You are on page 1of 161

G.R. No.

96078 January 9, 1992

HILARIO RADA, petitioner, vs NLRC

and PHILNOR CONSULTANTS AND PLANNERS, INC., respondents.

In this special civil action for certiorari, petitioner Rada seeks to annul the decision of respondent
National Labor Relations Commission (NLRC), dated November 19, 1990, reversing the decision of
the labor arbiter which ordered the reinstatement of petitioner with backwages and awarded him
overtime pay.

The facts, as stated in the Comment of private respondent Philnor Consultants and Planners, Inc.
(Philnor), are as follows:

Petitioner's initial employment with this Respondent was under a "Contract of Employment for a
Definite Period" dated July 7, 1977, copy of which is hereto attached and made an integral part hereof
as Annex A 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, emphasis supplied)

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" . . . 2

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. 3

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. 5 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. 6 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.
7
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision with the following
dispositive portion:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered:


(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.
SO ORDERED.

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.

Hence this petition wherein petitioner charges respondent NLRC with grave abuse of discretion
amounting to lack of jurisdiction for the following reasons:

1. The decision of the labor arbiter, dated August 31, 1989, has already become final and executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is it applicable to
this case;
3. The petitioner is a regular employee with eight years and five months of continuous services for his
employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are valid and meritorious and
should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in accord with the facts, the law
and evidence.
The petition is devoid of merit.

1. 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. 9

2. 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 .

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.

Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. 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.

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. 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. Anent the claim for overtime compensation, we hold that petitioner is entitled to the same. 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.

WHEREFORE, subject to the modification regarding the award of overtime pay to herein petitioner,
the decision appealed from is AFFIRMED in all other respects. SO ORDERED.
G.R. NO. 41314 November 13, 1992

UNION CARBIDE LABOR UNION (NLU), petitioner, vs. UNION CARBIDE PHILIPPINES,
INC. AND THE HON. SECRETARY OF LABOR, respondents.

This refers to a petition for review of the decision of the then Secretary of Labor Blas Ople handed
down on February 7, 1975 which set aside the decision of the Arbitrator ordering reinstatement with
backwages, and instead adjudged the payment of separation pay; and the resolution dated July 24, 1975
denying petitioner's motion for reconsideration for lack of merit.

The undisputed facts as found by the Secretary of Labor are as follows:

. . . Complainants Agapito Duro, Alfredo Torio, and Rustico Javillonar, were dismissed from their
employment after an application for clearance to terminate them was approved by the Secretary of
Labor on December 19, 1972. Respondent's application for clearance was premised on "willful
violation of Company regulations, gross insubordination and refusal to submit to a Company
investigation . . . ."

Prior events leading to the dismissal of complainants are recited in the Arbitrator's decision, which we
quote:

It appears that the Company is operating on three (3) shifts namely: morning, afternoon and night
shifts. The workers in the third shift normally work from Monday to Saturday, the last working day
being Friday or forty (40) hours a week or from Monday to Friday.

Sometime in July 1972, there seems to be a change in the working schedule from Monday to Friday as
contained in the collective bargaining agreement aforecited to Sunday thru Thursday. The change
became effective July 5, 1972. The third shift employees were required to start the new work schedule
from Sunday thru Thursday.

On November 6, 1972, the night shift employees filed a demand to maintain the old working schedule
from Monday thru Friday. (Letter of November 6, 1972 addressed to the Committee on Labor Relation,
UCLU). The demand was referred to the Labor Management Relation Committee and discussed from
November 15, up to November 24, 1972. In the discussions had, it was arrived at that all night shift
operating personnel were allowed to start their work Monday and on Saturday. This excepted the
employees in the maintenance and preparation crews whose work schedule is presumed to be
maintained from Sunday to Thursday. The work schedule between management representatives and the
alleged officers of the Union (Varias group) was approved and disseminated to take effect November
26, 1972. (Exh. "2" Respondent).

