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Separation Pay

Millares vs. NLRC
G.R. No. 122827. March 29, 1999
FACTS: Petitioners numbering one hundred sixteen (116) occupied technical,
managerial and even a Vice Presidential positions in the mill site of respondent Paper
Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur, were
retrenched by respondent when it sufered a major fnancial setback brought about by
the joint impact of restrictive government regulations on logging and the economic
crisis. Accordingly, petitioners were given separation pay. Believing that the allowances
they regularly received on a monthly basis during their employment should have been
included in the computation thereof, they lodged a complaint for separation pay
They customarily receive- (1) Staf/Managers Allowance. (2) Transportation
Allowance and (3) Bislig Allowance.
Staf/Managers allowance include provisions for housing with free electricity
however this allowance stops when there is vacancy occurs in the company's housing
In the case of transportation allowance, the company grants transportation
allowance to key ofcers and Managers assigned in the mill site who use their own
vehicles in the performance of their duties. It is a conditional grant such that when the
conditions no longer obtain, the privilege is discontinued. The recipients of this kind of
allowance are required to liquidate it by submitting a report with a detailed
enumeration of expenses incurred.
Lastly, The Bislig Allowance is given to Division Managers and corporate ofcers
assigned in Bislig on account of the hostile environment prevailing therein. But once
the recipient is transferred elsewhere outside Bislig, the allowance ceases.
The Executive Labor-Arbiter concluded that the allowances customarily furnished
by the respondent and regularly received by the petitioner should be included in the
latters basic pay and that in the computation of separation pay account should be taken
not just of the basic salary but also of the regular allowances that the employee had been
The NLRC set aside the Labor Arbiters decision. It decreed that the allowances did
not form part of the salary base in computing separation pay.
ISSUES: Whether or not the allowances customarily furnished by the employer is
included in the computation of separation pay
Held: No, when an employer customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof, as determined by the Secretary of
Labor and Employment is included in wage. Customary as founded on long-
established and constant practice connoting regularity. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part of a salary
because the nature of the grant is a factor worth considering. The subject allowances
were temporarily, not regularly received by petitioners.
In Santos the Court decreed that in the computation of separation pay awarded in
lieu of reinstatement, account must be taken not only of the basic salary but also of
transportation and emergency living allowances. Later, the Court
in Soriano, citing Santos, was general in its holding that the salary base properly used in
computing separation pay where reinstatement was no longer feasible should include
not just the basic salary but also the regular allowances that the employee had been
receiving. Insular merely reiterated the aforementioned rulings. The rationale is not
difcult to discern. It is the obligation of the employer to pay an illegally dismissed
employee the whole amount of his salaries plus all other benefts, bonuses and general
increases to which he would have been normally entitled had he not been dismissed and
had not stopped working. The same holds true in case of retrenched employees. And
thus we applied Insular and Soriano in Planters in the computation of separation pay of
retrenched employees. Songco likewise involved retrenchment and was relied upon
in Planters, Soriano and Santos in the proper amount of separation pay. As culled from
the foregoing jurisprudence, separation pay when awarded to an illegally dismissed
employee in lieu of reinstatement or to a retrenched employee should be computed
based not only on the basic salary but also on the regular allowances that the employee
had been receiving. But in view of the previous discussion that the disputed allowances
were not regularly received by petitioners herein, there was no reason at all for
petitioners to resort to the above cases.
In case of retrenchment to prevent losses, Art. 283 of the the Labor Code imposes on the
employer an obligation to grant to the afected employees separation pay equivalent
to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever
is higher.
Disposition: Wherefore, the petition is DISMISSED. The resolution of public
respondent National Labor Relations Commission dated 7 October 1994 holding that
the Staf /Manager's, transportation and Bislig allowances did not form part of the
salary base used in computing the separation pay of petitioners, as well as its resolution
dated 26 September 1995 denying reconsideration, is AFFIRMED.
