Case Brief: Baez v Valdevilla & Oro Marketing

Q: Whether or not the Labor Arbiter can award damages arising from tortious acts.

A: I qualify.  Generally, the Labor Arbiter cannot award damages arising from tortious acts. It is the RTC which has jurisdiction thereto. This is also true when the employer-employee relationship is merely incidental, and the cause of action comes from a different source of obligation.
However, if the damages arise directly from employer-employee relationship, Labor Arbiter can award damages arising therefrom.

GR No. 128024  May 9, 2000



Valdevilla and Oro Marketing, Inc

Baez was the sales operations manager of Oro Marketing Inc. In 1993, Oro Marketing indefinitely suspended Baez, prompting Baez to file for illegal dismissal. Labor Arbiter ruled in favor of Baez. Since Oro Marketing failed to timely file the appeal, both NLRC and SC dismissed the same.

Oro Marketing filed a complaint for damages before the RTC for loss of profit, cost of supplies, litigation expenses, and attorney’s fees. It alleged that due to Baez’ modus operandi, its sales decreased and reduced its profits.

Baez filed a motion to dismiss, interposing that the action for damages, having arisen from employer-employee relationship, was squarely under the exclusive original jurisdiction of NLRC under Art. 217(a) par. 4 of Labor Code, and is barred by reason of the final judgment in labor case. As such, he accused Oro Marketing of splitting causes of action, and that the latter should have included the claim in its counterclaim before the Labor Arbiter.

The respondent RTC Judge Valdevilla ruled that it had jurisdiction over the subject matter, since the complaint did not ask for any relief under the Labor Code, but rather to recover damages as redress for Baez’s nefarious activities, causing damage and prejudice to Oro Marketing. Since this there was a breach of contractual obligation, which is within the realm of civil law, the jurisdiction belongs to the regular courts.

Whether or not RTC has jurisdiction over the claim for damages filed by Oro Marketing against Baez.
No. RTC had no jurisdiction over Oro Marketing’s complaint for damages.

RTC was incorrect in saying that the resolution of the issues presented by the complaint did not entail application of the Labor Code or other labor laws; the dispute was intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employer-employee relations —in other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by the Civil Code.

It is clear that under Art. 217(a) par. 4 of Labor Code, the Labor Arbiter and NLRC have original and exclusive jurisdiction claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations. This provision is the result of the amendment by Section 9 of Republic Act (“R.A.”) No. 6715, which took effect on March 21, 1989, and which put to rest the earlier confusion as to who between Labor Arbiters and regular courts had jurisdiction over claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the Labor Code. On May 1, 1979, however, Presidential Decree (“P.D.”) No. 1367 amended said Article 217 to the effect that “Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages.” This limitation in jurisdiction, however, lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all forms of damages “arising from the employer-employee relations”.

By the designating clause “arising from the employer-employee relations”, Art. 217 should also apply with equal force to the claim of an employer for actual damages against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

In this case, Oro Marketing’s claim against Baez for actual damages arose from a prior employer-employee relationship. In the first place, Oro Marketing’s would not have taken issue with Baez’s “doing business of his own” had the latter not been concurrently its employee. Thus, the damages alleged in the complaint were: first, those amounting to lost profits and earnings due to Baez’s abandonment or neglect of his duties as sales manager, having been otherwise preoccupied by his unauthorized installment sale scheme; and second, those equivalent to the value of Oro Marketing’s property and supplies which Baez used in conducting his “business”.

Second, contrary to Oro Marketing’s allegations, no business losses may be attributed to Baez as in fact, it was by reason of Baez’s sales operations that the sales reached its highest record level, and that the installment scheme was in fact with the knowledge of the management of Oro Marketing. In other words, the issue of actual damages has been settled in the labor case, which is now final and executory.

This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were based on tort, malicious prosecution, or breach of contract, as when the claimant seeks to recover a debt from a former employee or seeks liquidated damages in enforcement of a prior employment contract.


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