Pablico vs. Cerro

A service establishment employing not more than ten workers is not automatically exempt from the minimum wage law; exemption requires both that the establishment regularly employs not more than ten workers and that it has applied for and been granted exemption by the appropriate Regional Board pursuant to R.A. No. 6727. Failure to apply for exemption bars the employer from claiming the benefit, and ignorance of the requirement is no excuse.

Petitioner Manuel B. Pablico purchased and took over the management of Master's Pab Resto Bar (MPRB), a service establishment, from its original owner, the Feliciano family, on November 18, 2008. On the same day, he promoted respondent Numeriano Cerro, Jr., a bartender, to Officer-in-Charge with authority to hire additional employees. Pursuant to that authority, the other respondents were employed in various positions at MPRB, all at daily wages below the prescribed minimum. The dispute centers on whether these employees were illegally dismissed, whether they are entitled to wage differentials and other monetary benefits, and whether separation pay in lieu of reinstatement was properly awarded and subsequently deleted.

On November 18, 2008, Manuel B. Pablico purchased and took over the management of Master's Pab Resto Bar (MPRB) from its original owner, the Feliciano family. On the same day, he promoted Numeriano Cerro, Jr., a bartender, to Officer-in-Charge at a daily wage of ₱200.00 and gave him authority to hire additional employees. Pursuant to that authority, the other respondents were employed at MPRB: Michael Caliguiran as disk jockey, Efren Panganiban as cook, Genius Pauig as waiter, Gloria Napitan as accountant, Reynalie Lim as barmaid, Manny Baguno as utility worker, and Richard Caronan as assistant cook, all at daily wages ranging from ₱133.33 to ₱200.00.

Sometime in September 2011, due to several infractions that caused MPRB losses, Pablico transferred Cerro to another establishment. Cerro admitted having appropriated MPRB's funds without the knowledge or consent of its owner. On October 18, 2011, the other respondents received text messages, which they interpreted to mean that they had been terminated on account of their close association with Cerro. However, as the labor tribunals found, the language of the text messages did not remotely suggest termination, and it was not shown that the respondents tried reporting for work but were prevented from doing so.

On October 24, 2011, the respondents filed a complaint for illegal dismissal, underpayment of salaries and benefits, damages, and attorney's fees before the NLRC. The Labor Arbiter dismissed the complaint on March 30, 2012, upholding the legality of Cerro's suspension, finding that the other respondents had failed to prove termination, and accepting the payrolls presented by Pablico as sufficient proof of payment. On appeal, the NLRC partially granted the appeal on November 21, 2012, affirming the dismissal of the illegal dismissal claim but awarding wage differentials and 13th month pay for three years counted backwards from October 2011, ordering reinstatement without backwages, and granting separation pay in lieu of reinstatement on account of apparent strained relations. The NLRC denied the respondents' partial motion for reconsideration on May 20, 2013.

Pablico elevated the case to the Court of Appeals via a petition for certiorari under Rule 65. The CA dismissed the petition on October 27, 2015, finding no grave abuse of discretion. On motion for reconsideration, the CA issued an Amended Decision on September 19, 2016, deleting the award of separation pay as inconsistent with the finding that there was no illegal dismissal. The factual findings of the labor tribunals, affirmed by the CA, established that MPRB employed more than ten employees, that the respondents were paid less than the prescribed minimum wage, and that the payrolls presented by Pablico were mere photocopies whose originals were never produced.

• Minimum Wage Exemption: Petitioner argued that he is exempt from the Minimum Wage Law because MPRB is a service establishment employing less than ten employees, and that the mere fact that he had not been granted exemption by DOLE should not disqualify him, as a layman cannot be expected to know of this requirement.
• Proof of Payment: Petitioner maintained that the NLRC and CA erred in not relying on his documentary evidence, specifically the payrolls, which if considered would prove that respondents had been paid the benefits claimed. He contended that although the documents were mere photocopies, the dismissal of the allegation of forgery by the Quezon City City Prosecutor should render them sufficient.
• Employment Status of Guest Relations Officers: Petitioner faulted the NLRC for not considering the "Pinagsamang Sinumpaang Salaysay" issued by the Guest Relations Officers/Waitresses working at MPRB as proof that those individuals were not its employees, thereby supporting his claim of exemption.
• Arbitrary Computation: Petitioner argued that the NLRC committed grave abuse of discretion in arbitrarily computing his alleged liability.

• Minimum Wage Exemption: Whether petitioner is exempt from the application of R.A. No. 6727 on the ground that MPRB is a service establishment employing less than ten employees.
• Wage Differentials — Proof of Payment: Whether the photocopied payrolls presented by petitioner constitute sufficient proof of payment of wages and benefits to respondents.
• Arbitrary Computation: Whether the NLRC arbitrarily computed the petitioner's liability for monetary awards.
• Separation Pay: Whether the deletion of the separation pay award was proper given the finding that respondents were not illegally dismissed.