In manifestation of their dissention to the new work schedule, the three respondents Duro, Torio, and
Javillonar did not report for work on November 26, 1972 which was a Sunday since it was not a
working day according to the provisions of the Collective Bargaining Agreement. (Exh. "A"
Complainant). Their absence caused their suspension for fourteen (14) days. (pp. 29-30, Rollo).
On May 4, 1973, the Arbitrator rendered a decision ordering the reinstatement with back wages of the
complainants. On June 8, 1973, the National Labor Relations Commission dismissed respondent
company's appeal for having been filed out of time. A motion for reconsideration which was treated as
an appeal was then filed by respondent company before the Secretary of Labor, resulting in the
modification of the Arbitrator's decision by awarding complainants separation pay. A motion for
reconsideration subsequently filed by the petitioner was denied for lack of merit.

Hence, this petition.

The main issue in this case is whether or not the complainants could be validly dismissed from their
employment on the ground of insubordination for refusing to comply with the new work schedule.

Petitioner alleges that the change in the company's working schedule violated the existing Collective
Bargaining Agreement of the parties. Hence, complainants cannot be dismissed since their refusal to
comply with the re-scheduled working hours was based on a provision of the Collective Bargaining
Agreement. Petitioner further contends that the dismissal of the complainants violated Section 9,
Article II of the 1973 Constitution which provides "the right of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work."

The petition has no merit.

Although Article XIX of the CBA provides for the duration of the agreement, which We quote:

This agreement shall become effective on September 1, 1971 and shall remain in full force and effect
without change until August 31, 1974. Unless the parties hereto agree otherwise, negotiation for
renewal, or renewal and modification, or a new agreement may not be initiated before July 1, 1974.

this does not necessarily mean that the company can no longer change its working schedule, for Section
2, Article II of the same CBA expressly provides that:

Sec. 2. In the exercise of its functions of management, the COMPANY shall have the sole and
exclusive right and power, among other things, to direct the operations and the working force of its
business in all respects; to be the sole judge in determining the capacity or fitness of an employee for
the position or job to which he has been assigned; to schedule the hours of work, shifts and work
schedules; to require work to be done in excess of eight hours or Sundays or holidays as the exigencies
of the service may require; to plan, schedule, direct, curtail and control factory operations and
schedules of production; to introduce and install new or improved methods or facilities; to designate
the work and the employees to perform it; to select and hire new employees; to train new employees
and improve the skill and ability of employees from one job to another or form one shift to another; to
classify or reclassify employees; and to make such changes in the duties of its employees as the
COMPANY may see fit or convenient for the proper conduct of its business.

Verily and wisely, management retained the prerogative, whenever exigencies of the service so require,
to change the working hours of its employees. And as long as such prerogative is exercised in good
faith for the advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this Court will
uphold such exercise (San Miguel Brewery Sales Force Union (PTGWO) vs. Ople, 170 SCRA 25
[1989]).

Thus, in the case of Abbott Laboratories (Phil.), Inc. vs. NLRC (154 SCRA 713 [1987]), We ruled:

.Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives. The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied. (p.717)

Further, the incident complained of took place sometime in 1972, so there is no violation of the 1973
Constitution to speak of because the guarantee of security of tenure embodied under Section 9, Article
II may not be given a retroactive effect. It is the basic norm that provisions of the fundamental law
should be given prospective application only, unless legislative intent for its retroactive application is
so provided.

As pointed out by Justice Isagani Cruz, to wit:

Finally, it should be observed that the provisions of the Constitution should be given only a prospective
application unless the contrary is clearly intended. Were the rule otherwise, rights already acquired or
vested might be unduly disturbed or withdrawn even in the absence of an unmistakable intention to
place them within the scope of the Constitution. (p.10, Constitutional Law, Isagani Cruz, 1991 Edition)

We agree with the findings arrived at by both Arbitrator and the Secretary of Labor that there is no
unfair labor practice in this case. Neither was there gross and habitual neglect of complainants' duties.
Nor did the act of complainants in refusing to follow the new working hours amount to serious
misconduct or willful disobedience to the orders of respondent company.

Although no serious objections may be offered to the Arbitrator's conclusion to order reinstatement
with backwages of the complainants, We now refrain from doing so considering that reinstatement is
no longer feasible due to the fact that the controversy started more than 20 years ago aside from the
obviously strained relations between the parties.

WHEREFORE, the decision appealed from is hereby AFFIRMED. SO ORDERED.


