Rajah Humabon Hotel, Inc. vs. Trajano

Where the aggregate money claim of each employee exceeds P5,000.00, the regional director has no jurisdiction to hear and decide the claim, regardless of whether the employer-employee relationship existed at the time of filing; such claims fall within the original and exclusive jurisdiction of the labor arbiter under Article 217(a)(6) of the Labor Code, as amended by Republic Act No. 6715, which applies retroactively to pending cases as a curative statute.

Rajah Humabon Hotel, Inc. and Rajah Soliman, Inc., represented by Peter Po, were employers of twenty-five private respondent-employees in Cebu City. The employees sought redress for underpaid wages and non-payment of benefits before the regional director of the Department of Labor and Employment, whose visitorial and adjudicatory authority over labor standards cases was governed by Articles 128, 129, and 217 of the Labor Code, as amended. The jurisdictional allocation between the regional director and the labor arbiter had been the subject of evolving legislation—Executive Order No. 111 (promulgated December 24, 1986) and later Republic Act No. 6715 (effective March 21, 1989)—which progressively narrowed the regional director's authority over money claims exceeding P5,000.00 per employee.

On March 14, 1989, twenty-five employees of Rajah Humabon Hotel, Inc. and Rajah Soliman, Inc.—both entities associated with Peter Po—filed a complaint with DOLE Regional Office No. 7 in Cebu City, seeking redress for underpayment of minimum wage from December 14, 1987 to March 31, 1989 and non-payment of service incentive leave for the years 1987 to 1988. The complaint was filed under the regime of Executive Order No. 111, which had amended Article 128(b) of the Labor Code and was interpreted in Briad Agro Development Corp. vs. Dela Serna as giving concurrent jurisdiction to both the Secretary of Labor (or regional directors) and labor arbiters over money claims where the employer-employee relationship still existed.

On April 4, 1989, petitioners were instructed to allow inspection of the employment records, but no inspection could be conducted because a picket staged by other workers at petitioners' premises prevented the inspectors' entry. On April 16, 1989, at the re-scheduled examination following the closure of petitioners' business, Peter Po submitted a motion to dismiss instead of presenting the required payrolls and daily time records. He contended that the regional director lacked jurisdiction because the employer-employee relationship had been severed by the closure of the business, and because each of the employees' claims exceeded the P5,000.00 jurisdictional limit fixed by Republic Act No. 6715, which had taken effect on March 21, 1989—seven days after the complaint was filed. Private respondents opposed the motion, arguing that they were also seeking enforcement of labor standards laws, which they asserted fell within the regional director's authority.

The regional director denied the motion to dismiss on September 25, 1989, sustaining his jurisdiction on the ground that the employer-employee relationship existed at the time of filing and that the subsequent termination of employment was a scheme to evade inspection. He found petitioners liable for underpayment of minimum wage in the aggregate amount of P287,141.55 and non-payment of service incentive leave in the aggregate amount of P3,840.00, and ordered payment of the total sum of P290,982.55 within ten calendar days. On appeal, the Department of Labor and Employment affirmed both the jurisdictional ruling and the awards, holding that the employer-employee relationship existed at the time the complaint was filed and that the P5,000.00 limit under Article 217(6) applied only to domestic workers. Petitioners' motion for re-evaluation was denied, prompting the present petition.

• Severance of Employer-Employee Relationship: Petitioners maintained that with the closure of their business on April 16, 1989, the employer-employee relationship was severed, converting the employees' claims into simple monetary demands that should be ventilated before the labor arbiter, pursuant to the doctrine in Maternity Children's Hospital vs. Secretary of Labor and the concurring opinion of then Justice Narvasa in Briad Agro Development Corp. vs. Dela Serna.
• Jurisdictional Limit under R.A. No. 6715: Petitioners argued that the regional director's authority is limited to cases where three conditions concur: (a) the claim is prosecuted by an employee or person employed in domestic or household service; (b) the claimant, no longer employed, does not seek reinstatement; and (c) the aggregate money claim does not exceed P5,000.00. Since each employee's claim exceeded P5,000.00, the regional director had no jurisdiction.
• Retroactive Application of R.A. No. 6715: Petitioners invoked Articles 129 and 217 of the Labor Code, as amended by R.A. No. 6715, to stress that the regional director's jurisdiction was limited to claims not exceeding P5,000.00, and that the new law applied retroactively to pending cases as a curative statute.

