred that he was framed up and dismissed without due process.

The Labor Arbiter found that on February 7, 1987, the Board of Directors adopted Policy No. 3-33 under Resolution No. 47, series of 1987, requiring all employees to avail of retirement benefits; all regular employees, including the complainants, were ordered to file their applications for retirement, resignation, and/or separation from service under NEECO I Form 87, and all NEECO I employees had no choice but to manifest their willingness to retire. The complainants pointed out that the approval of the employees’ applications for retirement was not done in succession according to the list, but according to the choice of the respondents, and the complainants were singled out from the list because they were union officers, past officers, and active members of the complainant association. The Labor Arbiter concluded that the complainants had established that they were illegally dismissed and that their dismissal was tainted with unfair labor practice. Petitioners were reinstated by NEECO I on March 16, 1993, pending appeal, and on April 22, 1993, Erdie Javate withdrew his complaint and opted to receive retirement benefits amounting to P42,114.09.

• Perfection of Appeal: Petitioners contended that although NEECO I filed its appeal on December 28, 1992, the appeal was not completed because the necessary supersedeas bond was not filed within the prescribed period, or until January 4, 1993, and the bond filed on January 5, 1993 excluded moral and exemplary damages, attorney’s fees, and costs; hence no appeal was perfected and it should not have been given due course.
• Deletion of Damages and Fees: Petitioners argued that the NLRC acted without or in excess of jurisdiction when it deleted en toto the moral damages, exemplary damages, attorney’s fees, and costs of litigation despite the factual basis ascertained by the Labor Arbiter.
• Application of Retirement Benefits to Backwages: Petitioners maintained that the order to apply and deduct receivable backwages from benefits already received may be reasonable but unrealistic and arbitrary.
• Waiver and Estoppel: Petitioners claimed that their acceptance of the money offered by NEECO I did not constitute estoppel or waiver because their acceptances were with vehement objections and without prejudice to all their rights resulting from an illegal dismissal.

• Substantial Compliance with Bond: Private respondents maintained that they filed a bond they honestly believed sufficient and that the NLRC should have called their attention if the bond was inadequate; an unreasonable and excessive bond would be oppressive and unjust and would deprive them of the right to appeal.
• Payment of Retirement Benefits and Cooperative Assets: Private respondents stressed that petitioners were paid their retirement benefits and that the cooperative has sufficient assets from which the other claims for damages and attorney’s fees may be obtained.

• Perfection of Appeal: Whether the appeal taken by NEECO I from the Labor Arbiter’s decision to the NLRC was not perfected within the ten-calendar-day reglementary period because of the alleged late and insufficient posting of the supersedeas bond, such that the appeal should not have been given due course.
• Deletion of Damages and Fees: Whether the NLRC acted without or in excess of jurisdiction when it resolved to delete en toto moral damages, exemplary damages, attorney’s fees, and costs of litigation despite the factual basis ascertained by the Labor Arbiter.
• Application of Retirement Benefits to Backwages: Whether the order to apply and deduct receivable backwages from benefits already received may be reasonable but unrealistic and arbitrary.

• Perfection of Appeal: No. The appeal was deemed perfected by substantial compliance; the bond was dated January 4, 1993, the last day for appeal, and was forwarded on January 5, 1993, and the Court relaxed the reglementary period in light of the holiday season and the circumstances.
• Deletion of Damages and Fees: Yes, in part. The total deletion was improper because the illegal dismissal was tainted with unfair labor practice, warranting moral and exemplary damages; the Labor Arbiter’s amounts were excessive, however, and were reduced to P10,000 moral and P5,000 exemplary damages per petitioner, with attorney’s fees and costs ordered in the dispositive portion.
• Application of Retirement Benefits to Backwages: No. The deduction of retirement benefits from backwages is proper, but backwages must be computed until actual reinstatement and any excess retirement pay must be treated as refundable advances.

