Bernardo vs NLRC

Facts:

Complainants numbering 43 (p. 176, Records) are deaf-mutes who were hired on various periods
from 1988 to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters through a
uniformly worded agreement called "Employment Contract for Handicapped Workers".

In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989 another two (2); in 1990,
nineteen (19); in 1991 six (6); in 1992, six (6) and in 1993, twenty-one (21). Their employment[s] were
renewed every six months such that by the time this case arose, there were fifty-six (56) deaf-mutes who
were employed by respondent under the said employment agreement. The last one was Thelma
Malindoy who was employed in 1992 and whose contract expired on July 1993.

Petitioners maintain that they should be considered regular employees, because their task as
money sorters and counters was necessary and desirable to the business of respondent bank. They
further allege that their contracts served merely to preclude the application of Article 280 and to bar
them from becoming regular employees.

Private respondent, on the other hand, submits that petitioners were hired only as "special
workers and should not in any way be considered as part of the regular complement of the Bank." 12
Rather, they were "special" workers under Article 80 of the Labor Code. Private respondent contends
that it never solicited the services of petitioners, whose employment was merely an "accommodation" in
response to the requests of government officials and civic-minded citizens. They were told from the
start, "with the assistance of government representatives," that they could not become regular
employees because there were no plantilla positions for "money sorters," whose task used to be
performed by tellers. Their contracts were renewed several times, not because of need "but merely for
humanitarian reasons." Respondent submits that "as of the present, the "special position" that was
created for the petitioners no longer exist[s] in private respondent [bank], after the latter had decided
not to renew anymore their special employment contracts."

The labor arbiter and, on appeal, the NLRC ruled against herein petitioners.

The NLRC also declared that the Magna Carta for Disabled Persons was not applicable,
"considering the prevailing circumstances/milieu of the case."

Issue:

WoN the petitioners were regular employees?

Ruling:

Yes. However, only the employees, who worked for more than six months and whose contracts
were renewed are deemed regular. Hence, their dismissal from employement was illegal.

The Magna Carta for Disabled Persons mandates that qualified disabled persons be granted the
same terms and conditions of employment as qualified able-bodied employees. Once they have attained
the status of regular workers, they should be accorded all the benefits granted by law, notwithstanding
written or verbal contracts to the contrary. This treatments is rooted not merely on charity or
accommodation, but on justice for all.

The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons,
indubitably show that the petitioners, except sixteen of them, should be deemed regular employees. As
such, they have acquired legal rights that this Court is duty-bound to protect and uphold, not as a matter
of compassion but as a consequence of law and justice.

The uniform employment contracts of the petitioners stipulated that they shall be trained for a
period of one month, after which the employer shall determine whether or not they should be allowed
to finish the 6-month term of the contract. Furthermore, the employer may terminate the contract at
any time for a just and reasonable cause. Unless renewed in writing by the employer, the contract shall
automatically expire at the end of the term.1wphi1.nt

According to private respondent, the employment contracts were prepared in accordance with
Article 80 of the Labor code, which provides;

Art. 80. Employment agreement. Any employer who employs handicapped

workers shall enter into an employment agreement with them, which
agreement shall include:

(a) The names and addresses of the handicapped workers to be

employed;

(b) The rate to be paid the handicapped workers which shall be

not less than seventy five (75%) per cent of the applicable legal
minimum wage;

(c) The duration of employment period; and

(d) The work to be performed by handicapped workers.

The employment agreement shall be subject to inspection by the Secretary of

Labor or his duly authorized representatives.

The stipulations in the employment contracts indubitably conform with the aforecited provision.
Succeeding events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons), 13
however, justify the application of Article 280 of the Labor Code.

Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers
and renewed the contracts of 37 of them. In fact, two of them worked from 1988 to 1993. Verily, the
renewal of the contracts of the handicapped workers and the hiring of others lead to the conclusion that
their tasks were beneficial and necessary to the bank. More important, these facts show that they were
qualified to perform the responsibilities of their positions. In other words, their disability did not render
them unqualified or unfit for the tasks assigned to them.
 In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee
should be given the same terms and conditions of employment as a qualified able-bodied person.

The fact that the employees were qualified disabled persons necessarily removes the
employment contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of
qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code, which provides:

Art. 280. Regular and Casual Employment. The provisions of written

agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the

preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be
considered as regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists.

The test of whether an employee is regular was laid down in De Leon v. NLRC, 14
in which this
Court held:

The primary standard, therefore, of determining regular employment is the

reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual business or
trade of the employer. The connection can be determined by considering the
nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Also if the employee has been performing the
job for at least one year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensibility of that activity to
the business. Hence, the employment is considered regular, but only with
respect to such activity, and while such activity exist.

Without a doubt, the task of counting and sorting bills is necessary and desirable to the business
of respondent bank. With the exception of sixteen of them, petitioners performed these tasks for more
than six months.

As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious
practice of making permanent casuals of our lowly employees by the simple expedient of extending to
them probationary appointments, ad infinitum."15 The contract signed by petitioners is akin to a
probationary employment, during which the bank determined the employees' fitness for the job. When
the bank renewed the contract after the lapse of the six-month probationary period, the employees
thereby became regular employees. 16 No employer is allowed to determine indefinitely the fitness of its
employees.

As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is,
their services may be terminated only for a just or authorized cause. Because respondent failed to show
such cause, 17 these twenty-seven petitioners are deemed illegally dismissed and therefore entitled to
back wages and reinstatement without loss of seniority rights and other privileges. 18 Considering the
allegation of respondent that the job of money sorting is no longer available because it has been
assigned back to the tellers to whom it originally belonged, 18 petitioners are hereby awarded separation
pay in lieu of reinstatement. 20

Because the other sixteen worked only for six months, they are not deemed regular employees
and hence not entitled to the same benefits.

Applicability of the Brent Ruling

Respondent bank, citing Brent School v. Zamora 21 in which the Court upheld the validity of an
employment contract with a fixed term, argues that the parties entered into the contract on equal
footing. It adds that the petitioners had in fact an advantage, because they were backed by then DSWD
Secretary Mita Pardo de Tavera and Representative Arturo Borjal.

We are not persuaded. The term limit in the contract was premised on the fact that the
petitioners were disabled, and that the bank had to determine their fitness for the position. Indeed, its
validity is based on Article 80 of the Labor Code. But as noted earlier, petitioners proved themselves to
be qualified disabled persons who, under the Magna Carta for Disabled Persons, are entitled to terms
and conditions of employment enjoyed by qualified able-bodied individuals; hence, Article 80 does not
apply because petitioners are qualified for their positions. The validation of the limit imposed on their
contracts, imposed by reason of their disability, was a glaring instance of the very mischief sought to be
addressed by the new law.

Moreover, it must be emphasized that a contract of employment is impressed with public

interest. 22 Provisions of applicable statutes are deemed written into the contract, and the "parties are
not at liberty to insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other." 23 Clearly, the agreement of the parties regarding the
period of employment cannot prevail over the provisions of the Magna Carta for Disabled Persons, which
mandate that petitioners must be treated as qualified able-bodied employees.

Respondent's reason for terminating the employment of petitioners is instructive. Because the
Bangko Sentral ng Pilipinas (BSP) required that cash in the bank be turned over to the BSP during
business hours from 8:00 a.m. to 5:00 p.m., respondent resorted to nighttime sorting and counting of
money. Thus, it reasons that this task "could not be done by deaf mutes because of their physical
limitations as it is very risky for them to travel at night." 24 We find no basis for this argument. Travelling
at night involves risks to handicapped and able-bodied persons alike. This excuse cannot justify the
termination of their employment.
Other Grounds Cited by Respondent

Respondent argues that petitioners were merely "accommodated" employees. This fact does not
change the nature of their employment. As earlier noted, an employee is regular because of the nature
of work and the length of service, not because of the mode or even the reason for hiring them.

Equally unavailing are private respondent's arguments that it did not go out of its way to recruit
petitioners, and that its plantilla did not contain their positions. In L. T. Datu v. NLRC, 25 the Court held
that "the determination of whether employment is casual or regular does not depend on the will or
word of the employer, and the procedure of hiring . . . but on the nature of the activities performed by
the employee, and to some extent, the length of performance and its continued existence."