G.R. No. 76746 July 27, 1987

DURABUILT RECAPPING PLANT & COMPANY and EDUARDO LAO, GENERAL


MANAGER, petitioners, vs. NLRC,

HON. COMM. RICARDO C. CASTRO, HON. ARBITER AMELIA M. GULOY, KAPISANAN NG


MGA MANGGAGAWA SA DURABUILT and REYNALDO BODEGAS, respondents.

GUTIERREZ, JR., J.:

This is a petition to review the May 16, 1986 resolution of respondent National Labor Relations
Commission (NLRC) affirming the Labor Arbiter's order in NLRC Case No. NCR-73162083. The sole
issue raised is the proper basis for the computation of backwages in favor of an illegally dismissed
employee.

The facts of the case are simple and uncontroverted.

On July 11, 1983, a complaint for illegal dismissal was filed by respondent Reynaldo Bodegas, against
petitioner Durabuilt, a tire recapping company.

In a decision rendered by the Labor Arbiter on February 13, 1984, the private respondent was ordered
reinstated to his former position with full backwages, from the time he was terminated up to the time he
is actually reinstated, without loss of seniority rights and benefits accruing to him.

The petitioners failed to file a seasonable appeal and entry of final judgment was made on July 8, 1985.

On August 8, 1985, the Acting Chief of Research and Information and the Corporation Auditing
Examiner of the then Ministry of Labor and Employment submitted a computation of backwages,
ECOLA, 13th month pay, sick and vacation leave benefits in favor of Reynaldo Bodegas in the total
amount of P24,316.38.

The petitioner filed its opposition to the computation on the ground that it contemplated a straight
computation of twenty six (26) working days in one month when the period covered by the
computation was intermittently interrupted due to frequent brownouts and machine trouble and that
respondent Bodegas had only a total of 250.75 days of attendance in 1982 due to absences. According
to the petitioner, Bodegas is entitled only to the amount of P3,834.05 broken down as follows: salaries
— P1,993.00; ECOLA — P1,433.50, and 13th month pay — P407.55.

On October 23, 1985, the Labor Arbiter denied the opposition to the computation. The petitioner
appealed to the NLRC which, in an order dated May 16, 1986, affirmed the order of the Labor Arbiter
and dismissed the appeal.

Claiming grave abuse of discretion on the part of the public respondents, Durabuilt filed the instant
petition.
Backwages, in general, are granted on grounds of equity for earnings which a worker or employee has
lost due to his dismissal from work (New Manila Candy Workers Union (NACONWA-PAFLU v. CIR,
86 SCRA 37).

The general principle is that an employee is entitled to receive as backwages all the amounts he may
have lost starting from the date of his dismissal up to the time of his reinstatement (Capital Garment
Corporation v. Ople, 117 SCRA 473; New Manila Candy Workers' Union (NACONWA-PAFLU) v.
CIR, supra).

In a line of cases, this Court has established a policy fixing the amount of backwages to a just and
reasonable level without qualification or deduction (Insular Life Assurance Co., Ltd. Employees'
Association-NATU v. Insular Life Assurance Co., Ltd., 76 SCRA 501; Feati University Club v. Feati
University, 58 SCRA 395; Mercury Drug Co., Inc. v. CIR, 56 SCRA 694). The respondents center their
attention on the above underlined portion of this policy. Hence, their contention that the deductions
cited by the petitioners cannot be made.

In their bid to recover a greater amount of backwages, the rationale of the policy has escaped the
respondents' consideration. In Insular Life Assurance Employees Association-NATU v. Insular Life
Assurance Co., Ltd. (76 SCRA 50) we held that to fix the amount of backwages without qualification
or deduction simply means that the workers are to be paid their backwages fixed as of the time of their
dismissal or strike without deduction for their earnings elsewhere during their law-off and without
qualification of their backwages as thus fixed; i.e. unqualified by any wage increases or other benefits
that may have been received by their co-workers who were not dismissed or did not go on strike. The
principle is justified "as a realistic, reasonable and mutually beneficial solution for it relieves the
employees from proving their earnings during their law-offs and the employer from submitting counter
proofs. It was meant to obviate the twin evils of Idleness on the part of the employees and attrition and
undue delay in satisfying the award on the part of the employer" (New Manila Candy Workers Union
NACONWA-PAFLU v. CIR supra). The same was not to establish an inflexible rule of computation of
any Backwages due an employee.