Anino vs NLRC
G.R. No. 123226. May 21, 1998
FACTS: Complainants are employees of respondent Hinatuan Mining Corporation
(HMC) holding supervisory positions. They formed a supervisors union where Anino,
Navarro, Daug-daug and Filoteo were elected as President, Vice President, PIO and
Director, respectively. The respondent on the other hand, after having been notifed of
the legal existence of the union and of the petitioners desire for a collective bargaining
completely ignored the unions proposal and did not answer. Petitioner fles for unfair
labor practice. Thereafter, in the guise of retrenchment dismissed the complainants.
Because of their dismissal, complainants state that they were deprived among
others of their salaries and prayed in their complaint that respondent: (a) be declared
guilty of unfair labor practices; (b) be ordered to reinstate complainants to their former
positions with back wages.
On respondents Motion to Dismiss, it alleged that the retrenchment, which
afected both the rank-and-fle as well as the supervisors and managerial stafs, was
implemented with the purpose of streamlining the organizational structure in order to
prevent further loses. It further alleged that the petitioners admitted the retrenchment
and were in fact accepted/received their respective separation pay equivalent to one
month salary for every year of service and other monetary benefts as evidenced by the
waiver and quitclaim which the complainants allegedly signed.
The Labor Arbiter ruled that the dismissal of the employees was illegal and
orders their reinstatement and granted payment of back wages. However, the ULP
allegation was DISMISSED and the claim for damages DENIED.
The NLRC REVERSED the ruling of the L.A. It reasoned that the actions of the
complainants to challenge their separation after a period of two months were
questionable for the reason that they already have received/accepted their respective
separation pay.

ISSUE: 1. Whether or not the petitioners were validly retrenched.
2. Whether or not the complainants were estopped from claiming illegal
dismissal for the reason of their execution of waiver and quitclaim.
HELD: 1. NO. Petitioners were illegally dismissed.
The Labor Code provides that: Art. 283. Closure of establishment and
reduction of personnel. -- The employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the workers
and the [Department] of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or redundancy, the
worker afected thereby shall be entitled to separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of establishment
or undertaking not due to serious business losses or fnancial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
To justify retrenchment, the following requisites must be complied with: (a) the
losses expected should be substantial and not merely de minimis in extent; (b) the
substantial losses apprehended must be reasonably imminent; (c) the retrenchment
must be reasonably necessary and likely to efectively prevent the expected losses; and
(d) the alleged losses, if already incurred, and the expected imminent losses sought to
be forestalled must be proved by sufcient and convincing evidence.
In termination cases, the burden of proving that the dismissal was for a valid or
authorized cause rests upon the employer. In the case at bar, respondent corporation did
not submit an iota of evidence to show losses in its business operations and the
economic havoc it would sustain imminently. It merely claimed that retrenchment was
undertaken as a measure of self-preservation to prevent losses brought about by the
continuing decline of nickel prices and export volume in the mining industry.
Additionally, it alleged that the reduction of excise taxes on mining from 5% to 1% on a
graduated basis, as provided under Republic Act No. 7729, was a clear recognition by
the government itself of the industrys worsening economic difculties.
These bare statements of private respondents miserably fall short of the requirements to
show the validity of a retrenchment.
2. No. The recognized and accepted doctrine is that a dismissed employee who has accepted
separation pay is not necessarily estopped from challenging the validity of his or her dismissal.
Neither does it relieve the employer from its legal obligation.
Acceptance of those benefts would not amount to estoppel. The reason is
plain. Employer and employee, obviously, do not stand on the same footing. The
employer drove the employee to the wall. The latter must have to get hold of
money. Because, out of job, he had to face the harsh necessities of life. He thus found
himself in no position to resist money profered. His, then, is a case of adherence, not of
choice. One thing sure, however, is that petitioners did not relent their claim. They
pressed it. They are deemed not to have waived any of their rights. Renuntiatio non
DISPOSITION: WHEREFORE, the petition is hereby GRANTED and the challenged
NLRC Decision is SET ASIDE. The Decision of Labor Arbiter is REINSTATED, except
that Respondent Federico B. Ganigan shall not be liable for petitioners monetary
claims. In lieu of reinstating petitioners, Respondent Hinatuan Mining Corporation
shall PAY them separation benefts, computed from the time each of the petitioners was
employed until this Decision becomes fnal and executory.