Private respondent argues that the petitioners were informed from the start that they could not
become regular employees. In fact, the bank adds, they agreed with the stipulation in the contract
regarding this point. Still, we are not persuaded. The well-settled rule is that the character of
employment is determined not by stipulations in the contract, but by the nature of the work performed.
26
Otherwise, no employee can become regular by the simple expedient of incorporating this condition in
the contract of employment.

In this light, we iterate our ruling in Romares v. NLRC: 27

Art. 280 was emplaced in our statute books to prevent the

circumvention of the employee's right to be secure in his tenure by
indiscriminately and completely ruling out all written and oral agreements
inconsistent with the concept of regular employment defined therein. Where an
employee has been engaged to perform activities which are usually necessary or
desirable in the usual business of the employer, such employee is deemed a
regular employee and is entitled to security of tenure notwithstanding the
contrary provisions of his contract of employment.

xxx xxx xxx

At this juncture, the leading case of Brent School, Inc. v. Zamora proves
instructive. As reaffirmed in subsequent cases, this Court has upheld the legality
of fixed-term employment. It ruled that the decisive determinant in "term
employment" should not be the activities that the employee is called upon to
perform but the day certain agreed upon the parties for the commencement
and termination of their employment relationship. But this Court went on to say
that where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they
should be struck down or disregarded as contrary to public policy and morals.
 CENTRAL AZUCARERA DE TARLAC,
vs.
CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU

Facts:

Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while

respondent is a legitimate labor organization which serves as the exclusive bargaining representative of
petitioners rank-and-file employees. The controversy stems from the interpretation of the term "basic
pay," essential in the computation of the 13th-month pay.

The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851,
petitioner granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula
used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve
(12). Included in petitioners computation of the Total Basic Annual Salary were the following: basic
monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium
pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this computation
until 2006.3

On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner
declared a temporary cessation of operations. In December 2005, all the striking union members were
allowed to return to work. Subsequently, petitioner declared another temporary cessation of operations
for the months of April and May 2006. The suspension of operation was lifted on June 2006, but the
rank-and-file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis
that lasted until September 2006. In December 2006, petitioner gave the employees their 13th-month
pay based on the employees total earnings during the year divided by 12. 4

Respondent objected to this computation. It averred that petitioner did not adhere to the usual
computation of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12,
because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not
observe the company practice of giving its employees the guaranteed amount equivalent to their one
month pay, in instances where the computed 13th-month pay was less than their basic monthly pay. 5

Petitioner and respondent tried to thresh out their differences in accordance with the grievance
procedure as provided in their collective bargaining agreement. During the grievance meeting, the
representative of petitioner explained that the change in the computation of the 13th-month pay was
intended to rectify an error in the computation, particularly the concept of basic pay which should have
included only the basic monthly pay of the employees. 6

For failure of the parties to arrive at a settlement, respondent applied for preventive mediation
before the National Conciliation and Mediation Board. However, despite four (4) conciliatory meetings,
the parties still failed to settle the dispute. On March 29, 2007, respondent filed a complaint against
petitioner for money claims based on the alleged diminution of benefits/erroneous computation of 13th-
month pay before the Regional Arbitration Branch of the National Labor Relations Commission (NLRC). 7
 On October 31, 2007, the Labor Arbiter rendered a Decision8 dismissing the complaint and
declaring that the petitioner had the right to rectify the error in the computation of the 13th-month pay
of its employees.

NLRC rendered a Decision11 reversing the Labor Arbiter. Central Azucarera de Tarlac is ordered to
adhere to its established practice of granting 13th[-] month pay on the basis of gross annual basic which
includes basic pay, premium pay for work in rest days and special holidays, night shift differential and
paid vacation and sick leaves for each year.

Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way

of 13th month pay.

Issue:

WoN petitioner is liable for money claims based on the alleged diminution of benefits/erroneous
computation of 13th-month pay?

Ruling:

Yes. The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an
additional income based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the
total basic salary earned by an employee within a calendar year. All rank-and-file employees, regardless
of their designation or employment status and irrespective of the method by which their wages are paid,
are entitled to this benefit, provided that they have worked for at least one month during the calendar
year. If the employee worked for only a portion of the year, the 13th-month pay is computed pro rata. 16

Petitioner argues that there was an error in the computation of the 13th-month pay of its
employees as a result of its mistake in implementing P.D. No. 851, an error that was discovered by the
management only when respondent raised a question concerning the computation of the employees

13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost
thirty (30) years. Petitioner insists that the length of time during which an employer has performed a
certain act beneficial to the employees, does not prove that such an act was not done in error. It
maintains that for the claim of mistake to be negated, there must be a clear showing that the employer
had freely, voluntarily, and continuously performed the act, knowing that he is under no obligation to do
so. Petitioner asserts that such voluntariness was absent in this case. 17

The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975,
defines 13th-month pay and basic salary as follows:

Sec. 2. Definition of certain terms. - As used in this issuance:

(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year; (b) "Basic salary" shall include all remunerations or earnings
paid by an employer to an employee for services rendered but may not include cost-of-living
allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174,
profit-sharing payments, and all allowances and monetary benefits which are not considered or
 integrated as part of the regular or basic salary of the employee at the time of the promulgation
of the Decree on December 16, 1975.

On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was
issued. The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are
not part of the basic salary shall not be included in the computation of the 13th-month pay.

On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay
Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that the minimum
13th-month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned
by an employee within a calendar year.1avvphi1

Furthermore, the term "basic salary" of an employee for the purpose of computing the 13th-
month pay was interpreted to include all remuneration or earnings paid by the employer for services
rendered, but does not include allowances and monetary benefits which are not integrated as part of
the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these
salary-related benefits should be included as part of the basic salary in the computation of the 13th-
month pay if, by individual or collective agreement, company practice or policy, the same are treated as
part of the basic salary of the employees.

Based on the foregoing, it is clear that there could have no erroneous interpretation or
application of what is included in the term "basic salary" for purposes of computing the 13th-month pay
of employees. From the inception of P.D. No. 851 on December 16, 1975, clear-cut administrative
guidelines have been issued to insure uniformity in the interpretation, application, and enforcement of
the provisions of P.D. No. 851 and its implementing regulations.

As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the
employees gross annual earnings which included the basic monthly salary, premium pay for work on
rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30)
years and has ripened into a company policy or practice which cannot be unilaterally withdrawn.

Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that
benefits given to employees cannot be taken back or reduced unilaterally by the employer because the
benefit has become part of the employment contract, written or unwritten. 18 The rule against
diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or
has ripened into a practice over a long period of time and that the practice is consistent and deliberate.
Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a
doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is
done soon after discovery of the error. 19

The argument of petitioner that the grant of the benefit was not voluntary and was due to error
in the interpretation of what is included in the basic salary deserves scant consideration. No doubtful or
difficult question of law is involved in this case. The guidelines set by the law are not difficult to decipher.
The voluntariness of the grant of the benefit was manifested by the number of years the employer had
paid the benefit to its employees. Petitioner only changed the formula in the computation of the 13th-
month pay after almost 30 years and only after the dispute between the management and employees
erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a
badge of bad faith.

Furthermore, petitioner cannot use the argument that it is suffering from financial losses to
claim exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous
unilateral computation of the 13th-month pay of its employees. Under Section 7 of the Rules and
Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption from the
requirement of the Decree only upon prior authorization by the Secretary of Labor. 20 In this case, no such
prior authorization has been obtained by petitioner; thus, it is not entitled to claim such exemption.

UFE vs Benigno
Facts:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and
the change of the divisor in the computation of benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the
National Labor Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights
and obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's
decision in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary
arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code,
subject only to the exclusions and limitations specified in Article 82 and such
other legal restrictions as are provided for in the Code. (Rollo,
p. 31)

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2)
the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3)
deduction from the holiday pay award of overpayment for overtime, night differential, vacation and sick
leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of
the Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday
pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of
the holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He
adjudged, however, that the company's sales personnel are field personnel and, as such, are not entitled
to holiday pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should be
changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night
differential, vacation and sick leave pay due to the use of 251 days as divisor.

Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent
Arbitrator treated the two motions as appeals and forwarded the case to the NLRC which issued a
resolution dated May 25, 1987 remanding the case to the respondent arbitrator on the ground that it
has no jurisdiction to review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor
Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules
implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of
the case reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned
from service effective May 1, 1986.
Issue:

1. Whether or not Nestle's sales personnel are field personnel and are not entitled to holiday
pay?
2. Whether or not, concomitant with the award of holiday pay, the divisor should be changed
from 251 to 261 days and whether or not the previous use of 251 as divisor resulted in
overpayment for overtime, night differential, vacation and sick leave pay?

Ruling:

1. Yes, They are field personnel. Under Article 82, field personnel are not entitled to holiday pay.
Said article defines field personnel as "non-agritultural employees who regularly perform their duties
away from the principal place of business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty."

The controversy centers on the interpretation of the clause "whose actual hours of work in the
field cannot be determined with reasonable certainty."

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having
reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the
sales personnel's working hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be
reasonably ascertained. The company has no way of determining whether or not these sales personnel,
even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really
spend the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated

employees to report for work at the office at 8:00 a.m. and return at 4:00 or
4:30 p.m. is not within the realm of work in the field as defined in the Code but
an exercise of purely management prerogative of providing administrative
control over such personnel. This does not in any manner provide a reasonable
level of determination on the actual field work of the employees which can be
reasonably ascertained. The theoretical analysis that salesmen and other
similarly-situated workers regularly report for work at 8:00 a.m. and return to
their home station at 4:00 or 4:30 p.m., creating the assumption that their field
work is supervised, is surface projection. Actual field work begins after 8:00
a.m., when the sales personnel follow their field itinerary, and ends immediately
before 4:00 or 4:30 p.m. when they report back to their office. The period
between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the
field, the extent or scope and result of which are subject to their individual
capacity and industry and which "cannot be determined with reasonable
certainty." This is the reason why effective supervision over field work of
 salesmen and medical representatives, truck drivers and merchandisers is
practically a physical impossibility. Consequently, they are excluded from the ten
holidays with pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with
reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which
provides:

Rule IV Holidays with Pay

Sec. 1. Coverage This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is
unsupervised by the employer . . . (Emphasis supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the
petitioner nevertheless attempted to show that its affected members are not covered by the
abovementioned rule. The petitioner asserts that the company's sales personnel are strictly supervised
as shown by the SOD (Supervisor of the Day) schedule and the company circular dated March 15, 1984
(Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did
not add another element to the Labor Code definition of field personnel. The clause "whose time and
performance is unsupervised by the employer" did not amplify but merely interpreted and expounded
the clause "whose actual hours of work in the field cannot be determined with reasonable certainty."
The former clause is still within the scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee's actual working hours in the field can be determined
with reasonable certainty, query must be made as to whether or not such employee's time and
performance is constantly supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales
personnel's time and performance are supervised. The purpose of this schedule is merely to ensure that
the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier
than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent
in field work by an employee through the imposition of sanctions on absenteeism contained in the
company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every
quarter based on their performance is proof that their actual hours of work in the field can be
determined with reasonable certainty.

The Court thinks otherwise.

 The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on
sales target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely
because of the difficulty in measuring their actual hours of field work. These employees are evaluated by
the result of their work and not by the actual hours of field work which are hardly susceptible to
determination.

2. No. The petitioner union also assails the respondent arbitrator's ruling that, concomitant with
the award of holiday pay, the divisor should be changed from 251 to 261 days to include the additional
10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251
days' divisor.

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten

holidays certainly adds to or accelerates the basis of conversion and
computation by ten days. With the inclusion of ten holidays as paid days, the
divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed
an extremely difficult legal question of interpretation which accounts for what is
claimed as falling within the concept of "solutio indebti."

When the claim of the Union for payment of ten holidays was granted,
there was a consequent need to abandon that 251 divisor. To maintain it would
create an impossible situation where the employees would benefit with
additional ten days with pay but would simultaneously enjoy higher benefits by
discarding the same ten days for purposes of computing overtime and night time
services and considering sick and vacation leave credits. Therefore,
reimbursement of such overpayment with the use of 251 as divisor arises
concomitant with the award of ten holidays with pay. (Rollo, p. 34)

The divisor assumes an important role in determining whether or not holiday pay is already
included in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust
of our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held:

It is argued that even without the presumption found in the rules and in
the policy instruction, the company practice indicates that the monthly salaries
of the employees are so computed as to include the holiday pay provided by
law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that
the Chartered Bank, in computing overtime compensation for its employees,
employs a "divisor" of 251 days. The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total
number of calendar days in a year. If the employees are already paid for all non-
working days, the divisor should be 365 and not 251.
 In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by
respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the
divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a
constant figure for the purpose of computing overtime and night differential pay and commutation of
sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing
the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a
lower daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of
the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend,
which represents the employee's annual salary, should correspondingly be increased to incorporate the
holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100,
then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay,
his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261
days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of
overtime and night differential pay and sick and vacation leave benefits, the computation of which are all
based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251
days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor of
labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day working
schedule, the divisor used by the company was 303, indicating that the 10 holidays were likewise not
paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the chance to
rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from
November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision was
favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition raising the
issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is not an
appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds,
but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also
appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food
Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order
to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly
delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay
award raised by Nestle.
 Nestle insists that the reckoning period for the application of the holiday pay award is 1985
when the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and
not from the date of effectivity of the Labor Code. Although the Court does not entirely agree with
Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984],
hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16,
1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday pay
benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor Code's
provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them
by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added
the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy
instruction enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit
up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably
valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed
the effect to be given to a legislative or executive act subsequently declared invalid:

. . . It does not admit of doubt that prior to the declaration of nullity

such challenged legislative or executive act must have been in force and had to
be complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting
than that in a subsequent litigation regard be had to what has been done while
such legislative or executive act was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness
that precisely because the judiciary is the government organ which has the final
say on whether or not a legislative or executive measure is valid, a period of
time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality
of fairness and justice then, if there be no recognition of what had transpired
prior to such adjudication.

In the language of an American Supreme Court decision: "The actual

existence of a statute, prior to such a determination of [unconstitutionality], is
an operative fact and may have consequences which cannot justly be ignored.
The past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects,
with respect to particular relations, individual and corporate, and particular
conduct, private and official." (Chicot County Drainage Dist. v. Baxter States
Bank, 308 US 371, 374 [1940]). This language has been quoted with approval in
a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila
 Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is
the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and
Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue
harshness and resulting unfairness must be avoided. It is now almost the end of 1991. To require various
companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer
reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying
on the implicit validity of the implementing rule and policy instruction before this Court nullified them,
and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have
been moved to grant other concessions to its employees, especially in the collective bargaining
agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among the
highest paid in the industry. With this consideration, it would be unfair to impose additional burdens on
Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to
Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of
promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from
October 23, 1984, the date of promulgation of the IBAA case.

CALTEX Regular Employees vs. CALTEX

Facts:

On 12 December 1985, petitioner Union and private respondent Caltex (Philippines), Inc.
("Caltex") entered into a Collective Bargaining Agreement ("1985 CBA") which was to be in effect until
midnight of 31 December 1988.
 Sometime in August 1986, the Union called Caltex's attention to alleged violations by Caltex of
Annex "B" of the 1985 CBA, e.g. non-payment of night-shift differential, non-payment of overtime pay
and non-payment at "first day-off rates" for work performed on a Saturday.

Caltex's Industrial Relations manager immediately evaluated petitioner's claims and accordingly
informed petitioner Union that differential payments would be timely implemented. In the
implementation of the re-computed claims, however, no differential payment was made with respect to
work performed on the first 2 1/2 hours on a Saturday.

On 7 July 1987, the Union instituted a complaint for unfair labor practice against Caltex alleging
violation of the provisions of the 1985 CBA. Petitioner Union charged Caltex with shortchanging its
employees when Caltex compensated work performed on the first 2 1/2 hours of Saturday, an
employees' day of rest, at regular rates, when it should be paying at "day of rest" or "day off" rates.

