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Traders Royal Bank vs NLRC, 189 SCRA 274; G. R. No.

88168, August 30, 1990

(Labor Standards bonus, diminution of benefits)
FACTS: Respondent union filed a letter-complaint against petitioner TRB for the diminution of
benefits being enjoyed by the employees since time immemorial, e.g. mid-year bonus, from 2 months
gross pay to 2 months basic and year-end bonus from 3 months gross to only 2 months.
Petitioner insisted that it had paid the employees holiday pay. The practice of giving them bonuses at
years end, would depend on how profitable the operation of the bank had been.
NLRC found TRB guilty of diminution of benefits due to the private respondents and ordered it to pay
the said employees claims for differentials in their holiday, mid-year, and year-end bonuses.
ISSUE: Whether or not bonuses are part of labor standards.
HELD: No, A bonus is a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right. It is something given in addition to what is ordinarily received by or
strictly due the recipient. The granting of a bonus is basically a management prerogative which
cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employees basic salaries or wages.
Globe Mackay Cable and Radio Corp. vs NLRC, 163 SCRA 71; G.R. No. L-74156
(Labor Standards COLA, payment of wage in unworked days)
FACTS: Wage Order No. 6 increased the cost-of-living allowance (COLA) of non-agricultural workers
in the private sector.
Petitioner Corporation complied with said Order by paying its monthly-paid employees the mandated
P3.00 per day COLA. In its computation, Petitioner Corporation multiplied the P3.00 daily COLA by
22 days, which is the number of working days in the company.
Respondent Union disagreed with the computation alleging that prior to the effectivity of the Wage
Order, Petitioner Corporation had been computing and paying the COLA on the basis of 30 days per
month and that this constituted an employer practice, which should not be unilaterally withdrawn.
The Labor Arbiter sustained the position of Petitioner Corporation by holding that the
monthly COLA should be computed on the basis of 22 days, since the evidence showed that there are
only 22 days in a month for monthly-paid employees in the company.
The NLRC reversed the Labor Arbiter on appeal, holding that Petitioner Corporation was
guilty of illegal deductions considering that COLA should be paid and computed on the basis of 30

days since workers paid on a monthly basis are entitled to COLA on days unworked; and the full
allowance enjoyed by Petitioner Corporations monthly-paid employees before the CBA executed
between the parties constituted voluntary employer practice, which cannot be unilaterally withdrawn.
ISSUE: WON the computation and payment of COLA on the basis of 30 days per month constitute an
employer practice which should not be unilaterally withdrawn.
HELD: No, Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 provides that all
covered employees shall be entitled to their daily living allowance during the days that they are paid
their basic wage, even if unworked. The primordial consideration for entitlement of COLA is that
basic wage is being paid. The payment of COLA is mandated only for the days that the employees are
paid their basic wage, even if said days are unworked. On the days that employees are not paid their
basic wage, the payment of COLA is not mandated.
Moreover, Petitioner Corporation cannot be faulted for erroneous application of a doubtful or
difficult question of law. Since it is a past error that is being corrected, no vested right may be said to
have arisen nor any diminution of benefit under Article 100 of the Labor Code may be said to have
resulted by virtue of the correction.
G.R. No. 170139 August 5, 2014
FACTS: Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.
Respondent Joy Cabiles was hired thus signed a one-year employment contract for a monthly salary of
NT$15,360.00. Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997. She
alleged that in her employment contract, she agreed to work as quality control for one year. In Taiwan,
she was asked to work as a cutter.
Sameer claims that on July 14, 1997, a certain Mr. Huwang from Wacoal informed Joy, without prior
notice, that she was terminated and that she should immediately report to their office to get her
salary and passport. She was asked to prepare for immediate repatriation. Joy claims that she was
told that from June 26 to July 14, 1997, she only earned a total of NT$9,000.15 According to her,
Wacoal deducted NT$3,000 to cover her plane ticket to Manila.
On October 15, 1997, Joy filed a complaint for illegal dismissal with the NLRC against
petitioner and Wacoal. LA dismissed the complaint. NLRC reversed LAs decision. CA affirmed the
ruling of the National Labor Relations Commission finding respondent illegally dismissed and
awarding her three months worth of salary, the reimbursement of the cost of her repatriation, and
attorneys fees.