• Perfection of Appeal: Under Article 223 of the Labor Code, as amended by Republic Act No. 6715, decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed within ten calendar days, and an appeal by the employer involving a monetary award may be perfected only upon posting a cash or surety bond equivalent to the monetary award. Perfection of an appeal within the reglementary period and in the manner prescribed by law is jurisdictional, and noncompliance is fatal. However, jurisprudence allows relaxation of the rule in meritorious cases and where there is substantial compliance. Here, the Labor Arbiter’s decision was issued on December 21, 1992; private respondents appealed on December 28, 1992, seven days from receipt. The bonding company issued the bond dated January 4, 1993, the last day for filing an appeal, but it was forwarded to the NLRC only on January 5, 1993. Considering these circumstances and the holiday season, the Court found it equitable to ease the rules and consider substantial compliance. As to the amount, the NLRC rules had changed: the previous computation of the bond was exclusive of moral and exemplary damages and attorney’s fees; the phrase was later deleted sometime in 1991 and 1992, then restored on November 20, 1993. NLRC Resolution No. 11-01-91 dated November 7, 1991 provided that the Commission may, in meritorious cases and upon motion of the appellant, reduce the amount of the bond. In Cosico, Jr. vs. NLRC, a bond posted on the honest belief that it was sufficient was considered substantial compliance, and the NLRC should have called attention if the bond was inadequate. An unreasonable and excessive bond would be oppressive and unjust and would deprive a party of the right to appeal. Private respondents also stressed that petitioners were paid their retirement benefits and that the cooperative has sufficient assets from which the other claims for damages and attorney’s fees may be obtained. Thus, the appeal was properly given due course.
• Deletion of Damages and Fees: To warrant an award of moral damages, it must be shown that the dismissal of the employee was attended by bad faith, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. The Labor Arbiter found illegal dismissal tainted with unfair labor practice: the Board adopted Policy No. 3-33 and required all employees to file Form 87, leaving them no choice but to manifest willingness to retire; approval of applications was not done in succession according to the list but according to the respondents’ choice; and complainants were singled out because they were union officers, past officers, and active members of the association. Unfair labor practices violate the constitutional rights of workers to self-organization, are inimical to labor-management relations, and disrupt industrial peace. The Court thus found it proper to impose moral and exemplary damages. However, the Labor Arbiter’s awards were excessive. In determining the amount of damages, the business, social, and financial position of the offended parties and the business and financial position of the offender are taken into account. Private respondents had not fully acted in good faith, but a cooperative promotes the welfare of its own members, and economic benefits filter to the members. Moral damages were reduced to P10,000 per individual petitioner, and exemplary damages to P5,000 each under Articles 2229 and 2232 of the Civil Code. The dispositive portion also ordered attorney’s fees and costs, thus not fully sustaining the NLRC’s deletion.
• Application of Retirement Benefits to Backwages: Having been illegally dismissed, individual petitioners were entitled to reinstatement from the time they were illegally dismissed until they were reinstated on March 16, 1993. For that period, they were entitled to backwages minus the amount they were forced to receive as “retirement” pay. The backwages computed by the Labor Arbiter covered only until December 22, 1992 and did not include backwages from January 1, 1993 to March 15, 1993, which should be computed and included for payment. If the amount of “retirement” pay received by an individual petitioner exceeds the amount of his backwages, the excess should be deemed as advances of salary refundable until fully repaid. The order to apply and deduct retirement benefits from backwages was therefore proper, subject to recomputation.

• Substantial Compliance with the Labor Appeal Bond — Under Article 223 of the Labor Code, as amended by Republic Act No. 6715, an employer’s appeal from a Labor Arbiter’s monetary award is perfected only upon posting a cash or surety bond equivalent to the award, and perfection within the reglementary period is jurisdictional. The Court may nevertheless relax the rule in meritorious cases and where there is substantial compliance. In this case, the bond was dated January 4, 1993, the last day for appeal, but was forwarded to the NLRC only on January 5, 1993; considering the holiday season and the employer’s honest belief that the bond was sufficient, the Court treated the requirement as substantially complied with.
• Moral Damages for Illegal Dismissal — Moral damages are recoverable only where the dismissal was attended by bad faith, constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. The Labor Arbiter’s finding of unfair labor practice—employees being required to manifest willingness to retire and being singled out because of union affiliation—supported the award, though the amount was reduced to P10,000 per petitioner.
• Exemplary Damages — Under Articles 2229 and 2232 of the Civil Code, exemplary damages are imposed by way of example or correction for the public good and may be awarded in contracts and quasi-contracts where the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The Court awarded P5,000 to each illegally terminated or compulsorily retired petitioner.
• Backwages and Retirement Pay Deduction — An illegally dismissed employee is entitled to reinstatement and backwages from the time of illegal dismissal until actual reinstatement, minus any retirement pay received. Where the retirement pay exceeds the backwages, the excess is treated as an advance of salary refundable from the employee’s salary until fully repaid.
• Unfair Labor Practice and Labor Rights — Unfair labor practices violate the constitutional rights of workers to self-organization, are inimical to labor-management relations, and disrupt industrial peace. The Court relied on this principle to justify moral and exemplary damages.
• Liberal Construction of Labor Procedural Rules — Procedural rules in labor cases are liberally construed to serve substantial justice, especially where strict application would defeat the right to appeal. The Court applied this to excuse the one-day delay in transmitting the bond.

