FACTS:

The case involves an appeal filed by the Philippine Long Distance Telephone Company (PLDT) seeking to annul the decision of the Court of Appeals (CA) affirming the National Labor Relations Commission (NLRC) decision. The NLRC had ordered PLDT to pay Henry Estranero his separation pay. PLDT is a public utility corporation and Estranero was employed by PLDT as an Auto-Mechanic/Electrician Helper.

In 1995, PLDT implemented a Manpower Reduction Program (MRP) to reduce its workforce. As part of the program, attractive redundancy pay was offered to affected employees. Estranero's position was declared redundant under the MRP and he expressed his agreement to be included in the program. After indicating his intention and approval by his superiors, Estranero was included in the list of redundant employees. A Notice of Separation Due to Redundancy was submitted to the Department of Labor and Employment, and Estranero signed a Receipt, Release and Quitclaim for his severance from employment. PLDT calculated his redundancy/separation benefits.

However, PLDT deducted Estranero's outstanding liabilities from various loans obtained from different entities. This deduction resulted in Estranero receiving "zero pesos" as his take-home pay. As a result, Estranero retracted his acceptance of the separation pay and filed a complaint for illegal dismissal.

In the proceedings, the Labor Arbiter (LA) ordered PLDT to pay Estranero his separation pay and dismissed the set-off of outstanding loans. The NLRC affirmed the LA's decision and ruled that the issue of setting-off loans is not a labor dispute but a debtor-creditor relation. The CA upheld the NLRC decision, confirming the legality of Estranero's dismissal, but questioning the deduction of his outstanding loans from his redundancy pay.

ISSUES:

1. Whether the respondent is entitled to receive his separation pay.

2. Whether the deduction of the respondent's outstanding loans from his redundancy pay is valid.

RULING:

1. The respondent is entitled to receive his separation pay. The LA and the NLRC both found that the respondent was included in the redundancy program of PLDT, and thus, entitled to separation pay. The CA affirmed this ruling, stating that there is no dispute as to the legality of the respondent's dismissal from employment as he had accepted the validity of his dismissal.

2. The deduction of the respondent's outstanding loans from his redundancy pay is valid. The LA and the NLRC both ruled that the deduction of the respondent's outstanding loans is not within their jurisdiction as it involves a debtor-creditor relationship and not an employer-employee relationship. The CA agreed with this ruling and held that labor tribunals have no jurisdiction over disputes arising from a debtor-creditor relation.

PRINCIPLES:

• Separation pay may be granted to an employee who is terminated from employment due to an authorized cause such as redundancy.

• Labor tribunals have jurisdiction over disputes arising from an employer-employee relationship, but not over disputes arising from a debtor-creditor relation.