Caltex denied the accusations of the Union. It averred that Saturday was never designated as a
day of rest, much less a "day-off". It maintained that the 1985 CBA provided only 1 day of rest for
employees at the Manila Office, as well as employees similarly situated at the Legazpi and Marinduque
Bulk Depots. This day of rest, according to Caltex, was Sunday.

In due time, the Labor Arbiter ruled in favor of petitioner Union, while finding at the same time
that private respondent Caltex was not guilty of any unfair labor practice. Labor Arbiter Valentin C.
Guanio, interpreting Article III and Annex "B" of the 1985 CBA, concluded that Caltex's employees had
been given two (2) days (instead of one [1] day) of rest, with the result that work performed on the
employee's first day of rest, viz. Saturday, should be compensated at "First day-off" rates.

On appeal by Caltex, public respondent NLRC set aside the decision of Labor Arbiter Guanio. The
NLRC found that the conclusions of the Labor Arbiter were not supported by the evidence on record. The
NLRC, interpreting the provisions of the 1985 CBA, concluded that that CBA granted only one (1) day of
rest, e.g., Sunday. The Union's motion for reconsideration was denied on 9 June 1993.

Issue: WoN the CBA granted only one day of rest?

Ruling:

Yes. After carefully examining the language of Article III, in relation to Annex "B" of the 1985
CBA, quoted in limine, as well as relevant portions of earlier CBAs between the parties, we agree with
the NLRC that the intention of the parties to the 1985 CBA was to provide the employees with only one
(1) day of rest. The plain and ordinary meaning of the language of Article III is that Caltex and the Union
had agreed to pay "day of rest" rates for work performed on "an employee's one day of rest". To the
Court's mind, the use of the word "one" describing the phrase "day of rest [of an employee]" emphasizes
the fact that the parties had agreed that only a single day of rest shall be scheduled and shall be
provided to the employee.
 It is useful to note that the contract clauses governing hours of work in previous CBAs executed
between private respondent Caltex and petitioner Union in 1973, 1976, 1979 and 1982 contained
provisions parallel if not identical to those set out in Article III of the 1985 CBA here before us.

In all their CBAs (1973, 1976, 1979, 1982), Article III provide that only "work on an employee's
one day of rest "shall be paid on the basis of "day of rest rates". The relevant point here is that petitioner
Union had never suggested that more than 1 day of rest had been agreed upon, and certainly Caltex had
never treated Article III or any other portion of the CBAs as providing two (2) days of rest. It is well
settled that the contemporaneous and subsequent conduct of the parties may be taken into account by
a court called upon to interpret and apply a contract entered into by them.7

We note that Labor Arbiter Guanio surmised that the intention he implied from the contents of
Annex "B" was in conflict with the intention expressed in Article III (which, the Labor Arbiter admitted,
stipulated only one day of rest). According to the Labor Arbiter, when Annex "B" referred to "First Day-off
Rates" and "Second Day-off Rates", these were meant to express an agreement that the parties intended
to provide employees two (2) days of rest. He then declared that Annex "B" should prevail over Article III
because the former was a more specific provision than the latter.

An annex expresses the idea of joining a smaller or subordinate thing with another, larger or of
higher importance.8 An annex has a subordinate role, without any independent significance separate
from that to which it is tacked on. Annex "B," in the case at bar, is one such document. It is not a
memorandum of amendments or a codicil containing additional or new terms or stipulations. Annex "B"
cannot be construed as modifying or altering the terms expressed in the body of the agreement
contained in the 1985 CBA. It did not confer any rights upon employees represented by petitioner Union;
neither did it impose any obligations upon private respondent Caltex. In fact, the contents of Annex "B"
have no intelligible significance in and of themselves when considered separately from the 1985 CBA.

Moreover, we are persuaded by private respondent's argument that Annex "B" was intended to
serve as a company wide guide in computing compensation for work performed by all its employees,
including but not limited to the Manila Office employees represented by petitioner Union. Private
respondent also points out that the mathematical formulae contained in Annex "B" are not all applicable
to all classes of employees, there being some formulae applicable only to particular groups or classes of
employees. Thus, "First Day-off rates" and "Second Day-off rates" are applicable only to employees
stationed at the refinery and associated facilities like depots and terminals which must be in constant
twenty-four (24) hours a day, seven (7) days a week, operation, hence necessitating the continuous
presence of operations personnel. The work of such operations personnel required them to be on duty
for six (6) consecutive days. Upon the other hand, "First Day-off rates" and "Second Day-off rates" are not
applicable to personnel of the Manila Office which consisted of other groups or categories of employees
(e.g., office clerks, librarians, computer operators, secretaries, collectors, etc.),9 since the nature of their
work did not require them to be on duty for six (6) consecutive days.

We find, under the foregoing circumstances, that the purported intention inferred from Annex
"B" by the Labor Arbiter was based merely on conjecture and speculation.
 We also note that the Labor Arbiter merely suspected that the parties agreed to provide two (2)
days of rest on the ground that they had so stipulated in their 1970 CBA. 10 A principal difficulty with this
view is that it disregards the fact that Article III of the 1985 CBA no longer contained a particular proviso
found in the 1970 CBA. In fact, all the CBAs subsequent to 1970 (1973, 1976, 1979, 1982) had similarly
deleted the proviso in the 1970 CBA providing for two (2) days-off. To the Court's mind, such deletion
means only one thing that is the parties had agreed to remove such stipulation. Accordingly, the
proviso found in Article III of the 1970 CBA ceased to be a demandable obligation. Petitioner Union
cannot now unilaterally re-insert such a stipulation by strained inference from Annex "B." Upon the
foregoing circumstances, we must hold that the Labor Arbiter's suspicion is without basis in the facts of
record.

Petitioner Union also contended that private respondent Caltex in the instant petition was
violating the statutory prohibition against off-setting undertime for overtime work on another day. 11
Union counsel attempted to establish this charge by asserting that the employees had been required to
render "overtime work" on a Saturday but compensated only at regular rates of pay, because they had
not completed the eight (8)-hour work period daily from Monday thru Friday.

The Court finds petitioner's contention bereft of merit. Overtime work consists of hours worked
on a given day in excess of the applicable work period, which here is eight (8) hours. 12 It is not enough
that the hours worked fall on disagreeable or inconvenient hours. In order that work may be considered
as overtime work, the hours worked must be in excess of and in addition to the eight (8) hours worked
during the prescribed daily work period, or the forty (40) hours worked during the regular work week
Monday thru Friday.

In the present case, under the 1985 CBA, hours worked on a Saturday do not, by that fact alone,
necessarily constitute overtime work compensable at premium rates of pay, contrary to petitioner's
assertion. These are normal or regular work hours, compensable at regular rates of pay, as provided in
the 1985 CBA; under that CBA, Saturday is not a rest day or a "day off". It is only when an employee has
been required on a Saturday to render work in excess of the forty (40) hours which constitute the regular
work week that such employee may be considered as performing overtime work on that Saturday. We
consider that the statutory prohibition against offsetting undertime one day with overtime another day
has no application in the case at bar.

Petitioner's counsel, in his final attempt to lay a basis for compelling private respondent to pay
premium rates of pay for all hours worked on a Saturday, regardless of the number of hours actually
worked earlier during the week, i.e., on Monday to Friday, insists that private respondent cannot require
its employees to complete the 40-hour regular work week on a Saturday, after it has allowed its
employees to render only 37-1/2 hours of work.

The company practice of allowing employees to leave thirty (30) minutes earlier than the
scheduled off-time had been established primarily for the convenience of the employees most of whom
have had to commute from work place to home and in order that they may avoid the heavy rush hour
vehicular traffic. There is no allegation here by petitioner Union that such practice was resorted to by
Caltex in order to escape its contractual obligations. This practice, while it effectively reduced to 37-1/2
the number of hours actually worked by employees who had opted to leave ahead of off-time, is not be
construed as modifying the other terms of the 1985 CBA. As correctly pointed out by private respondent,
the shortened work period did not result in likewise shortening the work required for purposes of
determining overtime pay, as well as for purposes of determining premium pay for work beyond forty
(40) hours within the calendar week. It follows that an employee is entitled to be paid premium rates,
whether for work in excess of eight (8) hours on any given day, or for work beyond the forty (40)-hour
requirement for the calendar week, only when the employee had, in fact already rendered the requisite
number of hours 8 or 40 prescribed in the 1985 CBA.

