CASE DIGEST : Antonio M. Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc. G.R. No. 167614, March 24, 2009 En Banc — Austria-Martinez, J.

 

FACTS

Antonio M. Serrano was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc. under a Philippine Overseas Employment Administration-approved employment contract for a period of 12 months, from March 19, 1998 to March 19, 1999, as Chief Officer, with a basic monthly salary of US$1,400.00. Upon his departure, however, he accepted a downgraded contract as Second Officer with a monthly salary of US$1,000.00, based on respondents' assurance that he would be made Chief Officer by the end of April 1998. The promised promotion did not happen, and Serrano refused to remain as Second Officer. He was repatriated on May 26, 1998, after serving only two months and seven days, leaving nine months and 23 days of his contract unexpired.

Serrano filed a complaint for constructive dismissal and payment of money claims. The Labor Arbiter declared his dismissal illegal and awarded him US$8,770.00, representing three months of his unexpired contract, plus US$45.00 salary differential and attorney's fees. The Labor Arbiter applied the fifth paragraph of Section 10 of Republic Act No. 8042, which provided that an illegally dismissed overseas Filipino worker was entitled to salaries for the unexpired portion of the employment contract “or for three months for every year of the unexpired term, whichever is less.”

The NLRC modified the Labor Arbiter's computation and awarded Serrano three months' salary at US$1,400.00 per month, plus the salary differential and attorney's fees. Serrano challenged the limitation on his monetary award and questioned the constitutionality of the provision. The Court of Appeals affirmed the NLRC ruling but did not resolve the constitutional issue. Serrano then brought the case before the Supreme Court.

The Supreme Court noted that the legality of Serrano's dismissal was not disputed. The remaining questions concerned the computation of his monetary award and the constitutionality of the clause in Section 10 of R.A. No. 8042 limiting the salaries recoverable by illegally dismissed overseas Filipino workers.

ISSUE

The first issue was whether the clause in the fifth paragraph of Section 10 of Republic Act No. 8042, limiting the monetary award of an illegally dismissed overseas Filipino worker to the unexpired portion of the contract or three months for every year of the unexpired term, whichever was less, was constitutional.

The second issue was whether the clause violated the constitutional guarantees of equal protection and substantive due process, particularly because overseas Filipino workers with unexpired contracts of one year or more were treated differently from local workers with fixed-term employment and from other overseas Filipino workers.

The third issue was whether Serrano's overtime pay and vacation leave pay should be included in the computation of his monetary award for the unexpired portion of his employment contract.

HELD

The Supreme Court GRANTED the petition. It declared unconstitutional the clause in the fifth paragraph of Section 10 of Republic Act No. 8042 which provided that an illegally dismissed overseas worker was entitled to salaries for the unexpired portion of the contract “or for three months for every year of the unexpired term, whichever is less.” The Court held that the clause violated Serrano's constitutional right to equal protection.

The Court explained that before the enactment of R.A. No. 8042, overseas Filipino workers and local workers with fixed-term employment contracts who were illegally dismissed were treated alike: they were entitled to their salaries for the entire unexpired portion of their contracts. The questioned clause created a classification among overseas Filipino workers because those with contracts having an unexpired portion of one year or more were subjected to a three-month cap, while other OFWs and local workers with fixed-term contracts were not subjected to the same limitation. The Court found this to be a suspect classification and subjected it to strict judicial scrutiny.

The Court found no compelling state interest that justified the discriminatory classification. The explanation that the limitation was intended to protect placement agencies and increase the chances of OFWs being hired was not sufficient. The Court held that there were already mechanisms under the POEA rules that could address the liability of erring foreign employers without imposing the discriminatory limitation upon OFWs. The Court therefore held that the subject clause violated the equal protection clause.

The Court also held that the clause violated Serrano's right to substantive due process because it deprived him of monetary benefits without an existing valid governmental purpose. The Court rejected the argument that the clause was justified by the need to give OFWs a better chance of being hired by foreign employers, finding that the asserted purpose was unsupported by the text of the law, the legislative records, and the pleadings.

The Court nevertheless held that the clause did not violate the non-impairment clause under Section 10, Article III of the Constitution. R.A. No. 8042 was enacted in 1995, before Serrano's 1998 employment contract. Thus, the law was already in existence when the parties entered into the contract and was deemed incorporated into it. The Court further held that the word “salaries” did not automatically include overtime and leave pay. Overtime pay required proof that overtime work was actually performed, while leave pay was not due for the unexpired portion of the contract because it was given during actual service.

Accordingly, the Supreme Court modified the Court of Appeals' decision and awarded Serrano his salaries for the entire unexpired portion of nine months and 23 days of his employment contract, computed at his basic monthly salary of US$1,400.00. The Court did not include overtime and leave pay in that award.