Case Digest: Cadalin, et al vs. POEA Administrator, GR Nos. L-104776, 104911-14 and 105029-32, December 5, 1994

Private International Law  

• Petitioner: Bienvenido M. Cadalin, et al.

• Respondent: POEA Administrator, et al.

Recit Version:

• Cadalin et al. were recruited by AIBC and employed by BRII to work in various countries, including Bahrain. They were terminated early and filed a lawsuit upon their return to the Philippines.

• Bahrain’s Labor Law Amiri Decree No. 23 of 1976 sets a one-year prescriptive period for claims arising from employment contracts. The POEA Administrator ruled for a 10-year period, while the NLRC favored a 3-year period under the Labor Code.

• The Court held that Amiri Decree No. 23 is contrary to Philippine public policy on labor protection. Philippine courts will not enforce foreign claims that violate Philippine public policy. The 1987 Philippine Constitution emphasizes social justice, labor protection, and full employment. Enforcing the one-year prescriptive period would contradict these constitutional principles.

Facts:

• Since 1984, a class suit initiated by Bienvenido M. Cadalin, Rolando M. Amul, Donato B. Evangelista, and 1,767 other overseas contract workers (OCWs) against respondents Philippine Overseas Employment Administration (POEA) Administrator, National Labor Relations Commission (NLRC), Brown & Root International, Inc. (BRII), and/or Asia International Builders Corporation (AIBC). 

• The claimants, overseas contract workers deployed in various countries, sought compensation for alleged premature termination, unpaid wages, benefits, and other claims arising from their employment with AIBC and BRII. 

• Some petitioners were deployed to work in Bahrain.

• In 1976, His Majesty Isa Bin Salman Al Kaifa of Bahrain issued Amiri Decree No. 23, known as the Labour Law for the Private Sector:

• Art. 79: Workers are entitled to 25% extra pay for overtime during the day and 50% extra for overtime during the night (7:00 PM to 7:00 AM).

• Art. 80: Friday is the weekly day of rest with full pay. If a worker agrees to work on this day, they are entitled to 150% of their normal wage.

• Art. 81: Workers who work on an official holiday are entitled to 150% of their normal wage.

• Art. 84: Workers are entitled to 21 days of paid leave after one year of continuous service, increasing to 28 days after five years. Leave is also earned proportionally for partial years of service.

• Art. 107: Contracts for indefinite duration can be terminated with 30 days' notice for monthly paid workers and 15 days' notice for other workers. Failure to provide notice requires compensation equivalent to the notice period.

• Art. 111: Upon termination, workers are entitled to a leaving indemnity of 15 days’ wages for each of the first three years of service and one month’s wages for each year thereafter, with proportional entitlement for partial years.

• Article 156 provided that "[a] claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the expiry of the contract."

• POEA Administrator: Ruled that the prescriptive period for the filing of claims was 10 years. 

• NLRC: Reversed the ruling, holding that the prescriptive period for filing claims was three years under the Labor Code, not ten years under the Civil Code or one year under Amiri Decree No. 23.

Issue: Whether Amiri Decree No. 23 could be applied in the Philippines. No.

Amiri Decree No. 23 is contrary to Philippine public policy on the protection of labor.

AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23 of 1976, argue that there is in force in the Philippines a "borrowing law," which is Section 48 of the Code of Civil Procedure and that where such kind of law exists, it takes precedence over the common-law conflicts rule.

First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law.

Article 156 of the Amiri Decree No. 23 of 1976 provides:

A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).

As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law.

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive, depending on the characterization given such a law.

Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of limitations of New York, instead of the Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive. Being considered merely a procedural law even in Panama, it has to give way to the law of the forum on prescription of actions.

However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has a "borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation as one of substance. 

b

A "borrowing statute" directs the state of the forum to apply the foreign statute of limitations to the pending claims based on a foreign law. While there are several kinds of "borrowing statutes," one form provides that an action barred by the laws of the place where it accrued, will not be enforced in the forum even though the local statute has not run against it. Section 48 of our Code of Civil Procedure is of this kind. Said Section provides:

If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippines Islands.

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed only those provisions of the Code of Civil Procedures as to which were inconsistent with it. There is no provision in the Civil Code of the Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure.

In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy. To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:

The state shall promote social justice in all phases of national development. (Sec. 10).

The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare (Sec. 18).

In Article XIII on Social Justice and Human Rights, the 1987 Constitution provides:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.

Having determined that the applicable law on prescription is the Philippine law, the next question is whether the prescriptive period governing the filing of the claims is three years, as provided by the Labor Code or ten years, as provided by the Civil Code of the Philippines.

The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the Philippines, which provides:

The following actions must be brought within ten years from the time the right of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law;

3. Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the Philippines, which in pertinent part provides:

Money claims-all money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued, otherwise they shall be forever barred.

xxx xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases at bench. The said case involved the correct computation of overtime pay as provided in the collective bargaining agreements and not the Eight-Hour Labor Law.

As noted by the Court: 

That is precisely why petitioners did not make any reference as to the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that work computation provided in the collective bargaining agreements between the parties be observed. Since the claim for pay differentials is primarily anchored on the written contracts between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern.

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:

Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of action accrued otherwise such action shall be forever barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will apply, if the claim for differentials for overtime work is solely based on said law, and not on a collective bargaining agreement or any other contract. In the instant case, the claim for overtime compensation is not so much because of Commonwealth Act No. 444, as amended but because the claim is demandable right of the employees, by reason of the above-mentioned collective bargaining agreement.

Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce any cause of action under said law." On the other hand, Article 291 of the Labor Code of the Philippines provides the prescriptive period for filing "money claims arising from employer-employee relations." The claims in the cases at bench all arose from the employer-employee relations, which is broader in scope than claims arising from a specific law or from the collective bargaining agreement.

The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of the Labor Code of the Philippines applies only to money claims specifically recoverable under said Code, does not find support in the plain language of the provision. Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the employer's violation of the employee's right," as provided by the Labor Code supported by the facial reading of the provision.

Explanation: 

• The three-year prescriptive period under the Labor Code applies.

• The Eight-Hour Labor Law's prescriptive period applies when claims are solely based on the law, not a contract.

• In this case, the claims arise from employer-employee relations, which is broader than claims under a specific law or contract.

• The Labor Code's prescriptive period applies to all money claims arising from employer-employee relations, regardless of whether they are specifically recoverable under the Code.