ISSUE: Whether or not Cabiles was entitled to the unexpired portion of her salary due to illegal
HELD: YES. The Court held that the award of the three-month equivalent of respondents salary
should be increased to the amount equivalent to the unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., this court
ruled that the clause or for three (3) months for every year of the unexpired term, whichever is less
is unconstitutional for violating the equal protection clause and substantive due process.
A statute or provision which was declared unconstitutional is not a law. It confers no rights;
it imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been
passed at all.
The Court said that they are aware that the clause or for three (3) months for every year of
the unexpired term, whichever is less was reinstated in Republic Act No. 8042 upon promulgation of
Republic Act No. 10022 in 2010.

Tabas vs. California Manufacturing Co., Inc. [169 SCRA 497, GR 80680]
(Labor Standards Both employer and labor only contractor may be liable)
Facts: Petitioners filed a petition in the NLRC for reinstatement and payment of various benefits
against California Manufacturing Company. The respondent company then denied the existence of an
employer-employee relationship between the company and the petitioners.
Pursuant to a manpower supply agreement, it appears that the petitioners prior their involvement
with California Manufacturing Company were employees of Livi Manpower service, an independent
contractor, which assigned them to work as promotional merchandisers. The agreement provides
California has no control or supervisions whatsoever over [Livis] workers with respect to how they
accomplish their work or perform [Californias] obligation It was further expressly stipulated that the
assignment of workers to California shall be on a seasonal and contractual basis; that [c]ost of
living allowance and the 10 legal holidays will be charged directly to [California] at cost ; and that
[p]ayroll for the preceding [sic] week [shall] be delivered by [Livi] at [Californias] premises.
Issue: WON principal employer is liable.

Held: Yes. The existence of an employer-employee relation cannot be made the subject of an
Based on Article 106, labor-only contractor is considered merely as an agent of the employer,
and the liability must be shouldered by either one or shared by both.
There is no doubt that in the case at bar, Livi performs manpower services, meaning to say, it
contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to
the contrary, and notwithstanding the provision of the contract that it is an independent
contractor. The nature of ones business is not determined by self-serving appellations one attaches
thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains
a separate line of business does not extinguish the equal fact that it has provided California with
workers to pursue the latters own business. In this connection, we do not agree that the petitioners
had been made to perform activities which are not directly related to the general business of
manufacturing, Californias purported principal operation activity. Livi, as a placement agency,
had simply supplied California with the manpower necessary to carry out its (Californias)
merchandising activities, using its (Californias) premises and equipment.
Manufacturing Company 169 scra 497
GR NO. 92777 MARCH 13, 1991
FACTS 1.Isagani Ecal was an employee of Hi-Line sawmill.On February 4, 1987, he tendered his
resignation stating the following reasons: ako po ay magreresign na sa aking trabaho bilang laborer
sapagkat nakita ko na masmalaki and kikitain kung mangongontrata na lamang. Thereafter, HiLine

does not










by Ecal.4.Petitioners were not included in the payroll. Instead, a lump sum of P1,400.00 is given
to Ecal or his representative Solomon de los Santos, every four days, to cover their wages for the
period the petitioners divide among themselves.5.Private respondents allege that Ecal customarily
removes some of his laborers at theHi-Line sawmill and assigns them to other sawmill.6.Petitioners
worked the companys compound in Wakas, Bocaue, Bulacan at least eight hours a day, seven days a
week.7.On June 6, 1987, the company unilaterally terminated the services of petitioners without
notice allegedly on the ground that its contract with Ecal has expired.
1. Whether or not Ecal is a labor only contractor.
2. Whether or not the petitioners are regular employees of Hi-Line.

1. YES. Isagani Ecal is a labor-only contractor, a mere supplier of manpower to Hi-Line. Isagani was
only a poor laborer at the time of his resignation who cannot even afford to have his daughter treated
for malnutrition. He resigned and became a supplier of laborers for Hi-Line because he saw an
opportunity for him to earn more than what he was earning while still in the payroll of the
company. At the same time, he continued working for the company as laborer at the kiln drying
section. He does not have sufficient capital to invest in tools and machineries. Private respondents
however claim that the business contracted by Ecal did not require the use of tools, equipment and
machineries and the contracted task had to be executed in the premises of Hi-Line where they use the
machineries and equipment of the company for the drying of lumber materials. Even the companys
personnel officer Elizabeth Natividad admitted that Ecal resigned in order to supply manpower to the
company on a task basis. By the very allegations of private respondents, it is quite clear that
Isagani Ecal only supplies man-power to Hi-Line within the context of labor-onlycontracting as
defined by law.A finding that Isagani Ecal is a labor-only contractor is equivalent to finding that
anemployer-employee relationship exist between the company and Ecal including thelatters contract
workers, the relationship such as provided by the law itself.
2. YES. There is no question that the task performed by petitioners is directly-related tothe business
of Hi-Line. Petitioners were assigned to sort out the lumber materialswhether wet or fresh kiln as to
sizes and to carry them from the stockpile to the dryerwhere they are loaded for drying after which
they are unloaded. The work ofpetitioners is an integral part of the operation of the sawmill of Hi-Line
without whichproduction and company sales will suffer.