• Uncontested Claims: Private respondents countered that the regional director acted within his jurisdiction because petitioners did not controvert the findings of the labor regulation officers, and the claims were therefore uncontested money claims within the regional director's enforcement authority under Article 128(b) of the Labor Code.
• Visitorial and Enforcement Powers: Private respondents cited Executive Order No. 111, particularly the amendment to Article 128(b), arguing that the regional director retained visitorial and enforcement powers to order compliance with labor standards provisions regardless of the amount involved, so long as the employer-employee relationship still existed.
• Article 217(6) Limited to Domestic Workers: Private respondents argued that the P5,000.00 limit in Article 217(6) of the Labor Code applied only to domestic workers, and since they were not domestic workers, the provision should not oust the regional director of jurisdiction.
• Validity of Curative Statutes: Private respondents acknowledged in their Comment that curative statutes have long been considered valid, implicitly conceding the retroactive application of R.A. No. 6715.

• Applicable Law: Whether Executive Order No. 111 or Republic Act No. 6715 is the applicable law to the complaint filed on March 14, 1989, given that R.A. No. 6715 took effect seven days later on March 21, 1989.
• Retroactive Application: Whether Republic Act No. 6715, which amended Articles 129 and 217 of the Labor Code to limit the regional director's jurisdiction to money claims not exceeding P5,000.00, applies retroactively to pending cases as a curative statute.
• Jurisdiction over Claims Exceeding P5,000.00: Whether the regional director has jurisdiction over employees' money claims where each employee's aggregate claim exceeds P5,000.00, or whether such claims fall within the exclusive jurisdiction of the labor arbiter.
• Scope of Article 217(6): Whether the P5,000.00 jurisdictional limit under Article 217(6) of the Labor Code applies only to domestic workers or to all workers.

• Applicable Law: Republic Act No. 6715 is the applicable law. The complaint was filed on March 14, 1989, but R.A. No. 6715 took effect on March 21, 1989, before the case was decided, and applies retroactively to pending proceedings.
• Retroactive Application: Yes. R.A. No. 6715 is in the nature of a curative statute with retroactive operation to pending proceedings, curing any defect of jurisdiction that may have existed at the commencement of the action.
• Jurisdiction over Claims Exceeding P5,000.00: No. The regional director has no jurisdiction over money claims where each employee's aggregate claim exceeds P5,000.00; such claims fall within the original and exclusive jurisdiction of the labor arbiter under Article 217(a)(6) of the Labor Code.
• Scope of Article 217(6): The P5,000.00 jurisdictional limit under Article 217(6) applies to all workers, not solely to domestic workers. The prefatory statement of Article 217 speaks of the labor arbiter's original and exclusive jurisdiction over all workers, and paragraph 6 expressly includes claims of persons in domestic or household service without excluding other employees.

• Applicable Law: The resolution of the jurisdictional dispute hinges on determining whether E.O. No. 111 or R.A. No. 6715 governs the complaint. E.O. No. 111, promulgated on December 24, 1986, was interpreted in Briad Agro Development Corp. vs. Dela Serna as giving concurrent jurisdiction to both the Secretary of Labor (or regional directors) and labor arbiters over money claims where the employer-employee relationship still existed. However, R.A. No. 6715, which took effect on March 21, 1989—seven days after the complaint was filed on March 14, 1989—amended Articles 129 and 217 of the Labor Code and, as a consequence, the doctrine in Briad Agro was reconsidered on November 9, 1989. The reconsidered ruling held that R.A. No. 6715, like its predecessors, has retroactive application, and when the new law divested regional directors of the power to hear money claims exceeding P5,000.00, the divestment affected pending litigations, including the case at bar.

• Retroactive Application: The Court relied on the established doctrine that amendments relative to the jurisdiction of labor arbiters partake of the nature of curative statutes with retrospective application to pending proceedings. In Garcia vs. Martinez, the Court held that where a court lacked jurisdiction at the time an action was filed but a subsequent statute clothes it with jurisdiction before the action is decided, the statute is in the nature of a curative law with retroactive operation. This principle was uniformly applied in South Motorists Enterprises vs. Tosoc, Brokenshire Memorial Hospital Inc. vs. Minister of Labor and Employment, Servando's Inc. vs. Secretary of Labor and Employment, Baritua vs. Secretary of the Department of Labor and Employment, and Midland Insurance Corporation vs. Secretary of Labor and Employment. Private respondents themselves acknowledged that curative statutes have long been considered valid. The principle of continuous jurisdiction invoked by the Secretary of Labor was therefore incorrect.

