To what extent is the Labor Arbiter’s jurisdiction over damages?

In Banez v. Oro Marketing, Inc. (G.R. No. 128024, 09 May 2000), the Employer filed a Civil Case before a Regional Trial Court (RTC) seeking to recover damages against a dismissed Employee who previously filed an illegal dismissal case against the Employer. The Employee moved to dismiss the case on the ground that regular court has no jurisdiction as the controversy is within the jurisdiction of the Labor Arbiter as provided in the Labor Code:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under [the Labor] Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

x x x

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;

In resolving the case, it was held that the above provision applies similarly for actual damages that may be claimed by an employer against a dismissed employee.

Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for damages filed by employees, we [the Supreme Court] hold that by the designating clause “arising from the employer-employee relations” Article 217 should 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.

The Employer’s claim for actual damages “arose from a prior employer-employee relationship” as the Employee’s supposed violation was ground on him “doing business of his own”. Accordingly, the damages in the Complaint are:

… first, those amounting to lost profits and earnings due to [the Employee’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 [the Employer’s] property and supplies which [the Employee] used in conducting his “business”.

Second, and more importantly, to allow [the RTC] to proceed with the instant action for damages would be to open anew the factual issue of whether [the Employee’s] installment sale scheme resulted in business losses and the dissipation of [the Employer’s] property. This issue has been duly raised and ruled upon in the illegal dismissal case, where [the Employer] brought up as a defense the same allegations now embodied in his complaint, and presented evidence in support thereof. The Labor Arbiter, however, found to the contrary — that no business losses may be attributed to [the Employee] as in fact, it was by reason of [the Employee’s] installment plan that the sales of the Iligan branch of [the Employer]… reached its highest record level to the extent that [the Employee] was awarded the 1989 Field Sales Achievement Award in recognition of his exceptional sales performance, and that the installment scheme was in fact with the knowledge of the management of the Iligan branch of [the Employer].  In other words, the issue of actual damages has been settled in the labor case, which is now final and executory.

The Labor Arbiter’s jurisdiction includes damages in the Civil Code. “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.”

The Supreme Court, however, clarified that the Employer may pursue a Civil Case against the Employer in certain situations, viz:

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.

The Civil Case was thus ordered dismissed.