• Minimum Wage Exemption: No. Petitioner is not exempt because he failed to apply for and be granted exemption by the appropriate Regional Board, which is a mandatory requirement under Section 4(c) of R.A. No. 6727; ignorance of the law excuses no one from compliance.
• Wage Differentials — Proof of Payment: No. The photocopied payrolls are insufficient to prove payment, as petitioner failed to present the originals or explain their non-presentation, and the allegation of forgery by respondents raised legitimate doubts on their authenticity.
• Arbitrary Computation: No. The NLRC's computation was not arbitrary; the factual findings of the labor tribunals, supported by substantial evidence, are accorded respect and finality.
• Separation Pay: Yes. The deletion was proper; separation pay in lieu of reinstatement cannot generally be awarded to an employee whose employment was not terminated, and none of the recognized exceptions — including strained relations — were proven by allegation or evidence.

• Minimum Wage Exemption: Under R.A. No. 6727, two elements must concur for exemption: first, the establishment must regularly employ not more than ten workers, and second, the establishment must have applied for and been granted exemption by the appropriate Regional Board. Petitioner admitted he did not apply for exemption, which alone bars his claim. Ignorance of the law's requirements does not excuse non-compliance, pursuant to Article 3 of the Civil Code. Moreover, the policy of the Labor Code is to include all establishments under the coverage of the law except a few specific classes. Although inconsequential given the failure to apply, the first element was also wanting: the LA, NLRC, and CA all found that petitioner employed more than ten employees. Petitioner's counter, based on affidavits from guest relations officers/waitresses disclaiming employment status, was rejected because employment status is determined by the four-fold test and attendant circumstances, not by contract stipulation or an employee's own avowal. The factual findings of the labor tribunals on this point, supported by substantial evidence, are accorded finality.

• Wage Differentials — Proof of Payment: The dismissal of the forgery allegation by the City Prosecutor meant only that the signatures could not be definitively declared forged, as the respondents had failed to adduce evidence of the manner of forgery — not that the signatures were established as genuine. The documents remained mere photocopies. While photocopied documents are generally admitted in administrative proceedings, allegations of forgery and fabrication prompt the presentation of originals for inspection, to give the opposing party the opportunity to examine and controvert them. Petitioner neither presented the originals nor explained their absence, despite their being in his possession. The non-presentation of originals, the incomplete nature of the photocopied documents, the absence of certification as to their authenticity, and the allegation of forgery collectively rendered the payrolls devoid of probative value.

• Arbitrary Computation: The factual findings of labor officials, deemed to have acquired expertise in matters within their jurisdiction, are generally accorded not only respect but finality and bind the Court when supported by substantial evidence. The Court found no unfairness or arbitrariness in the labor tribunals' decision-making process. The mere existence of guest relations officers/waitresses employed under the same terms and conditions as the respondents was sufficient to disqualify petitioner from the exemption. Having ruled out illegal dismissal, no wages were due for the period the respondents did not report to work, and the dates of last reporting served as the basis for both the amount of wage differential and the proper interest due.

• Separation Pay: As a general rule, where an employee was neither found to have been dismissed nor to have abandoned work, the proper course is to dismiss the complaint, direct the employee to return to work, and order the employer to accept the employee. Separation pay in lieu of reinstatement presupposes that the employee was dismissed, whether legally or illegally. While the Court has awarded separation pay in lieu of reinstatement even without a finding of dismissal in certain exceptional circumstances — such as in Nightowl Watchman & Security Agency, Inc. vs. Lumahan, where the employee stopped reporting for work for more than ten years — none of those circumstances obtained here. The doctrine of strained relations, recognized as an exception to the general rule of reinstatement, does not automatically apply whenever an illegal dismissal case is filed; it must be proven as a fact and supported by substantial evidence. No allegation or evidence was presented to prove that reinstatement was impossible due to strained relations, so the NLRC's order for reinstatement was proper and the CA's deletion of separation pay was sustained.

• Two-Requisite Test for Minimum Wage Exemption — Under R.A. No. 6727, a retail/service establishment is exempt from the minimum wage law only if two elements concur: (1) the establishment regularly employs not more than ten workers, and (2) the establishment has applied for and been granted exemption by the appropriate Regional Board in accordance with applicable rules and regulations. Failure to apply for exemption alone bars the claim; ignorance of the requirement is no excuse under Article 3 of the Civil Code.

• Burden of Proof in Illegal Dismissal — In illegal dismissal cases, the employee must first establish by competent evidence the fact of termination. Mere allegation does not suffice; evidence must be substantial and the fact of dismissal must be clear, positive, and convincing. The rule that the employer bears the burden of proof applies only when the employer admits dismissal but claims lawful cause; where the employer denies having dismissed the employees and the latter fail to prove the fact of termination, the claim of illegal dismissal cannot be sustained.

• Four-Fold Test for Employment Status — Employment status is not determined by contract or document, nor is an employee's avowal of his or her status conclusive. Status is determined by the four-fold test (selection, payment of wages, power of dismissal, and power of control) and the attendant circumstances of each case, as supported by competent and relevant evidence. Parties cannot insulate their relationship from labor laws by means of contract or waiver, as this is contrary to public policy.