• Jurisdiction over Claims Exceeding P5,000.00: The Court harmonized Articles 128(b), 129, and 217(a)(6) of the Labor Code, relying on the clarification in Servando's Inc. vs. Secretary of Labor and Employment (198 SCRA 156 [1991]). The exclusive jurisdiction to hear and decide employees' claims arising from employer-employee relations exceeding P5,000.00 per employee is vested in the labor arbiter under Article 217(a)(6). This is confirmed by Article 129, which excludes from the regional director's jurisdiction claims exceeding P5,000.00 per employee. To construe the visitorial power under Article 128(b) as including the power to hear and decide claims exceeding P5,000.00 would render Articles 217(a)(6) and 129 useless surplusage. The Secretary of Labor retains plenary visitorial powers to inspect establishments and order compliance with labor standards, but when findings disclose an employee claim exceeding P5,000.00, the matter must be referred to the labor arbiter. Since the aggregate claims of each of the twenty-five employees exceeded P5,000.00, the regional director had no jurisdiction.

• Scope of Article 217(6): The Department of Labor and Employment's position that Article 217(6) applies only to domestic workers was rejected. The prefatory statement of Article 217 speaks of the labor arbiter's original and exclusive jurisdiction over all workers, whether agricultural or non-agricultural. Paragraph 6 is not confined to domestic workers; it covers all claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding P5,000.00. The word "including" is expansive, not restrictive. The Court further noted that summary proceedings before the regional director are justified only for claims not exceeding P5,000.00; more substantial claims require the more formal proceedings before the labor arbiter, which are in accord with the rules of evidence.

• Jurisdictional Requisites for Regional Director over Money Claims — Under R.A. No. 6715, the regional director can assume authority over money claims only upon the concurrence of three requisites: (1) the claim is presented by an employee or person employed in domestic or household service, or househelper under the Code; (2) the claimant, no longer being employed, does not seek reinstatement; and (3) the aggregate money claim does not exceed P5,000.00. In this case, the third requisite was absent because each employee's claim exceeded P5,000.00.

• Curative Statute Doctrine (Retroactive Application to Pending Proceedings) — Where at the time an action is filed the tribunal has no jurisdiction over the subject matter but a subsequent statute clothes it with jurisdiction before the action is decided, the statute is in the nature of a curative law with retroactive operation to pending proceedings and cures the defect of lack of jurisdiction. Amendments relative to the jurisdiction of labor arbiters partake of the nature of curative statutes with retrospective application. R.A. No. 6715, which divested regional directors of power to hear money claims exceeding P5,000.00, applies retroactively to pending litigations.

• Harmonization of Articles 128(b), 129, and 217(a)(6) of the Labor Code — The Secretary of Labor retains plenary visitorial powers to inspect establishments and order compliance with labor standards, but the power to hear and decide employees' claims exceeding P5,000.00 per employee belongs exclusively to the labor arbiter. When inspection findings disclose an employee claim exceeding P5,000.00, the matter should be referred to the labor arbiter. To construe the visitorial power as including adjudication of all claims regardless of amount would emasculate Articles 217(a)(6) and 129 and render them useless surplusage.

• "Republic Act No. 6715, like its predecessors, Executive Order No. 111 and Article 217, as amended, has retroactive application. Thus when this new law divested Regional Directors of the power to hear money claims, the divestment affected pending litigations. It also affected this particular case." — This passage articulates the ratio decidendi that R.A. No. 6715 operates retroactively on pending cases, divesting the regional director of jurisdiction over claims exceeding P5,000.00.

• "To construe the visitorial power of the Secretary of Labor to order and enforce compliance with labor laws as including the power to hear and decide cases involving employees' claims for wages, arising from employer-employee relations, even if the amount of said claims exceed P5,000.00 for each employee, would, in our considered opinion, emasculate and render meaningless, if not useless, the provisions of Article 217 (a) (6) and Article 129 of the Labor Code." — This passage, quoted from Servando's Inc. vs. Secretary of Labor and Employment, defines the canonical formulation of the harmonization between the Secretary's visitorial powers and the labor arbiter's exclusive adjudicatory jurisdiction.

