Case Digest: Serrano vs Gallant Maritime Services (2009)

G.R. No. 167614               March 24, 2009





The petitioner, Antonio Serrano (petitioner), a Filipino seafarer, was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment.

During the petitioner’s departure for work, he was constrained to accept a downgraded employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation of respondents that he would be made Chief Officer by the end of April 1998. The downgrade is contrary to the Chief Officer post that he initially signed up for. (with higher salary rate).

Respondents did not deliver on their promise to make petitioner Chief Officer. Hence, petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.

Petitioner’s employment contract was for a period of 12 months, but at the time of his repatriation he had served only two (2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days. He then filed with the Labor Arbiter (LA) a Complaint against respondents for constructive dismissal and for payment of his money claims in the total amount of US$26,442.73

LA Decision – Declaring the dismissal of petitioner illegal and awarding him monetary benefits. As to the benefits, the LA based his computation on the salary period of three months only

Petitioner appealed to the NLRC citing that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts

Respondents also appealed to the National Labor Relations Commission (NLRC) to question the finding of the LA that petitioner was illegally dismissed.

NLRC – The NLRC corrected the LA’s computation of the lump-sum salary awarded to petitioner by reducing the applicable salary rate.

Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject clause. Motion was denied.

Petitioner filed a Petition for Certiorari with the CA, reiterating the constitutional challenge against the subject clause.

CA- Dismissed petitioner’s motion due to technicality. CA affirmed the NLRC ruling on the reduction of the applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.

Petitioner raised these main grounds to the Supreme Court:

  1. CA erred  to not acknowledge the constitutional issues raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3) months

The law in question is Republic Act (R.A.) No. 8042 – Migrant Workers Act, to wit:

Sec. 10. Money Claims. – x x x In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less.

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because

(1) it unduly impairs the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed salary package and

(2) It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared illegal; that the disparate treatment


  1. Whether or not the subject clause violates Section 10, Article III of the Constitution on non-impairment of contracts?
  2. Whether or not the subject clause violate Section 1,Article III of the Constitution, and Section 18,Article II and Section 3, Article XIII on labor as a protected sector


  1. NO. Petitioner’s claim that the subject clause unduly interferes with the stipulations in his contract on the term of his employment and the fixed salary package he will receive is not tenable.

Section 10, Article III of the Constitution provides:

“No law impairing the obligation of contracts shall be passed.”

The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation, and cannot affect acts or contracts already perfected.

As to laws already in existence, their provisions are read into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II is limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto.

2. YES. Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the equal protection of the law.

Section 18, Article II and Section 3, Article XIII accord all members of the labor sector, without distinction as to place of deployment, full protection of their rights and welfare.

Such rights are not absolute. To be valid, the classification must comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.

To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like circumstances.


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