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ANTONIO M. SERRANO v. GALLANT MARITIME SERVICES

FACTS:

Antonio Serrano, a Filipino seafarer, was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment for a period of 12 months, as a Chief Officer with a basic monthly salary of US$1,400.00, effective from March 19, 1998. Upon departure on March 19, 1998, Serrano was compelled to accept a downgraded contract for the position of Second Officer at a reduced salary of US$1,000.00, with the assurance of being promoted to Chief Officer by the end of April 1998. This promise was not fulfilled, leading Serrano to repatriate to the Philippines on May 26, 1998, after only serving two months and seven days of his 12-month contract. Serrano subsequently filed a complaint for constructive dismissal and sought payment of his full money claims amounting to US$26,442.73 based on the unexpired portion of his contract. The Labor Arbiter (LA) declared his dismissal illegal but awarded him a lump sum of US$8,770.00, computed as salary for three months of the unexpired portion of his contract, applying Section 10 of Republic Act No. 8042, which limited the award to the lesser of the unexpired portion or three months of salary per year of the unexpired term. Both parties filed appeals to the National Labor Relations Commission (NLRC), which modified the LA’s decision to award US$4,245.00 for three months’ salary plus attorney’s fees. Serrano challenged the constitutionality of the clause limiting his entitlement in the Court of Appeals (CA), which upheld the NLRC's decision. This controversy eventually reached the Supreme Court, where Serrano petitioned to declare the subject clause unconstitutional and sought his salaries for the entire unexpired portion of his contract.

ISSUES:

  1. Constitutionality of the Subject Clause in Section 10, Republic Act (R.A.) No. 8042

  2. Entitlement to Monetary Benefits (Overtime and Leave Pay) upon Illegal Dismissal

RULING:

    • Ruling: The clause is declared unconstitutional as it violates the Equal Protection Clause and the right to Substantive Due Process of Overseas Filipino Workers (OFWs).
    • Ruling: The overtime and leave pay should not be included in the computation of petitioner's monetary award unless there is evidence proving that such work was actually performed.

The Supreme Court declared the subject clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042 as unconstitutional. Consequently, the petitioner is awarded his salaries for the entire unexpired portion of his employment contract consisting of nine months and 23 days, computed at the rate of US$1,400.00 per month. The inclusion of overtime and leave pay in the computation of the monetary award is disallowed unless proven to have been actually rendered.

PRINCIPLES:

  1. Equal Protection Clause (Section 1, Article III of the Constitution)

    • Legislation must treat individuals equally who are in similar circumstances.

    • Suspect classifications involving vulnerable sectors such as labor are subjected to strict judicial scrutiny.

  2. Substantive Due Process (Section 1, Article III of the Constitution)

    • Legislation must not deprive any person of life, liberty, or property without a valid governmental purpose.

  3. Non-Impairment of Contracts (Section 10, Article III of the Constitution)

    • No law impairing the obligation of contracts shall be passed.

  4. Protection of Labor (Section 18, Article II and Section 3, Article XIII of the Constitution)

    • The State shall promote the welfare of Filipino workers at home and abroad.

  5. Judicial Standards and Scrutiny

  • Rational Basis Test: Legislation must show a rational relation to a legitimate state interest.

  • Strict Scrutiny: Applied when legislation affects the fundamental rights or involves suspect classifications. The state must prove a compelling interest and that the means chosen are the least restrictive.

  1. Contract Provisions and Enforcement
  • Employment contracts and their stipulations, such as fixed salaries and terms, are protected under the law.
  1. Police Power
  • The right of the State to enact laws for the general welfare, but such laws must not infringe upon constitutional rights without a compelling reason.
  1. Monetary Awards for Illegal Dismissal
  • Prior to R.A. No. 8042, all OFWs, regardless of the length of their contract periods, were entitled to their salaries for the entire unexpired portion of their employment contracts. This principle was altered by the subject clause in R.A. No. 8042, which has now been declared unconstitutional.

The Court emphasizes that legislative measures must always strive to be fair and equitable, especially when dealing with the rights of marginalized sectors such as OFWs, ensuring their protection and welfare are paramount.