The age-old rule governing the relation between labor and capital, or management and employee of a
"fair day's wage for a fair day's labor" remains as the basic factor in determining employees' wages, and
for that matter backwages. If there is no work performed by the employee there can be no wage or pay
unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or
suspended (SSS v. SSS Supervisors Union-CUGCO, 117 SCRA 746).

The illegal dismissal of the private respondent is conceded by the petitioner. It is willing to pay
backwages. However, the petitioner argues that for days where no work was required and could be
done by its employees, no wages could have been earned and, thereafter, lost by said employees to
justify an award of backwages. We quote with approval the Solicitor General's comment, * to wit:

From the indubitable facts on record, it appears that petitioners have valid reasons to claim that certain
days should not be considered days worked for purposes of computing private respondent's backwages
since their business was not in actual operation due to brownouts or power interruption and the
retrenchment of workers they had during the period of private respondent's dismissal.

It cannot be denied that during the past years particularly in 1983, there was chronic electrical power
interruption resulting to disruption of business operations. To alleviate the situation, the government
thru the Ministry of Trade and Industry called on the industrial sector to resort to the so-called
Voluntary Loan Curtailment Plan (or VLCP), whereby brownouts or electrical power interruption was
scheduled by area. The program while it may have been called 1. voluntary" was not so as electrical
power consumers had no choice then due to the prevailing energy crisis.

Petitioners heeding the government's call, participated in the VLCP as indicated in their statement of
conformity dated November 23, 1982. Thus, beginning March 21, 1983 and every Wednesday
thereafter, petitioner's business (which indicentally is recapping rubber tires) was not in actual
operation. No less than the former Minister of Trade and Industry expressed his gratitude to petitioners
for participating in the VLCP. Petitioners substantiated claim therefore, that the days during which they
were not in operation due to the VLCP should be excluded in the number of days worked for purposes
of computing private respondents backwages stands reasonable and should have been considered by the
corporation auditing examiner.1avvphi1

Moreover, as early as May 1978, the Ministry of Labor and Employment, thru Policy Instruction No.
36, has said that —

2. Brownouts running for more than twenty minutes may not be treated as hours worked provided that
any of the following conditions are present;

a) The employees can leave their work place or go elsewhere whether within or without the work
premises; or

b) The employees can use the time effectively for their own interest.

It is of record that during electrical power interruptions, petitioners business was not in operation. This
was never disputed by private respondent.

Petitioners' claim that the period (December 1983) during which they effected retrenchment of workers
owing to economic crisis then prevailing likewise appears plausible. There is substantial evidence
consisting of reports to MOLE and Social Security System showing that petitioners had laid off
workers due to lack of raw materials. The petitioners payrolls submitted to support their objection to
computation indicate that the number of working days was reduced from the normal weekly six
working days to four working days for a great number of petitioners' workers. Obviously, private
respondent could not have been among those laid off, as at that time he was already dismissed by
petitioner. (Rollo, pp. 31-34).

Thus, we have held that where the failure of workers to work was not due to the employer's fault, the
burden of economic loss suffered by the employees should not be shifted to the employer. Each party
must bear his own loss (SSS v. SSS Supervisors' Union-CUGCO, supra; Pan-American World
Airways, Inc. v. CIR, 17 SCRA 813). As pointed out by the Solicitor General —

... to allow payment of backwages of P24,316.68 as ordered by public respondents instead of P3,834.16
as petitioners claim and which appears to be just and reasonable under the circumstances of this case
would not only be unconscionable but would be grossly unfair to other employees who were not paid
when petitioners' business was not in operation. (Rollo, p. 35).

Indeed, it would neither be fair nor just to allow respondent to recover something he has not earned and
could not have earned and to further penalize the petitioner company over and above the losses it had
suffered due to lack of raw materials and the energy-saving programs of the government. The private
respondent cannot be allowed to enrich himself at the expense of the petitioner company. The
computation of backwages should be based on daily rather than on monthly pay schedules where, as in
the case at bar, such basis is more realistic and accurate. (Compania Maritima v. United Seamen's
Union of the Philippines, 65 SCRA 393).

