Serrano v. Gallant Mari.me Services, Inc. and Marlow Naviga.on Co., Ltd. | G.R. No.

167614 | March 24, 2009 | Po-

nente: Austria-Martinez, J.

Nature of Case: Petition for review under Rule 45 of Court

Plaintiff(s): Antonio M. Serrano
Defendant(s): Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.

SUMMARY: Pe##oner Seafarer Serrano was employed by Gallant Mari#me Services. On his un#mely illegal dismissal by the respondent, Serrano pleaded to be fully
reimbursed for his en#re 12-month contract, including the unexpired por#on and over#me pay. The NLRC and CA refused ci#ng RA No. 8042 Sec 10’s subject clause, which
provided that illegally dismissed OFW’s may be reimbursed for 3 months for every year of the unexpired term. The Court ruled that the law’s clause was uncons#tu#onal
using the strict scru#ny test. They found that the subject clause violated the pe##oner’s right to equal protec#on by crea#ng dis#nc#ons between the reimbursement of
OFW and domes#c workers. The Court also found that the pe##oner’s right to substan#ve due process was violated because there was no compelling paramount interest
of the State to protect the local placement agencies’ liability via RA No.8042 subject clause.

FACTS
• Petitioner Antonio Serrano, a Filiino seafarer employed by respondent, Gallant Maritime Services, Inc. and Marlow Naviga-
tion Co. Ltd., impleads the unconstitutionality of the underlined clause —
RA No. 8042, Sec. 10 Money Claims. - x x x In case of termination of overseas employment without just, valid or au-
thorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement
fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment con-
tract or for three (3) months for every year of the unexpired term, whichever is less.
• Terms of his contract:
- Chief Officer
- 12 months
- basic monthly salary US$1,400 with an allowance for overtime
• On the date of his departure, March 19, petitioner was told that he would be made Chief Officer by the end of April BUT only
if he meanwhile accepted the position of Second Officer with a monthly salary of $1,000
• After 2 months and 7 days, respondents failed to fulfill their promise
- petitioner refused to stay and so he was repatriated back to the Philippines
- 9 months and 23 days remained unexpired from his first contract
• LA: petitioner was illegally dismissed
- awarded the lump sum US$8,770.00 for only the 3 months as found in RA No. 8042 Sec. 10
• NLRC: R.A. No. 8042 "does not provide for the award of overtime pay, which should be proven to have been actually per-
formed, and for vacation leave pay"
- awarded only $2,590
- likewise denies petitioner’s Motion for Reconsideration
• CA also denied petitioner’s appeal
• After submitting this Petition for Review to the Court, the petitioner asked to withdraw his case, citing old age and sickness.
He intended to use the money he did receive as payment for medication and treatment. His Counsel filed for partial execu-
tion of the monetary award and that the constitutional question be answered.
• Petitioner argues for the unconstitutionality of RA No. 8046, Sec. 10 that —
1. it impairs the freedom of OFW’s to contract a determinate employment package and a fixed salary package
• the different treatment of OFWs (limited lump sum salary upon illegal termination of contract) compared to the
treatment of domestic Filipino workers violates the equal protection clause, as it is unreasonable and Section 18
of Article 2 guarantees the protection of the rights and welfare of all Filipino workers, whether deployed locally
or overseas
2. decisions by the CA and NLRC are not in line with current OFW jurisprudence, petitioner asks that the Court re-
lease guidance and standards for the issue of money claims by illegally dismissed OFWs
3. the subject clause does not serve anyone except local placement agencies — while these agencies enjoy a miti-
gated risk of the characteristic solidary liability they incur when foreign employers illegally dismissed their OFWs,
the OFWs are victimized by this action
4. the benefits of the 3-month rule are only enjoyed by foreign employers, but local employers must pay the lump
sum for unexpired term in full when they dismiss their workers invalidly

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 5. the clause deprives the OFW of the salaries and other emoluments from his contract, therefore violating the due
process clause
• Respondents argue for the dismissal of the case due to procedural grounds. The issue should not be entertained as it was
not interposed in the earliest opportunity.
• Solicitor General:
1. RA 8042 enforcement preceded the petitioner’s 1998 contract, therefore the provisions are understood to be the minimum
terms of any employment such as that of the petitioner’s
2. The employment of OFW and Domestic workers have significantly different natures, so therefore, the equal protection
clause nor Sec. 18, Art. II of the Constitution have been violated.
- local workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over whom
it is difficult for our courts to acquire jurisdiction
- local workers may become regular employees, OFWs are naturally contractual
3. The law is a valid use of police power
- mitigating the solidary liability of local placement agencies assures the survival of these entities that are essential to
maintaining humane conditions for our OFWs

ISSUE(S) + RULING
WON the subject clause violates Sec. 10, Art. III of the Constitution on non-impariment of contracts — NO
• Sec. 10, Art. III, 1987C: No law impairing the obliga#on of contracts shall be passed.
• Contracts created after the enactment of the law are assumed to have incorporated all of its provisions including the subject
clause.
• Even disregarding ^ argument, the subject clause does not impinge on contracts because the law was enacted as a valid
use of police power to benefit the OFW’s welfare — all private contracts must yield to the State’s legitimate measures to
promote public welfare