NERI VS NLRC (1993) 224 SCRA 717

FACTS: Petitioners instituted complaints against FEBTC and BCC to compel the bank to accept them
as regular employeesand for it to pay the differential between the wages being paid them by BCC and
those received by FEBTC employeeswith similar length of service. They contended that BCC in
engaged in labor-only contracting because it failed toadduce evidence purporting to show that it
invested in the form of tools, equipment, machineries, work premisesand other materials which are
necessary in the conduct of its business. Moreover, petitioners argue that they performduties which
are directly related to the principal business or operation of FEBTC.
ISSUE: Whether or not BCC was engaged in labor-only contracting.

HELD: It is well-settled that there is labor-only contracting where:

(a) the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others; and,
(b) The workers recruited and placed by such person are performing activities which are
directly related to the principal business of the employer.
BCC need not prove that it made investments in the form of tools, equipment, machineries, and work
premises, among others, because it has established that it has sufficient capitalization. This fact was
both determined by the Labor Arbiter and the NLRC as BCC had a capital stock of P1 million fully
subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged
in labor-only contracting.

415 SCRA 573

FACTS: In October 1993, petitioner Mariveles Shipyard Corporation engaged the services of Longest
Force Investigation and Security Agency, Inc. to render security services at its premises. Pursuant to
their agreement, Longest Force deployed its security guards, the private respondents herein, at the
petitioners shipyard in Mariveles, Bataan.
According to petitioner, it found the services being rendered by the assigned guards
unsatisfactory and inadequate, causing it to terminate its contract with Longest Force on April 1995.
Longest Force, in turn, terminated the employment of the security guards it had deployed at
petitioners shipyard.
Private respondents filed a case for illegal dismissal and underpayment of wages, among
others. In turn, Longest Force filed a cross-claim against Mariveles Shipyard, alleging that the service
fee paid by the latter to it was way below the PNPSOSIA and PADPAO rate.
The petitioner denied any liability on account of the alleged illegal dismissal, stressing that no
employer-employee relationship existed between it and the security guards. Petitioner likewise prayed
that Longest Forces cross-claim be dismissed for lack of merit. Petitioner averred that Longest Force
had benefited from the contract, it was now estopped from questioning said agreement on the ground
that it had made a bad deal.
The Labor Arbiter found Mariveles and Longest Force jointly and severally liable for private
respondentsmoney claims and attorneys fees. Longest Force was likewise ordered to reinstate private
respondents without loss of seniority rights and privileges with full back wages. The NLRC affirmed
the Labor Arbiters decision.
The Court of Appeals refused to give due course to Mariveles Shipyards appeal for failure to
comply with procedural requirements

WON petitioner was denied due process of law by the NLRC
NO- The essence of due process is simply an opportunity to be heard, or, as applied to administrative
proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration of the
action or ruling complained of. Not all cases require a trial-type hearing. The requirement of due
process in labor cases before a Labor Arbiter is satisfied when the parties are given the opportunity to
submit their position papers to which they are supposed to attach all the supporting documents or
documentary evidence that would prove their respective claims, in the event the Labor Arbiter
determines that no formal hearing would be conducted or that such hearing was not necessary. In any
event, petitioner was given ample opportunity to present its side in several hearings conducted before
the Labor Arbiter and in the position papers and other supporting documents that it had
submitted. Such opportunity more than satisfies the requirement of due process in labor cases.
FACTS: Petitioner Department of Agriculture (DA) and Sultan Security Agency entered into a
contract for security services to be provided by the latter to the said governmental entity. Pursuant to
their arrangements, guards were deployed by Sultan Security Agency in the various premises of the
DA. Thereafter, several guards filed a complaint for underpayment of wages, nonpayment of 13th
month pay, uniform allowances, night shift differential pay, holiday pay, and overtime pay, as well as
for damages against the DA and the security agency.
The Labor Arbiter rendered a decision finding the DA jointly and severally liable with the security
agency for the payment of money claims of the complainant security guards. The DA and the security
agency did notappeal the decision. Thus, the decision became final and executory. The
Labor Arbiter issued a writ of execution to enforce and execute the judgment against the property of
the DA and the security agency. Thereafter, the City Sheriff levied on execution the motor vehicles of
the DA.
ISSUE: Whether or not the doctrine of non-suability of the State applies in the case
HELD: The basic postulate enshrined in the Constitution that the State may not be sued without its
consent reflects nothing less than a recognition of the sovereign character of the State and an express
affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. It is based on
the very essence of sovereignty. A sovereign is exempt from suit based on the logical and practical