• "In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from." — This states the statutory bond requirement under Article 223 of the Labor Code, as amended, which the Court considered in resolving the perfection of the appeal.
• "Considering these circumstances and the holiday season, we find it equitable to ease the rules and consider that there was substantial compliance with the requirements of the law." — This is the ratio for relaxing the reglementary period and treating the appeal as perfected despite the bond’s one-day late transmittal.
• "To warrant an award of moral damages, it must be shown that the dismissal of the employee was attended to by bad faith, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy." — This defines the standard for moral damages in illegal dismissal cases, which the Court applied to sustain the award but reduce the amount.
• "Having been illegally dismissed, individual petitioners are entitled to reinstatement from the time they were illegally dismissed, until they were reinstated on March 16, 1993. For that period they are likewise entitled to backwages minus the amount petitioners were forced to receive as "retirement" pay." — This states the rule on backwages and the deduction of retirement pay, including the treatment of any excess as refundable advances.

• Cosico, Jr. vs. NLRC, 272 SCRA 583 (1997) — Cited for substantial compliance with the supersedeas bond requirement; where the employer posts a bond it honestly believes sufficient, the NLRC should call attention if inadequate, and an excessive bond would be oppressive and deprive the right to appeal.
• Rosewood Processing, Inc. vs. NLRC, 290 SCRA 408 (1998) — Cited for the rule that an appeal involving a monetary award is perfected only upon posting a cash or surety bond and that perfection within the reglementary period is jurisdictional.
• Quijano vs. Mercury Drug Corporation, 292 SCRA 109 (1998) — Cited for the standard that moral damages require bad faith, oppression to labor, or a manner contrary to morals, good customs, or public policy.
• Lopez vs. Pan American World Airways, 16 SCRA 431 (1966) — Cited for the principle that the amount of damages is determined by the business, social, and financial position of the offended parties and the business and financial position of the offender.
• San Miguel vs. NLRC, 293 SCRA 13 (1998) — Cited in relation to the entitlement to backwages for illegally dismissed employees.
• Philippine Airlines, Inc. vs. NLRC, 263 SCRA 638 (1996) — Cited for relaxing procedural rules in meritorious cases and special circumstances.
• CLLC E.G. Gochongco Workers Union vs. NLRC, 161 SCRA 655 (1998) — Cited for the Court’s duty to ensure that none trifles with labor rights.

• Article 223, Labor Code, as amended by Republic Act No. 6715 — Provides that Labor Arbiter decisions are final unless appealed within ten calendar days and that an employer’s appeal involving a monetary award is perfected only upon posting a cash or surety bond equivalent to the monetary award. Applied: the Court relaxed the bond requirement upon finding substantial compliance.
• Article 247, Labor Code (Book V, Title VI, Chapter I) — States that unfair labor practices violate the constitutional rights of workers to self-organization and are inimical to labor-management relations. Applied: the illegal dismissal was tainted with unfair labor practice, justifying moral and exemplary damages.
• Articles 2229 and 2232, Civil Code — Define exemplary damages as imposed by way of example or correction for the public good, and allow such damages in contracts and quasi-contracts where the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Applied: the Court awarded P5,000 exemplary damages to each petitioner.
• Section 6, Rule VI, NLRC New Rules of Procedure — Requires a cash or surety bond for an employer’s appeal involving a monetary award and allows the Commission to reduce the bond in meritorious cases; the rule previously excluded moral and exemplary damages and attorney’s fees from the bond computation. Applied: the Court considered the changes in the NLRC rules in assessing the sufficiency of the bond.
• Rule 65, Revised Rules of Court — The petitioners invoked this rule in filing a special civil action before the Supreme Court. Applied: the case reached the Court via this procedural vehicle.

Bellosillo, Mendoza, Buena, and De Leon, Jr., JJ., concurred.