G.R. No. 108813 . December 15, 1994.
JUSMAG PHILIPPINES, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION (Second Division) and FLORENCIO SACRAMENTO, Union President, JPFCEA, respondents.

FACTS

Private respondent Florencio Sacramento was a Security Assistance Support Personnel (SASP) working at the Joint United States Military Assistance Group to the Philippines (JUSMAG) from 1969 until his dismissal in 1992. He filed a complaint for illegal dismissal before the Department of Labor and Employment. JUSMAG moved to dismiss the complaint, invoking immunity from suit as an agency of the United States government and denying the existence of an employer-employee relationship.
The Labor Arbiter dismissed the complaint for lack of jurisdiction, upholding JUSMAG’s immunity. On appeal, the National Labor Relations Commission (NLRC) reversed the Arbiter’s order. The NLRC ruled that JUSMAG had waived its immunity by hiring private respondent and was estopped from denying an employer-employee relationship, relying on the principle that a state waives immunity by entering into commercial contracts. The NLRC remanded the case for reception of evidence on the illegal dismissal claim.

ISSUE

Whether or not the NLRC committed grave abuse of discretion in assuming jurisdiction over the complaint by ruling that JUSMAG is not immune from suit.

RULING

Yes, the NLRC committed grave abuse of discretion. The Supreme Court granted the petition and reversed the NLRC Resolution. The Court held that JUSMAG, as an agency of the United States government, is immune from suit. JUSMAG was created pursuant to the 1947 Military Assistance Agreement between the Philippines and the United States, with its primary task being to advise and assist on military matters—a governmental function. The Court applied the restrictive theory of state immunity, which distinguishes between sovereign/jure imperii acts (immune) and commercial/jure gestionis acts (not immune). JUSMAG’s functions are unequivocally jure imperii.
The NLRC’s finding of waiver was erroneous. The hiring of local civilian personnel is necessary for the mission’s operation and does not transform the agency’s governmental acts into commercial ones. The cited case of Harry Lyons vs. USA involved a purely commercial stevedoring contract, which is not analogous to JUSMAG’s employment of support staff for its advisory functions. Furthermore, the evidence, including a subsequent Memorandum of Agreement, indicated that the SASP were considered employees of the Armed Forces of the Philippines, with JUSMAG merely having operational control. Thus, no employer-employee relationship existed between JUSMAG and private respondent to support a waiver of immunity. The labor tribunals had no jurisdiction over the case.