ground that there can be no legal right as against the authority that makes the law on which the right
The rule is not really absolute for it does not say that the State may not be sued under any
circumstances. The State may at times be sued. The States consent may be given expressly or
impliedly. Express consent may be made through a general law or a special law. Implied consent, on
the other hand, is conceded when the State itself commences litigation, thus opening itself to a
counterclaim, or when it enters into a contract. In this situation, the government is deemed to have
descended to the level of the other contracting party and to have divested itself of its sovereign
But not all contracts entered into by the government operate as a waiver of its non-suability;
distinction must still be made between one which is executed in the exercise of its sovereign function
and another which is done in its proprietary capacity. A State may be said to have descended to the
level of an individual and can this be deemed to have actually given its consent to be sued only when
it enters into business contracts. It does not apply where the contract relates to the exercise of its
sovereign functions.
In the case, the DA has not pretended to have assumed a capacity apart from its being a governmental
entity when it entered into the questioned contract; nor that it could have, in fact, performed any act
proprietary in character.
But, be that as it may, the claims of the complainant security guards clearly constitute money claims.
Act No. 3083 gives the consent of the State to be sued upon any moneyed claim involving liability
arising from contract, express or implied. Pursuant, however, to Commonwealth Act 327, as
amended by PD 1145, the money claim must first be brought to the Commission on Audit.
PHILIPPINE Fisheries Development Authority v. NLRC, 213 SCRA 621 (1992)
Issue 1: WON an indirect employer is bound by the ruling of NLRC which made the indirect employer
liable when the guards are not employees of the petitioner because the contract of services explicitly
states that the security guards are not their employees thus, no employer -employee relationship, thus
the jurisdiction of the CSC may not be invoked in this case.
Notwithstanding that the petitioner is a government agency, its liabilities, which are jointly and
solidary with that of the contractor are provided in Art. 106,107 and 109.

Its liabilities are under the NLRC scope and in addition, book three title ii on wages provides that
the term employer includes any person acting directly or indirectly in the interest of an employer in
relation to an employee and shall include the Government and all its branches, subdivisions and
instrumentalities, all GOCCs and institutions as well as non-profit private institutions or
Issue 2: Who should carry the burden of the wage increases?
It is settled that in job contracting, the petitioner as principal is jointly and severally liable with the









case at

bar, the


was for

the payment of unpaid wage differentials under Wage Order No. 6.


G.R. No. 128399

FACTS: Cagayan Sugar Milling, Co. violated the wage order issued by the RTWPB, having failed to
implement the across the board increase in the salary of its employees. Another wage order was
issued, amending the earlier wage order and providing that the across the board wage increase shall
retroact to the date of the effectivity of the earlier wage order.
ISSUE: WON the amendatory wage order violated CSMCs right to due process.
HELD: YES, The amendatory wage order was invalid for lack of public consultations and
hearings andnonpublication in a newspaper of general circulation, in violation of the Labor Code. CS
MC was deprived of due process as it was not given the opportunity to ventilate its position regarding
the proposed wage increase.
Facts: Metrobank entered into a CBA with Petitioner, granting a P900 increase in wages.
Subsequently, a law was passed increasing the minimum wage. Metrobank classifiedemployees into th
ose receiving less than 100 per day and those receiving more.
Those receiving more were not covered by the implementation of the new law but only the increase as
agreed upon in the CBA. Petitioners argue that the method of implementation created a wage
distortion within the employees of Metrobank because the differences in the salaries of the employee
classifications were substantially reduced.

ISSUE: Whether or not there was wage distortion?

