Serrano V Gallant

ANTONIO M. SERRANO, Petitioner, v. Gallant MARITIME SERVICES, INC.
and MARLOW NAVIGATION

CO., INC., Respondents. (March 24, 2009)
FACTS: Petitioner Serrano was hired by respondents under a POEA-approved contract of employment
for 12 months, as Chief Officer.On the date of his departure, Serrano was constrained to accept a
downgraded employment contract for the position of Second Officer with a decreased monthly salary
upon the assurance and representation of respondents that he would be Chief Officer by the end of
April 1998. Respondents did not deliver on their promise. Hence, Serrano refused to stay on as second
Officer and was repatriated to the Philippines serving only 2 months and 7 days of his contract, leaving
an unexpired portion of 9 months and 23 days. Serrano filed with the Labor Arbiter a Complaint against
respondents for constructive dismissal and for payment of his money claims.
LA: Ruled in favor of Serrano
NLRC: modified the award
Serrano filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of
the last clause in the 5th paragraph of Section 10 of RA 8042, which reads:
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.
ISSUES/RULINGS:
1. WON the subject clause violates Section 10, Article III of the Constitution on non-impairment of
contracts?
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; however, 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.
The enactment of R.A. No. 8042 in 1995 preceded the execution of the employment contract between
petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the parties. Rather, when the parties executed
their 1998 employment contract, they were deemed to have incorporated into it all the provisions of
R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in
the exercise of the police power of the State to regulate a business, profession or calling, particularly the
recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and
well-being of OFWs wherever they may be employed. Police power legislations adopted by the State to
promote the health, morals, peace, education, good order, safety, and general welfare of the people are
generally applicable not only to future contracts but even to those already in existence, for all private
contracts must yield to the superior and legitimate measures taken by the State to promote public
welfare.
2. WON 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?
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.
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.
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees
fit, a system of classification into its legislation; however, 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.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a
closer examination reveals that the subject clause has a discriminatory intent against, and an invidious
impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis-à-vis OFWs with employment contracts
of one year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis-à-vis local workers with fixed-period employment;
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally
discharged were treated alike in terms of the computation of their money claims: they were uniformly
entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of
R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired
portion of one year or more in their employment contract have since been differently treated in that
their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the computation
of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap
on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the
claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage. There being a suspect classification
involving a vulnerable sector protected by the Constitution, the Court now subjects the classification to
a strict judicial scrutiny, and determines whether it serves a compelling state interest through the least
restrictive means.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state
interest that would justify the perpetuation of the discrimination against OFWs under the subject clause.
There can never be a justification for any form of government action that alleviates the burden of one
sector, but imposes the same burden on another sector, especially when the favored sector is composed
of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs
whose protection no less than the Constitution commands. The idea that private business interest can
be elevated to the level of a compelling state interest is odious.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of
petitioner and other OFWs to equal protection.
The subject clause “or for three months for every year of the unexpired term, whichever is less” in the
5th paragraph of Section 10 of Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL

Serrano V Gallant

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Serrano V Gallant

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ANTONIO M. SERRANO, Petitioner, v. Gallant MARITIME SERVICES, INC.

and MARLOW NAVIGATION

LA: Ruled in favor of Serrano

NLRC: modified the award

Third, OFWs vis-à-vis local workers with fixed-period employment;

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