In recapitulation, the parties' 1985 CBA stipulated that employees at the Manila Office, as well as
those similarly situated at the Legazpi and Marinduque Bulk Depots, shall be provided only one (1) day
of rest; Sunday, and not Saturday, was designated as this day of rest. Work performed on a Saturday is
accordingly to be paid at regular rates of pay, as a rule, unless the employee shall have been required to
render work in excess of forty (40) hours in a calendar week. The employee must, however, have in fact
rendered work in excess of forty (40) hours before hours subsequently worked become payable at
premium rates. We conclude that the NLRC correctly set aside the palpable error committed by Labor
Arbiter Guanio, when the latter imposed upon one of the parties to the 1985 CBA, an obligation which it
had never assumed.

PAL vs NLRC

Facts:

Private respondent was employed as flight surgeon at petitioner company. He was assigned at
the PAL Medical Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00 midnight.
 On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to have
his dinner at his residence, which was about five-minute drive away. A few minutes later, the clinic
received an emergency call from the PAL Cargo Services. One of its employees, Mr. Manuel Acosta, had
suffered a heart attack. The nurse on duty, Mr. Merlino Eusebio, called private respondent at home to
inform him of the emergency. The patient arrived at the clinic at 7:50 in the evening and Mr. Eusebio
immediately rushed him to the hospital. When private respondent reached the clinic at around 7:51 in
the evening, Mr. Eusebio had already left with the patient. Mr. Acosta died the following day.

Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon ordered the
Chief Flight Surgeon to conduct an investigation. The Chief Flight Surgeon, in turn, required private
respondent to explain why no disciplinary sanction should be taken against him.

In his explanation, private respondent asserted that he was entitled to a thirty-minute meal
break; that he immediately left his residence upon being informed by Mr. Eusebio about the emergency
and he arrived at the clinic a few minutes later; that Mr. Eusebio panicked and brought the patient to the
hospital without waiting for him.

Finding private respondent's explanation unacceptable, the management charged private

respondent with abandonment of post while on duty. He was given ten days to submit a written answer
to the administrative charge.

In his answer, private respondent reiterated the assertions in his previous explanation. He
further denied that he abandoned his post on February 17, 1994. He said that he only left the clinic to
have his dinner at home. In fact, he returned to the clinic at 7:51 in the evening upon being informed of
the emergency.

After evaluating the charge as well as the answer of private respondent, petitioner company
decided to suspend private respondent for three months effective December 16, 1994.

Private respondent filed a complaint for illegal suspension against petitioner.

On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a decision 1 declaring the
suspension of private respondent illegal. It also ordered petitioner to pay private respondent the amount
equivalent to all the benefits he should have received during his period of suspension plus P500,000.00
moral damages.

Petitioner appealed to the NLRC. The NLRC, however, dismissed the appeal after finding that the
decision of the Labor Arbiter is supported by the facts on record and the law on the matter. 3 The NLRC
likewise denied petitioner's motion for reconsideration.

Issue: 1. WoN the private respondents erred in nullifying the suspension?

2. WoN private respondents ered in awarding damages?#

Ruling:
 1. No. The facts do not support petitioner's allegation that private respondent abandoned his
post on the evening of February 17, 1994. Private respondent left the clinic that night only to have his
dinner at his house, which was only a few minutes' drive away from the clinic. His whereabouts were
known to the nurse on duty so that he could be easily reached in case of emergency. Upon being
informed of Mr. Acosta's condition, private respondent immediately left his home and returned to the
clinic. These facts belie petitioner's claim of abandonment.

Petitioner argues that being a full-time employee, private respondent is obliged to stay in the
company premises for not less than eight (8) hours. Hence, he may not leave the company premises
during such time, even to take his meals.

We are not impressed.

Art. 83 and 85 of the Labor Code read:

Art. 83. Normal hours of work. The normal hours of work of any employee shall not
exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least one

million (1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred
(100) shall hold regular office hours for eight (8) hours a day, for five (5) days a week,
exclusive of time for meals, except where the exigencies of the service require that such
personnel work for six (6) days or forty-eight (48) hours, in which case they shall be
entitled to an additional compensation of at least thirty per cent (30%) of their regular
wage for work on the sixth day. For purposes of this Article, "health personnel" shall
include: resident physicians, nurses, nutritionists, dieticians, pharmacists, social workers,
laboratory technicians, paramedical technicians, psychologists, midwives, attendants
and all other hospital or clinic personnel. (emphasis supplied)

Art. 85. Meal periods. Subject to such regulations as the Secretary of Labor may
prescribe, it shall be the duty of every employer to give his employees not less than sixty
(60) minutes time-off for their regular meals.

Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:

Sec. 7. Meal and Rest Periods. Every employer shall give his employees, regardless of
sex, not less than one (1) hour time-off for regular meals, except in the following cases
when a meal period of not less than twenty (20) minutes may be given by the employer
provided that such shorter meal period is credited as compensable hours worked of the
employee;

(a) Where the work is non-manual work in nature or does not involve strenuous
physical exertion;

(b) Where the establishment regularly operates not less than sixteen hours a
day;
 (c) In cases of actual or impending emergencies or there is urgent work to be
performed on machineries, equipment or installations to avoid serious loss which the
employer would otherwise suffer; and

(d) Where the work is necessary to prevent serious loss of perishable goods.

Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall
be considered as compensable working time.

Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be
inferred that employees must take their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return to their posts on time. Private
respondent's act, therefore, of going home to take his dinner does not constitute abandonment.

2. Yes. Not every employee who is illegally dismissed or suspended is entitled to damages. As a
rule, moral damages are recoverable only where the dismissal or suspension of the employee was
attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy. 6 Bad faith does not simply mean negligence or bad
judgment. It involves a state of mind dominated by ill will or motive. It implies a conscious and
intentional design to do a wrongful act for a dishonest purpose or some moral obliquity. 7 The person
claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the
law always presumes good faith.8

In the case at bar, there is no showing that the management of petitioner company was moved
by some evil motive in suspending private respondent. It suspended private respondent on an honest,
albeit erroneous, belief that private respondent's act of leaving the company premises to take his meal
at home constituted abandonment of post which warrants the penalty of suspension. Also, it is evident
from the facts that petitioner gave private respondent all the opportunity to refute the charge against
him and to defend himself. These negate the existence of bad faith on the part of petitioner. Under the
circumstances, we hold that private respondent is not entitled to moral damages.

Rada vs NLRC

Facts:
 Petitioner's initial employment with this Respondent was under a "Contract of Employment for a
Definite Period" whereby Petitioner was hired as "Driver" for the construction supervision phase of the
Manila North Expressway Extension, Second Stage (hereinafter referred to as MNEE Stage 2) for a term
of "about 24 months effective July 1, 1977.

Highlighting the nature of Petitioner's employment, Annex A specifically provides as follows:

It is hereby understood that the Employer does not have a continuing need for the services of
the Employee beyond the termination date of this contract and that the Employee's services
shall automatically, and without notice, terminate upon the completion of the above specified
phase of the project; and that it is further understood that the engagement of his/her services is
coterminus with the same and not with the whole project or other phases thereof wherein other
employees of similar position as he/she have been hired. (Par. 7

Petitioner's first contract of employment expired on June 30, 1979. Meanwhile, the main
project, MNEE Stage 2, was not finished on account of various constraints, not the least of which was
inadequate funding, and the same was extended and remained in progress beyond the original period of
2.3 years. Fortunately for the Petitioner, at the time the first contract of employment expired,
Respondent was in need of Driver for the extended project. Since Petitioner had the necessary
experience and his performance under the first contract of employment was found satisfactory, the
position of Driver was offered to Petitioner, which he accepted. Hence a second Contract of Employment
for a Definite Period of 10 months, that is, from July 1, 1979 to April 30, 1980 was executed between
Petitioner and Respondent on July 7, 1979. . . .