WON the subject clause violates Sec. 1, Art. III of the Cons.tu.on, and Sec. 18, Art. II and Sec. 3, Ar.cle XIII on labor as a pro-
tected sector — YES
• Sec. 1, Art. III, 1987C: No person shall be deprived of life, liberty, or property without due process of law nor shall any per-
son be denied the equal protection of the law.
• Sec. 18, Article II and Sec. 3, Art. XIII of the 1987C accord all members of the labor sector, without distinction as to place of
deployment, full protection of their rights and welfare
• Court ruled using strict scrutiny test, finding that the social and economic rights guaranteed by the Constitution to the labor
force were fundamental rights
- What constitutes it is measured by the scale of rights and powers arrayed in the constitution and calibrated by history.
It is akin to the paramount interest of the state for which some individual liberties must give way, such as the public
interest in safeguarding health or maintaining medical standards, or in maintaining access to information on matters of
public concern.
• As such, the subject clause violates the equal protection clause
1. OFWs with employment contracts of less than one year vis-à-vis OFWs with employment contracts of one year or
more
• A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed over-
seas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or 3
months’ salary for every year of the unexpired term, whichever is less, comes into play only when the employ-
ment contract concerned has a term of at least 1 year or more. This is evident from the words "for every year of
the unexpired term" which follows the words "salaries x x x for 3 months.”
• Court here goes through jurisprudence to show the inconsistencies in the interpretation of this clause:
- Court often uses the case in Marsaman wherein an OFW with a 10-month contract was dismissed after 2
months. He was awarded for the remaining 8 months. The matrix presented by the Court shows different
jurisprudence using the same doctrine.

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 - Two categories occur with large disparities:
a. the first category includes OFWs with fixed-period employment contracts of less than one year — in
case of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their
contract
b. the second category consists of OFWs with fixed-period employment contracts of one year or more;
— in case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of
the unexpired portion of their contracts
• Court goes onto hypotheticals and into jurisprudence before the law’s effectivity. It’s implying that the disparity
between jurisprudence’s awarding of salaries as incredibly grave.

2. Among OFWs with employment contracts of more than one year

• Court says that it has misgivings on the Marsaman ruling and its reading of the subject clause
• The subject clause "or for 3 months for every year of the unexpired term, whichever is less" contains
the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term"
means a limited or definite extent of time. Corollarily, that "every year" is but part of an "unexpired
term" is significant in many ways: first, the unexpired term must be at least one year, for if it were any
shorter, there would be no occasion for such unexpired term to be measured by every year; and sec-
ond, the original term must be more than one year, for otherwise, whatever would be the unexpired term
thereof will not reach even a year. Consequently, the more decisive factor in the determination of when
the subject clause "for 3 months for every year of the unexpired term, whichever is less" shall apply is
not the length of the original contract period as held in Marsaman, but the length of the unexpired por-
tion of the contract period -- the subject clause applies in cases when the unexpired portion of the con-
tract period is at least one year, which arithmetically requires that the original contract period be more
than one year.
• The subject clause is discriminative by creating categories among OFWs with contracts more than a year
- Illegally dismissed with less than one year left in their contracts = salaries for the entire unexpired portion
thereof
- Illegally dismissed with one year or more remaining in their contracts = 3 months via subject clause

3. OFWs vis-à-vis local workers with fixed-period employment

• Here the Court proves that there is no compelling state interest that merit the need for the subject clause —
prior to RA 8042, many other sources of uniformed period employments were used
• Art. 299 of the Code of Commerce prescribes:
- If the contracts between the merchants and their shop clerks and employees should have been made of a
fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfill-
ment of said contract until the termination of the period agreed upon.
- Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the excep-
tion of the provisions contained in the following articles.
• In general, the principle is that when an employee is illegally dismissed, the burden is on the employee to find
employment in the same community so as to prove that the discharge was not of his own fault. However, the
burden in proving in Court that the illegal dismissal caused difficulty in finding employment is also on the em-
ployee.
• Prior to the law, all workers (OFWs and domestic) were treated alike in the computation of money claims for
illegal dismissal.
• The Court concludes that the subject clause contains a suspect classification in that, in the computa-
tion of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-
month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but
none on the claims of other OFWs or local workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a peculiar disadvantage.

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 • The OSG’s claim that the protection of local placement agencies is a valid reason for the use of police power is
untenable
- private business interests cannot be upheld before the individuals’ fundamental rights
- even so, measures already exist to protect these entities’ liability, like the POEA disciplinary measures on
erring foreign employers
• The clause violates the right to substantive due process
- there is no valid government purpose for the clause, but it deprives the petitioner of his monetary benefits
- there is no definitive government purpose stated in the text of the law
• Petitioner’s contention that his overpay and leave pay should be included in the salary computation is untenable
- the word “salaries” Sec. 10 (5) does not include overtime and leave pay
- salary is defined as the regular 8 hours pay in the Standard Employment Contract of Seafarers document provided by
DOLE
- entitlement to overpay computed on the basis of 30% of the monthly salary must first be established

The subject clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Sec#on 10 of
Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolu#on of the Court
of Appeals are MODIFIED to the effect that pe##oner is AWARDED his salaries for the en#re unexpired por#on of his employment con-
tract consis#ng of nine months and 23 days computed at the rate of US$1,400.00 per month.

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