HELD: There was wage distortion. Wage Distortion means a situation where an increase in






elimination or severe contradiction of


quantitative differences in wage or salary rates between and among employee Groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.
Facts: Bankard, Inc. classifies its employees by levels: Level I, Level II, Level III, Level IV, and Level
V. On May 1993, its Board of Directors approved a New Salary Scale, made retroactive to April 1,
1993, for the purpose of making its hiring rate competitive in the industrys labor market. The New
Salary Scale increased the hiring rates of new employees, to wit: Levels I and V by one thousand pesos
(P1, 000.00), and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly, the salaries of
employees who fell below the new minimum rates were also adjusted to reach such rates under their
This made Bankard Employees Union-WATU (petitioner), the duly certified exclusive bargaining agent
of the regular rank and file employees of Bankard, to request for the increase in the salary of its old,
regular employees. Bankard insisted that there was no obligation on the part of the management to
grant to all its employees the same increase in an across the-board manner.
Petitioner filed a notice of strike. The strike was averted when the dispute was certified by the
Secretary of Labor and Employment for compulsory arbitration. NLRC finding no wage distortion
dismissed the case for lack of merit.
Petitioners motion for reconsideration of the dismissal of the case was denied.
ISSUE: Whether the unilateral adoption by an employer of an upgraded salary resulted in wage
distortion within the contemplation of Article 124 of the Labor Code.
HELD: There exists a wage distortion but the Court will not interfere in the management prerogative
of the petitioner.
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others,
Article 124 of the Labor Code), the term "wage distortion" was explicitly defined as... a situation
where an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in an


establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.
In the case of Prubankers Association v. Prudential Bank and Trust Company, it laid down the four
elements of wage distortion, to wit:
(1.) An existing hierarchy of positions with corresponding salary rates;
(2)A significant change in the salary rate of a lower pay class without a concomitant increase
in the salary rate of a higher one;
(3) The elimination of the distinction between the two levels; and
(4) The existence of the distortion in the same region of the country.


NO. 179652, MAY 8, 2009

FACTS: Jandeleon Juezan (Juezan) filed a complaint before the DOLE against Bombo Radyo Phils.
(Bombo Radyo) for illegal deduction, non-payment of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages
and non-coverage of SSS, PAG-IBIG and Philhealth. On the basis of the complaint, the DOLE
conducted a plant level inspection. The Labor Inspector in his report wrote,
Management representative informed that (Juezan) complainant is a drama talent hired on a per
drama participation basis hence no employer-employer relationship existed between them. As proof of
this, management presented photocopies of cash vouchers, billing statement, employments of specific
undertaking, etc. The management has no control of the talent if he ventures into another contract
with other broadcasting industries.
The DOLE Regional Director issued an order ruling that Juezan is an employee of Bombo Radyo, and
that Juezan is entitled to his money claims. Bombo Radyo sought reconsideration claiming that the
Regional Director gave credence to the documents offered by Juezan without examining the originals,
but at the same time the Regional Director missed or failed to consider Bombo Radyos evidence. The
motion for reconsideration was denied. On appeal, the Acting DOLE Secretary dismissed the appeal
on the ground that Bombo Radyo did not post a cash or surety bond and instead submitted a Deed of
Assignment of Bank Deposit.
Bombo Radyo elevated the case to the Court of Appeals, claiming that it was denied due process when
the DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to
refute the claims of Juezan. It maintained that no employer-employee relationship had ever existed


between it and Juezan because it was the drama directors and producers who paid, supervised and
disciplined him. It also added that the case was beyond the DOLEs jurisdiction because Juezans
claim exceeded P5,000.
The Court of Appeals held that the DOLE Secretary had the power to order and enforce compliance
with labor standard laws irrespective of the amount of individual claims because the limitation
imposed by Art. 29 of the Labor Code had been repealed by R.A. 7730.
Bombo Radyo argues that the NLRC (not the DOLE Secretary) has jurisdiction over Juezans claim, in
view of Arts. 217 and 128 of the Labor Code. It adds that the Court of Appeals committed grave abuse
of discretion when it dismissed their appeal without delving on the issue of employer-employee
ISSUE: Whether or not the Secretary of Labor has the power to determine the existence of an
employer-employee relationship.
HELD: NO. Art. 128 (b) of the Labor Code, as amended by R.A. 7730 reads:
Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his
duly authorized representatives shall have the power to issue compliance orders to give effect to the
labor standards provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of inspection.
The provision is explicit that the visitorial and enforcement power of the DOLE comes into play only
in cases when the relationship of employer-employee still exists. This clause signifies that the
employer-employee relationship must have existed even before the emergence of the controversy.
Necessarily, the DOLEs power does not apply in two instances, namely:

where the employer-employee relationship has ceased; and

where no such relationship has ever existed.

The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on

the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The
rationale underlying this limitation is to eliminate the prospect of competing conclusions of the
Secretary of Labor and the NLRC. If the Secretary of Labor proceeds to exercise his visitorial and
enforcement powers absent the first requisite, his office confers jurisdiction on itself which it cannot
otherwise acquire.