In March 1980 some of the areas or phases of the project were completed, but the bulk of the
project was yet to be finished. By that time some of those project employees whose contracts of
employment expired or were about to expire because of the completion of portions of the project were
offered another employment in the remaining portion of the project. Petitioner was among those whose
contract was about to expire, and since his service performance was satisfactory, respondent renewed
his contract of employment in April 1980, after Petitioner agreed to the offer. Accordingly, a third
contract of employment for a definite period was executed by and between the Petitioner and the
Respondent whereby the Petitioner was again employed as Driver for 19 months, from May 1, 1980 to
November 30, 1981, . . .

This third contract of employment was subsequently extended for a number of times, the last
extension being for a period of 3 months, that is, from October 1, 1985 to December 31, 1985, . .

The last extension, from October 1, 1985 to December 31, 1985 (Annex E) covered by an
"Amendment to the Contract of Employment with a Definite Period," was not extended any further
because Petitioner had no more work to do in the project. This last extension was confirmed by a notice
on November 28, 1985 duly acknowledged by the Petitioner the very next day, . . .

Sometime in the 2nd week of December 1985, Petitioner applied for "Personnel Clearance" with
Respondent dated December 9, 1985 and acknowledged having received the amount of P3,796.20
representing conversion to cash of unused leave credits and financial assistance. Petitioner also released
Respondent from all obligations and/or claims, etc. in a "Release, Waiver and Quitclaim" . . .

Culled from the records, it appears that on May 20, 1987, petitioner filed before the NLRC,
National Capital Region, Department of Labor and Employment, a Complaint for non-payment of
separation pay and overtime pay. On June 3, 1987, Philnor filed its Position Paper alleging, inter alia, that
petitioner was not illegally terminated since the project for which he was hired was completed; that he
was hired under three distinct contracts of employment, each of which was for a definite period, all
within the estimated period of MNEE Stage 2 Project, covering different phases or areas of the said
project; that his work was strictly confined to the MNEE Stage 2 Project and that he was never assigned
to any other project of Philnor; that he did not render overtime services and that there was no demand
or claim for him for such overtime pay; that he signed a "Release, Waiver and Quitclaim" releasing
Philnor from all obligations and claims; and that Philnor's business is to provide engineering consultancy
services, including supervision of construction services, such that it hires employees according to the
requirements of the project manning schedule of a particular contract.

On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally dismissed
and that he was not paid overtime pay although he was made to render three hours overtime work form
Monday to Saturday for a period of three years.

On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally dismissed since
he was a regular employee entitled to security of tenure; that he was not a project employee since
Philnor is not engaged in the construction business as to be covered by Policy Instructions No. 20; that
the contract of employment for a definite period executed between him and Philnor is against public
policy and a clear circumvention of the law designed merely to evade any benefits or liabilities under the
statute; that his position as driver was essential, necessary and desirable to the conduct of the business
of Philnor; that he rendered overtime work until 6:00 p.m. daily except Sundays and holidays and,
therefore, he was entitled to overtime pay.

In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular employee
pursuant to Article 278(c) of the Labor Code and, thus, he cannot be terminated except for a just cause
under Article 280 of the Code; and that the public respondent's ruling in Quiwa vs. Philnor Consultants
and Planners, Inc. is not applicable to his case since he was an administrative employee working as a
company driver, which position still exists and is essential to the conduct of the business of Philnor even
after the completion of his contract of employment. Petitioner likewise avers that the contract of
employment for a definite period entered into between him and Philnor was a ploy to defeat the intent
of Article 280 of the Labor Code.

On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging therein
that petitioner was not a company driver since his job was to drive the employees hired to work at the
MNEE Stage 2 Project to and from the filed office at Sto. Domingo Interchange, Pampanga; that the
office hours observed in the project were from 7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that
Philnor adopted the policy of allowing certain employees, not necessarily the project driver, to bring
home project vehicles to afford fast and free transportation to and from the project field office
considering the distance between the project site and the employees' residence, to avoid project delays
and inefficiency due to employee tardiness caused by transportation problem; that petitioner was
allowed to use a project vehicle which he used to pick up and drop off some ten employees along
Epifanio de los Santos Avenue (EDSA), on his way home to Marikina, Metro Manila; that when he was
absent or on leave, another employee living in Metro Manila used the same vehicle in transporting the
same employees; that the time used by petitioner to and from his residence to the project site from 5:30
a.m. to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three hours daily, was not overtime work as
he was merely enjoying the benefit and convenience of free transportation provided by Philnor,
otherwise without such vehicle he would have used at least four hours by using public transportation
and spent P12.00 daily fare; that in the case of Quiwa vs. Philnor Consultants and Planners, Inc., supra,
the NLRC upheld Philnor's position that Quiwa was a project employee and he was not entitled to
termination pay under Policy Instructions No. 20 since his employment was coterminous with the
completion of the project.

On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's Rejoinder
and Reply, submitting therewith two letters dated January 5, 1985 and February 6, 1985, signed by MNEE
Stage 2 Project employees, including herein petitioner, where they asked what termination benefits
could be given to them as the MNEE Stage 2 Project was nearing completion, and Philnor's letter-reply
dated February 22, 1985 informing them that they are not entitled to termination benefits as they are
contractual/project employees.

On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision

(1) Ordering the respondent company to reinstate the complainant to his former position without loss of
seniority rights and other privileges with full backwages from the time of his dismissal to his actual
reinstatement;

(2) Directing the respondent company to pay the complainant overtime pay for the three excess hours of
work performed during working days from January 1983 to December 1985; and

(3) Dismissing all other claims for lack of merit.

Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19, 1990,
setting aside the labor arbiter's aforequoted decision and dismissing petitioner's complaint.

Issue:

1. WoN NLRC has jurisdiction?

2. WoN petitioner is a project employee?

 3. WoN petitioner is entitled to overtime pay?

Ruling:

1. Yes. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of the
appeal filed by Philnor in spite of the latter's failure to file a supersedeas bond within ten days from
receipt of the labor arbiter's decision, by reason of which the appeal should be deemed to have been
filed out of time. It will be noted, however, that Philnor was able to file a bond although it was made
beyond the 10-day reglementary period.

While it is true that the payment of the supersedeas bond is an essential requirement in the
perfection of an appeal, however, where the fee had been paid although payment was delayed, the
broader interests of justice and the desired objective of resolving controversies on the merits demands
that the appeal be given due course. Besides, it was within the inherent power of the NLRC to have
allowed late payment of the bond, considering that the aforesaid decision of the labor arbiter was
received by private respondent on October 3, 1989 and its appeal was duly filed on October 13, 1989.
However, said decision did not state the amount awarded as backwages and overtime pay, hence the
amount of the supersedeas bond could not be determined. It was only in the order of the NLRC of
February 16, 1990 that the amount of the supersedeas bond was specified and which bond, after an
extension granted by the NLRC, was timely filed by private respondent.

Moreover, as provided by Article 221 of the Labor Code, "in any proceeding before the
Commission or any of the Labor Arbiters, the rules of evidence prevailing in Courts of law or equity shall
not be controlling and it is the spirit and intention of this Code that the Commission and its members
and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively without regard to technicalities of law or procedure, all in the interest of due
process. 8 Finally, the issue of timeliness of the appeal being an entirely new and unpleaded matter in
the proceedings below it may not now be raised for the first time before this Court.

2. Yes. Petitioner postulates that as a regular employee, he is entitled to security of tenure,

hence he cannot be terminated without cause. Private respondent Philnor believes otherwise and
asserts that petitioner is merely a project employee who was terminated upon the completion of the
project for which he was employed.