• Strained Relations Doctrine — Separation pay may be awarded in lieu of reinstatement when continued employment is no longer viable due to strained relations. However, the doctrine does not automatically apply nor can it be inferred whenever an illegal dismissal case is filed. Strained relations cannot be based on impression alone; they must be proven as a fact and supported by substantial evidence.

• Interest on Wage Differentials and Monetary Awards — Where there is a violation of R.A. No. 6727, the employer is liable for interest on unpaid wage differentials at 12% per annum from the time payment accrued or the employees' respective dates of employment until the date they last reported for work or July 1, 2013, whichever is earlier, in light of Nacar vs. Gallery Frames and BSP Monetary Board Resolution No. 796. Thereafter, all monetary awards earn interest at 6% per annum from the date of finality of the decision until fully paid.

• Finality of Labor Tribunals' Factual Findings — Factual findings of labor officials, who are deemed to have acquired expertise in matters within their jurisdiction, are generally accorded not only respect but finality and bind the Supreme Court when supported by substantial evidence.

• "Employment status is not determined by contract or document. Neither is an employee's avowal of his or her employment status — as regular, casual, contractual, seasonal — conclusive upon the Court." — This passage articulates the principle that employment status is a matter of law and fact, not of stipulation, and that parties cannot contract out of labor law protections.

• "The policy of the Labor Code, under which R.A. No. 6727 is premised, is to include all establishments, except a few specific classes, under the coverage of the law." — This statement defines the inclusive policy rationale behind wage rationalization legislation, reinforcing that exemptions are the exception, not the rule, and must be affirmatively sought.

• "Strained relations between the parties cannot be based on impression alone. It must be proven as a fact and supported by substantial evidence." — This formulation sets the evidentiary threshold for invoking the strained relations doctrine as a substitute for reinstatement, preventing its automatic application whenever an illegal dismissal complaint is filed.

• "as a general rule, separation pay in lieu of reinstatement could not be awarded to an employee whose employment was not terminated by his employer." — This passage states the controlling rule on separation pay: it presupposes an actual dismissal, whether lawful or unlawful, and cannot be granted where no termination occurred.

• C. Planas Commercial vs. NLRC (Second Division), 511 Phil. 232 (2005) — Controlling precedent on the two-requisite test for minimum wage exemption under R.A. No. 6727; followed and applied to hold that both employment of not more than ten workers and application for and grant of exemption must concur.

• Nacar vs. Gallery Frames, et al., 716 Phil. 267 (2013) — Controlling precedent on the rate of interest, reconciled with BSP Monetary Board Resolution No. 796 to impose 12% per annum until July 1, 2013 and 6% per annum thereafter on monetary awards.

• Tri-C General Services vs. Matuto, et al., 770 Phil. 251 (2015) — Cited for the rule that in illegal dismissal cases, the employee bears the initial burden of proving the fact of termination by substantial, clear, positive, and convincing evidence.

• Fuji Television Network, Inc. vs. Espiritu, 749 Phil. 388 (2014) — Cited for the principle that employment status is determined by the four-fold test and attendant circumstances, not by contract or document.

• Nightowl Watchman & Security Agency, Inc. vs. Lumahan — Cited as an exception to the general rule against awarding separation pay where there was no dismissal; distinguished on the ground that none of the exceptional circumstances present in that case obtained here.

• Claudia's Kitchen, Inc., et al. vs. Tanguin, 811 Phil. 784 (2017) — Cited for the general rule that where an employee was neither dismissed nor abandoned work, the proper course is to dismiss the complaint and order reinstatement.

• Aznar Brothers Realty Company vs. Aying, et al., 497 Phil. 788 (2005) — Cited for the procedural principle that the burden is upon the person who asserts the truth of the matter alleged.

• Section 4(c), Republic Act No. 6727 (Wage Rationalization Act) — Provides that retail/service establishments regularly employing not more than ten workers may be exempted from the Act upon application with and as determined by the appropriate Regional Board. Applied to hold that petitioner's failure to apply for exemption barred his claim, and that the law imposes 1% per month interest retroactive to its effectivity if exemption is not granted.

• Article 3, Civil Code of the Philippines — Provides that ignorance of the law excuses no one from compliance therewith. Applied to reject petitioner's argument that his status as a layman excused his failure to apply for exemption.

• Sections 8 and 9, Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code (as amended by DOLE Department Order No. 9, Series of 1997) — Govern preventive suspension and the period thereof. Applied to uphold the legality of Cerro's suspension, his continued employment posing a serious and imminent threat to the employer's property given his position as Officer-in-Charge and his admitted appropriation of company funds.

• BSP Monetary Board Resolution No. 796, dated May 16, 2013 — Amended the rate of interest for loan or forbearance of money in the absence of stipulation to 6% per annum, effective July 1, 2013. Applied to set the transitional interest rate on wage differentials at 12% per annum until July 1, 2013, and 6% per annum thereafter.

Peralta (Chairperson), Leonen, Hernando, and Inting, JJ., concurred.