Serrano v. Gallant Maritime (2009): OFW Pay for the Unexpired Term

Antonio Serrano, a Filipino seafarer, was hired by Gallant Maritime Services and Marlow Navigation under a contract approved by the Philippine Overseas Employment Administration (POEA). The contract was for 12 months, as Chief Officer, with a basic monthly salary of US$1,400, overtime of US$700 a month, and seven days of vacation leave with pay each month.

On March 19, 1998, the day he left, he had to accept a downgraded contract as Second Officer at US$1,000 a month. He was told he would be made Chief Officer by the end of April 1998. That promise was not kept. He refused to stay on as Second Officer and was sent home on May 26, 1998. He had served two months and seven days, so nine months and 23 days of his contract were left.

He filed a complaint for constructive dismissal and money claims. The Labor Arbiter found the dismissal illegal but, applying the three-month clause, awarded only three months' salary: US$8,770, computed at US$2,590 a month (basic salary plus fixed overtime and vacation leave pay). The NLRC cut the monthly rate to the basic US$1,400, so the award became US$4,200 for three months, plus a US$45 salary differential and attorney's fees.

Antonio then challenged the clause as unconstitutional. The NLRC denied his motion. The Court of Appeals affirmed the lower rate and did not rule on the constitutional question. He went to the Supreme Court. While the case was pending, he wrote to withdraw it because he was old and sick and needed the money for treatment; the Court still decided the constitutional question because of its importance.

Is the clause "or for three months for every year of the unexpired term, whichever is less" in Section 10 of Republic Act No. 8042, the Migrant Workers and Overseas Filipinos Act of 1995, constitutional? And should the award include his overtime and leave pay?

The Supreme Court granted the petition and declared the clause unconstitutional.

The challenge was raised on time. The Court said the NLRC, a labor tribunal, applies the law but cannot declare it invalid. The Court of Appeals can. Raising the issue there was timely, and the Court of Appeals should have ruled on it.

No impairment of contracts. Republic Act No. 8042 took effect in 1995, before Antonio's 1998 contract. A law already in force when a contract is made is read into it, so the clause did not impair his contract.

Equal protection. Before Republic Act No. 8042, both overseas workers and local workers with fixed-term contracts who were illegally dismissed received their salaries for the whole unexpired portion of their contracts. The clause changed this only for overseas workers with one year or more left on their contracts: their claim was capped at three months for every year of the unexpired term. Other overseas workers and local fixed-term workers had no such cap. The Court called this a suspect classification that burdens a sector the Constitution specially protects, so it applied strict scrutiny. The government had to show a compelling state interest and did not.

The government said the cap protected placement agencies, which are solidarily liable with foreign employers. The Court rejected this: "The idea that private business interest can be elevated to the level of a compelling state interest is odious." It added that less restrictive means existed, such as the POEA's disciplinary measures against foreign employers who default.

Substantive due process. The clause also took away the worker's monetary benefits, which are property, without any valid government purpose.

Overtime and leave pay excluded. The Court said the word "salaries" in Section 10 does not include overtime and leave pay. Overtime pay requires proof that the work was actually done, and leave pay is given during actual service. So the award was computed on the basic salary of US$1,400.

The order. Antonio was awarded his salaries for the entire unexpired portion of his contract, nine months and 23 days, at US$1,400 a month.

Justices Carpio and Brion wrote separate concurring opinions.

The clause "or for three months for every year of the unexpired term, whichever is less" in Section 10 of Republic Act No. 8042 is unconstitutional because it violates equal protection and substantive due process; an illegally dismissed overseas worker is entitled to salary for the entire unexpired portion of the employment contract, computed on the basic wage.

Serrano is the starting point for the rule that an illegally dismissed OFW is owed the salary for the rest of the contract, not a three-month cap. Congress put the same clause back in 2010 through Republic Act No. 10022. The Court struck it down again in Sameer Overseas Placement Agency v. Cabiles (2014) and repeated the ruling in Aldovino v. Gold and Green Manpower (2019).

Do not confuse this case with Serrano v. NLRC (2000), a local case about dismissals without notice. That earlier rule was abandoned in Agabon v. NLRC.

Here is a made-up illustration, with invented names. Marco signs a 12-month contract as a ship's officer with a basic salary of US$1,500 a month. He is sent home after three months without a valid cause. If a labor tribunal finds the dismissal illegal, then under the rule in Serrano his salary claim is measured by the nine months left on his contract, at his basic salary. Overtime that he did not actually work is not added.

This page explains the 2009 decision. Laws passed after 2009 on overseas employment are covered only as far as Sameer and Aldovino discuss them. Before signing with or paying any agency, check its license on the DMW list. For a plain answer, read OFW illegally dismissed: salary for the unexpired contract, and for a case of your own, see where to find legal help.