In holding that petitioner is a regular employee, the labor arbiter found that:

. . . There is no question that the complainant was employed as driver in the

respondent company continuously from July 1, 1977 to December 31, 1985
under various contracts of employment. Similarly, there is no dispute that
respondent Philnor Consultant & Planner, Inc., as its business name connotes,
has been engaged in providing to its client(e)le engineering consultancy services.
The record shows that while the different labor contracts executed by the
parties stipulated definite periods of engaging the services of the complainant,
yet the latter was suffered to continue performing his job upon the expiration of
one contract and the renewal of another. Under these circumstances, the
 complaint has obtained the status of regular employee, it appearing that he has
worked without fail for almost eight years, a fraction of six months considered as
one whole year, and that his assigned task as driver was necessary and desirable
in the usual trade/business of the respondent employer. Assuming to be true, as
spelled out in the employment contract, that the Employer has no "continuing
need for the services of the Employe(e) beyond the termination date of this
contract and that the Employee's services shall automatically, and without
notice, terminate upon completion of the above specified phase of the project,"
still we cannot see our way clear why the complainant was hired and his services
engaged contract after contract straight from 1977 to 1985 which, to our
considered view, lends credence to the contention that he worked as regular
driver ferrying early in the morning office personnel to the company main office
in Pampanga and bringing back late in the afternoon to Manila, and driving
company executives for inspection of construction workers to the jobsites. All
told, we believe that the complainant, under the environmental facts obtaining
in the case at bar, is a regular employee, the provisions of written agreement to
the
contrary notwithstanding and regardless of the oral understanding of the parties
. . . 10

On the other hand, respondent NLRC declared that, as between the uncorroborated and
unsupported assertions of petitioners and those of private respondent which are supported by
documents, greater credence should be given the latter. It further held that:

Complainant was hired in a specific project or undertaking as driver. While such project was still
on-going he was hired several times with his employment period fixed every time his contract was
renewed. At the completion of the specific project or undertaking his employment contract was not
renewed.

We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and Planners, Inc., NLRC
RAB III 5-1738-84, it is being applicable in this case, viz.:

While it is true that the activities performed by him were necessary or desirable in the usual
business or trade of the respondent as consultants, planners, contractor and while it is also true
that the duration of his employment was for a period of about seven years, these circumstances
did not make him a
regular employee in contemplation of Article 281 of (the) Labor Code. . . . 11

Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. 12
is
applicable to the case at bar. Thus:

We hold that private respondents were project employees whose work was coterminous with
the project or which they were hired. Project employees, as distinguished from regular or non-
project employees, are mentioned in section 281 of the Labor Code as those "where the
employment has been fixed for a specific project or undertaking the completion or termination
of which has been determined at the time of the engagement of the employee."
 Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employer-
employee relations in the construction industry, provides:

Project employees are those employed in connection with a particular construction project.
Non-project (regular) employees are those employed by a construction company without
reference to any particular project.

Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the
number of projects in which they have been employed by a particular construction company.
Moreover, the company is not required to obtain clearance from the Secretary of Labor in
connection with such termination.

The petitioner cited three of its own cases wherein the National Labor Relations Commission,
Deputy Minister of Labor and Employment Inciong and the Director of the National Capital Region held
that the layoff of its project employees was lawful. Deputy Minister Inciong in TFU Case No. 1530, In Re
Sandoval Shipyards, Inc. Application for Clearance to Terminate Employees, rendered the following ruling
on February 26, 1979;

We feel that there is merit in the contention of the applicant corporation. To our mind, the
employment of the employees concerned were fixed for a specific project or undertaking. For
the nature of the business the corporation is engaged into is one which will not allow it to
employ workers for an indefinite period.

It is significant to note that the corporation does not construct vessels for sale or otherwise
which will demand continuous productions of ships and will need permanent or regular workers.
It merely accepts contracts for shipbuilding or for repair of vessels form third parties and, only,
on occasion when it has work contract of this nature that it hires workers to do the job which,
needless to say, lasts only for less than a year or longer.

The completion of their work or project automatically terminates their employment, in which
case, the employer is, under the law, only obliged to render a report on the termination of the
employment. (139-140, Rollo of G.R. No. 65689) (Emphasis supplied)

In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., 13 we likewise held that:

As an electrical contractor, the private respondent depends for its business on the contracts it is
able to obtain from real estate developers and builders of buildings. Since its work depends on
the availability of such contracts or "projects," necessarily the duration of the employment's of
this work force is not permanent but co-terminus with the projects to which they are assigned
and from whose payrolls they are paid. It would be extremely burdensome for their employer
who, like them, depends on the availability of projects, if it would have to carry them as
permanent employees and pay them wages even if there are no projects for them to work on.
(Emphasis supplied.)

It must be stressed herein that although petitioner worked with Philnor as a driver for eight
years, the fact that his services were rendered only for a particular project which took that same period
of time to complete categorizes him as a project employee. Petitioner was employed for one specific
project.

A non-project employee is different in that the employee is hired for more than one project. A
non-project employee, vis-a-vis a project employee, is best exemplified in the case of Fegurin, et al. vs.
National Labor Relations Commission, et al. 14 wherein four of the petitioners had been working with the
company for nine years, one for eight years, another for six years, the shortest term being three years. In
holding that petitioners are regular employees, this Court therein explained:

Considering the nature of the work of petitioners, that of carpenter, laborer or mason,
their respective jobs would actually be continuous and on-going. When a project to
which they are individually assigned is completed, they would be assigned to the next
project or a phase thereof. In other words, they belonged to a "work pool" from which
the company would draw workers for assignment to other projects at its discretion. They
are, therefore, actually "non-project employees."

From the foregoing, it is clear that petitioner is a project employee considering that he does not
belong to a "work pool" from which the company would draw workers for assignment to other projects
at its discretion. It is likewise apparent from the facts obtaining herein that petitioner was utilized only
for one particular project, the MNEE Stage 2 Project of respondent company. Hence, the termination of
herein petitioner is valid by reason of the completion of the project and the expiration of his
employment contract.

3. Yes. The fact that he picks up employees of Philnor at certain specified points along EDSA in
going to the project site and drops them off at the same points on his way back from the field office
going home to Marikina, Metro Manila is not merely incidental to petitioner's job as a driver. On the
contrary, said transportation arrangement had been adopted, not so much for the convenience of the
employees, but primarily for the benefit of the employer, herein private respondent. This fact is
inevitably deducible from the Memorandum of respondent company:

The herein Respondent resorted to the above transport arrangement because from its
previous project construction supervision experiences, Respondent found out that
project delays and inefficiencies resulted from employees' tardiness; and that the
problem of tardiness, in turn, was aggravated by transportation problems, which varied
in degrees in proportion to the distance between the project site and the employees'
residence. In view of this lesson from experience, and as a practical, if expensive,
solution to employees' tardiness and its concomitant problems, Respondent adopted the
policy of allowing certain employees not necessarily project drivers to bring home
project vehicles, so that employees could be afforded fast, convenient and free
transportation to and from the project field office.

Private respondent does not hesitate to admit that it is usually the project driver who is tasked
with picking up or dropping off his fellow employees. Proof thereof is the undisputed fact that when
petitioner is absent, another driver is supposed to replace him and drive the vehicle and likewise pick up
and/or drop off the other employees at the designated points on EDSA. If driving these employees to
and from the project site is not really part of petitioner's job, then there would have been no need to
find a replacement driver to fetch these employees. But since the assigned task of fetching and
delivering employees is indispensable and consequently mandatory, then the time required of and used
by petitioner in going from his residence to the field office and back, that is, from 5:30 a.m. to 7:00 a.m.
and from 4:00 p.m. to around 6:00 p.m., which the labor arbiter rounded off as averaging three hours
each working day, should be paid as overtime work. Quintessentially, petitioner should be given
overtime pay for the three excess hours of work performed during working days from January, 1983 to
December, 1985.