• "Where at the time an action is filed in court the latter has no jurisdiction over the subject matter thereof but a subsequent statute clothes it with jurisdiction before the action is decided, the statute is in the nature of a curative law with retroactive operation to pending proceedings and cures the defect of lack of jurisdiction of the court at the commencement of the action." — This passage states the curative statute doctrine as applied to labor jurisdiction amendments, frequently cited in subsequent jurisprudence on retroactive application of jurisdictional statutes.

• Briad Agro Development Corp. vs. Dela Serna, 174 SCRA 524 (1989); reconsidered 179 SCRA 269 (1989) — Initially interpreted E.O. No. 111 as giving concurrent jurisdiction to the Secretary of Labor and labor arbiters over money claims; subsequently reconsidered to hold that R.A. No. 6715 has retroactive application and divested regional directors of power to hear money claims exceeding P5,000.00.

• Maternity Children's Hospital vs. Secretary of Labor, 174 SCRA 632 (1989) — Interpreted Article 128(b) as merely confirming the enforcement/adjudication authority of the regional director over uncontested money claims where the employer-employee relationship still exists. Cited by petitioners but ultimately distinguished, as the governing law had shifted to R.A. No. 6715.

• Servando's Inc. vs. Secretary of Labor and Employment, 198 SCRA 156 (1991) — Controlling precedent on the harmonization of Articles 128(b), 129, and 217(a)(6). Held that the labor arbiter has exclusive jurisdiction over employees' claims exceeding P5,000.00 per employee; the Secretary's visitorial power does not include adjudication of such claims. Extensively quoted in the decision.

• Garcia vs. Martinez, 90 SCRA 331 (1979) — Established that amendments relative to the jurisdiction of labor arbiters partake of the nature of curative statutes with retrospective application to pending proceedings. Foundational authority for the retroactive application of R.A. No. 6715.

• South Motorists Enterprises vs. Tosoc, 181 SCRA 386 (1990) — Applied the doctrine that R.A. No. 6715 applies retroactively to pending cases, recognizing the three requisites for regional director jurisdiction over money claims.

• Brokenshire Memorial Hospital Inc. vs. Minister of Labor and Employment, 182 SCRA 5 (1990) — Followed the doctrine that even if a claim exceeds P5,000.00, the regional director may still exercise visitorial powers, but adjudication of claims exceeding the limit belongs to the labor arbiter. Adopted the view from Justice Narvasa's separate opinion in Briad Agro.

• Abad vs. Phil. American General Ins. Co., Inc., 108 SCRA 717 (1981) — Cited for the principle that a subsequent statute clothing a court with jurisdiction over a pending action operates as a curative law with retroactive effect.

• Article 129, Labor Code (as amended by R.A. No. 6715) — Empowers the regional director to hear and decide claims for recovery of wages and other monetary benefits through summary proceedings, provided the aggregate claim does not exceed P5,000.00 per employee and the claimant does not seek reinstatement. Applied to exclude the regional director's jurisdiction over the employees' claims, each of which exceeded P5,000.00.

• Article 217(a)(6), Labor Code (as amended by R.A. No. 6715) — Vests labor arbiters with original and exclusive jurisdiction over all claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding P5,000.00, regardless of whether accompanied by a claim for reinstatement. Applied to confer jurisdiction over the employees' claims upon the labor arbiter.

• Article 128(b), Labor Code (as amended by E.O. No. 111) — Grants the Secretary of Labor (or regional directors) visitorial and enforcement powers to order compliance with labor standards provisions based on inspection findings, where the employer-employee relationship still exists. Construed as not including the power to adjudicate claims exceeding P5,000.00, which belongs exclusively to the labor arbiter.

• Article 4, New Civil Code — Provides that laws shall have no retroactive effect unless otherwise provided. Distinguished, as the curative statute doctrine constitutes an exception to the general rule against retroactivity.

• Article 1431, New Civil Code — Recognizes the validity of curative statutes. Cited in support of the retroactive application of R.A. No. 6715, which private respondents themselves acknowledged as valid.

Bidin, Romero, and Vitug, JJ., concurred. Feliciano, J., was on leave.