Serrano v. Gallant Maritime Services, Inc.

Antonio Serrano, a Filipino seafarer, was hired by Gallant Maritime Services and Marlow Navigation under a POEA-approved 12-month contract as Chief Officer at US$1,400.00 a month. On his departure on March 19, 1998, he was made to accept a downgraded contract as Second Officer at US$1,000.00 a month, on the promise that he would be made Chief Officer by the end of April 1998. When the promise was not kept, he refused to stay on and was repatriated on May 26, 1998, with nine months and 23 days of his contract unexpired. The Labor Arbiter found his dismissal illegal but, applying the last clause of Sec. 10, R.A. 8042, awarded salaries for only three months at US$2,590.00, which included overtime and leave pay. The NLRC reduced the rate to the US$1,400.00 basic salary. Serrano first questioned the constitutionality of the clause in his motion for partial reconsideration with the NLRC and repeated it before the Court of Appeals, which affirmed the NLRC without ruling on the constitutional issue.

1. 1Whether the clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Sec. 10, R.A. 8042 is unconstitutional.
2. 2Whether overtime and leave pay form part of the salary base for computing the award.

The clause was declared unconstitutional; overtime and leave pay are excluded. The constitutional issue was timely raised, because the CA, not the NLRC, has the power to decide it. The clause does not violate the non-impairment clause. R.A. 8042 (1995) predated the 1998 contract, so its terms were deemed written into it, and the law was in any case a police power measure. The clause does, however, deny equal protection. Before R.A. 8042, OFWs and local fixed-term workers who were illegally dismissed uniformly recovered their salaries for the entire unexpired term. The clause imposes a 3-month cap only on OFWs with one year or more left in their contracts. The Court treated this as a suspect classification against a sector the Constitution specially protects and applied strict scrutiny. The Solicitor General's rationale was to ease the solidary liability of placement agencies, but the legislative record showed no compelling state interest. "The idea that private business interest can be elevated to the level of a compelling state interest is odious." Less restrictive means also existed, namely the POEA disciplinary rules against defaulting foreign employers. Art. XIII, Sec. 3 is not itself a source of enforceable rights, but read with the equal protection clause it justifies strict scrutiny. The clause also violates substantive due process because it serves no valid governmental purpose. Under Department Order No. 33, s. 1996, "salaries" means basic wage, so overtime and leave pay are not included without proof of actual work. The petition was granted, and Serrano was awarded his salaries for nine months and 23 days at US$1,400.00 a month.