Wellington vs Trajano

Facts:
 The case arose from a routine inspection conducted by a Labor Enforcement Officer on August 6,
1991 of the Wellington Flour Mills, an establishment owned and operated by petitioner Wellington
Investment and Manufacturing Corporation (hereafter, simply Wellington). The officer thereafter drew
up a report, a copy of which was "explained to and received by" Wellington's personnel manager, in
which he set forth his finding of "(n)on-payment of regular holidays falling on a Sunday for monthly-paid
employees."1

Wellington sought reconsideration of the Labor Inspector's report, by letter dated August 10,
1991. It argued that "the monthly salary of the company's monthly-salaried employees already includes
holiday pay for all regular holidays . . . (and hence) there is no legal basis for the finding of alleged non-
payment of regular holidays falling on a Sunday." It expounded on this thesis in a position paper
subsequently submitted to the Regional Director, asserting that it pays its monthly-paid employees a
fixed monthly compensation "using the 314 factor which undeniably covers and already includes
payment for all the working days in a month as well as all the 10 unworked regular holidays within a
year."3

Wellington's arguments failed to persuade the Regional Director who, in an Order issued on July
28, 1992, ruled that "when a regular holiday falls on a Sunday, an extra or additional working day is
created and the employer has the obligation to pay the employees for the extra day except the last
Sunday of August since the payment for the said holiday is already included in the 314 factor," and
accordingly directed Wellington to pay its employees compensation corresponding to four (4) extra
working days.4

Wellington timely filed a motion for reconsideration of this Order of August 10, 1992, pointing
out that it was in effect being compelled to "shell out an additional pay for an alleged extra working day"
despite its complete payment of all compensation lawfully due its workers, using the 314 factor. 5 Its
motion was treated as an appeal and was acted on by respondent Undersecretary. By Order dated
September 22, the latter affirmed the challenged order of the Regional Director, holding that "the divisor
being used by the respondent (Wellington) does not reliably reflect the actual working days in a year, "
and consequently commanded Wellington to pay its employees the "six additional working days resulting
from regular holidays falling on Sundays in 1988, 1989 and 1990." 6 Again, Wellington moved for
reconsideration,7 and again was rebuffed.

Wellington then instituted the special civil action of certiorari at bar in an attempt to nullify the
orders above mentioned. By Resolution dated July 4, 1994, this Court authorized the issuance of a
temporary restraining order enjoining the respondents from enforcing the questioned orders.

Issue: WoN a monthly-paid employee, receiving a fixed monthly compensation, is entitled to an

additional pay aside from his usual holiday pay, whenever a regular holiday falls on a Sunday?

Ruling:
 No. Every worker should, according to the Labor Code, "be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten (10)
workers;" this, of course, even if the worker does no work on these holidays. The regular holidays
include: "New Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty-fifth of December, and the day
designated by law for holding a general election (or national referendum or plebiscite). 11

Particularly as regards employees "who are uniformly paid by the month, "the monthly
minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by
twelve."12 This monthly salary shall serve as compensation "for all days in the month whether worked or
not," and "irrespective of the number of working days therein." In other words, whether the month is of
thirty (30) or thirty-one (31) days' duration, or twenty-eight (28) or twenty-nine (29) (as in February), the
employee is entitled to receive the entire monthly salary. So, too, in the event of the declaration of any
special holiday, or any fortuitous cause precluding work on any particular day or days (such as
transportation strikes, riots, or typhoons or other natural calamities), the employee is entitled to the
salary for the entire month and the employer has no right to deduct the proportionate amount
corresponding to the days when no work was done. The monthly compensation is evidently intended
precisely to avoid computations and adjustments resulting from the contingencies just mentioned which
are routinely made in the case of workers paid on daily basis.

In Wellington's case, there seems to be no question that at the time of the inspection conducted
by the Labor Enforcement Officer on August 6, 1991, it was and had been paying its employees "a salary
of not less than the statutory or established minimum wage," and that the monthly salary thus paid was
"not . . . less than the statutory minimum wage multiplied by 365 days divided by twelve," supra. There
is, in other words, no issue that to this extent, Wellington complied with the minimum norm laid down
by law.

Apparently the monthly salary was fixed by Wellington to provide for compensation for every
working day of the year including the holidays specified by law and excluding only Sundays. In fixing
the salary, Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays
from the 365 days normally comprising a year and used the difference, 314, as basis for determining the
monthly salary. The monthly salary thus fixed actually covers payment for 314 days of the year, including
regular and special holidays, as well as days when no work is done by reason of fortuitous cause, as
above specified, or causes not attributable to the employees.

The Labor Officer who conducted the routine inspection of Wellington discovered that in certain
years, two or three regular holidays had fallen on Sundays. He reasoned that this had precluded the
enjoyment by the employees of a non-working day, and the employees had consequently had to work an
additional day for that month. This ratiocination received the approval of his Regional Director who
opined 14 that "when a regular holiday falls on a Sunday, an extra or additional working day is created and
the employer has the obligation to pay its employees for the extra day except the last Sunday of August
since the payment for the said holiday is already included in the 314 factor." 15

This ingenuous theory was adopted and further explained by respondent Labor Undersecretary,
to whom the matter was appealed, as follows: 16
 By using said (314) factor, the respondent (Wellington) assumes that all the regular
holidays fell on ordinary days and never on a Sunday. Thus, the respondent failed to
consider the circumstance that whenever a regular holiday coincides with a Sunday, an
additional working day is created and left unpaid. In other words, while the said divisor
may be utilized as proof evidencing payment of 302 working days, 2 special days and the
ten regular holidays in a calendar year, the same does not cover or include payment of
additional working days created as a result of some regular holidays falling on Sundays.

He pointed out that in 1988 there was "an increase of three (3) working days resulting from
regular holidays falling on Sundays;" hence Wellington "should pay for 317 days, instead of 314 days." By
the same process of ratiocination, respondent Undersecretary theorized that there should be additional
payment by Wellington to its monthly-paid employees for "an increment of three (3) working days" for
1989 and again, for 1990. What he is saying is that in those years, Wellington should have used the "317
factor," not the "314 factor."

The theory loses sight of the fact that the monthly salary in Wellington which is based on the
so-called "314 factor" accounts for all 365 days of a year; i.e., Wellington's "314 factor" leaves no day
unaccounted for; it is paying for all the days of a year with the exception only of 51 Sundays.

The respondents' theory would make each of the years in question (1988, 1989, 1990), a year of
368 days. Pursuant to this theory, no employer opting to pay his employees by the month would have
any definite basis to determine the number of days in a year for which compensation should be given to
his work force. He would have to ascertain the number of times legal holidays would fall on Sundays in
all the years of the expected or extrapolated lifetime of his business. Alternatively, he would be
compelled to make adjustments in his employees' monthly salaries every year, depending on the
number of times that a legal holiday fell on a Sunday.

There is no provision of law requiring any employer to make such adjustments in the monthly
salary rate set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to
the legal provisions bearing on the point, otherwise to reckon a year at more than 365 days. As earlier
mentioned, what the law requires of employers opting to pay by the month is to assure that "the
monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days
divided by twelve," and to pay that salary "for all days in the month whether worked or not," and
"irrespective of the number of working days therein." That salary is due and payable regardless of the
declaration of any special holiday in the entire country or a particular place therein, or any fortuitous
cause precluding work on any particular day or days (such as transportation strikes, riots, or typhoons or
other natural calamities), or cause not imputable to the worker. And as also earlier pointed out, the legal
provisions governing monthly compensation are evidently intended precisely to avoid re-computations
and alterations in salary on account of the contingencies just mentioned, which, by the way, are
routinely made between employer and employees when the wages are paid on daily basis.

The public respondents argue that their challenged conclusions and dispositions may be justified
by Section 2, Rule X, Book III of the Implementing Rules, giving the Regional Director power

to order and administer (in cases where employer-employee relations

still exist), after due notice and hearing, compliance with the labor standards
provisions of the Code and the other labor legislations based on the findings of
 their Regulations Officers or Industrial Safety Engineers (Labor Standard and
Welfare Officers) and made in the course of inspection, and to issue writs of
execution to the appropriate authority for the enforcement of his order, in line
with the provisions of Article 128 in relation to Articles 289 and 290 of the Labor
Code, as amended. . . .

The respondents beg the question. Their argument assumes that there are some "labor
standards provisions of the Code and the other labor legislations" imposing on employers the obligation
to give additional compensation to their monthly-paid employees in the event that a legal holiday should
fall on a Sunday in a particular month with which compliance may be commanded by the Regional
Director when the existence of said provisions is precisely the matter to be established.

In promulgating the orders complained of the public respondents have attempted to legislate, or
interpret legal provisions in such a manner as to create obligations where none are intended. They have
acted without authority, or at the very least, with grave abuse of their discretion. Their acts must be
nullified and set aside.