In conclusion, we again quote the Solicitor General's comment:

Finally, what strengthens petitioners claim for mitigated liability is their evident good faith as
manifested by their reinstatement of private respondent while the case for illegal dismissal was still
pending and their willingness to pay backwages. While it is true that as a general rule order of
reinstatement carries with it an award of backwages (Art. 280, Labor Code) this Honorable Court did
not only mitigate but absolved employers from liability of backwages where good faith is evident
(Findlay Millar Timber Co. v. PLASLU, 6 SCRA 26: Cromwell Com. Employees & Laborers Union v.
CIR, 13 SCRA 259, Norton and Harrison Labor Union v. Harrison Co. Inc. 15 SCRA 310; PAL v.
PALEA, 57 SCRA 489; Cruz v. MOLE, 120 SCRA 15). There is no indication, to paraphrase this
Honorable Court's ruling in Pantranco North Express Inc. v. NLRC (126 SCRA 526) that private
respondent was a "victim of arbitrary and high handed action. Rollo, pp. 34-35).

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The order of the Labor
Arbiter, Amelia M. Guloy in NLRC Case No. NCR-7-3162083, dated October 23, 1985, as affirmed by
the NLRC is SET ASIDE. The petitioner is ordered to pay private respondent his backwages from the
time he was terminated up to the time he was actually reinstated computed on the basis of the number
of days when petitioner's business was in actual operation. The number of days where no work was
required and could be done by petitioner's employees on account of shutdowns due to electrical power
interruptions, machine repair, and lack of raw materials are not considered hours worked for purposes
of computing the petitioner's obligation to respondent employee. In no case shall the award exceed
three year's backpay as above computed. SO ORDERED.
G.R. No. L-98368 December 15, 1993

OPULENCIA ICE PLANT AND STORAGE AND/OR DR. MELCHOR OPULENCIA, petitioners,
vs. NLRC,

LABOR ARBITER NUMERIANO VILLENA AND MANUEL P. ESITA, respondents.

MANUEL P. ESITA was for twenty (20) years a compressor operator of Tiongson Ice Plant in San
Pablo City. In 1980 he was hired as compressor operator-mechanic for the ice plants of petitioner Dr.
Melchor Opulencia located in Tanauan, Batangas, and Calamba, Laguna. Initially assigned at the ice
plant in Tanauan, Esita would work from seven o'clock in the morning to five o'clock in the afternoon
receiving a daily wage of P35.00.

In 1986, Esita was transferred to the ice plant in Calamba, which was then undergoing overhauling,
taking the place of compressor operator Lorenzo Eseta, who was relieved because he was already old
and weak. For less than a month, Esita helped in the construction-remodeling of Dr. Opulencia's house.

On 6 February 1989, for demanding the correct amount of wages due him, Esita was dismissed from
service. Consequently, he filed with Sub-Regional Arbitration Branch IV, San Pablo City, a complaint
for illegal dismissal, underpayment, non-payment for overtime, legal holiday, premium for holiday and
rest day, 13th month, separation/retirement pay and allowances against petitioners.

Petitioners deny that Esita is an employee. They claim that Esita could not have been employed in 1980
because the Tanauan ice plant was not in operation due to low voltage of electricity and that Esita was
merely a helper/peon of one of the contractors they had engaged to do major repairs and renovation of
the Tanauan ice plant in 1986. Petitioners further allege that when they had the Calamba ice plant
repaired and expanded, Esita likewise rendered services in a similar capacity, and thus admitting that
he worked as a helper/peon in the repair or remodeling of Dr. Opulencia's residence in Tanauan.

Opulencia likewise maintains that while he refused the insistent pleas of Esita for employment in the
ice plants due to lack of vacancy, he nonetheless allowed him to stay in the premises of the ice plant for
free and to collect fees for crushing or loading ice of the customers and dealers of the ice plant.
Opulencia claims that in addition, Esita enjoyed free electricity and water, and was allowed to cultivate
crops within the premises of the ice plant to augment his income. Petitioners however admit that
"following the tradition of 'pakikisama' and as a token of gratitude of the part of the complainant
(Esita), he helps in the cleaning of the ice plant premises and engine room whenever he is requested to
do so, and this happens only (at) twice a month."

On 8 December 1989, Labor Arbiter Nemeriano D. Villena rendered a decision 1 finding the existence
of an employer-employee relationship between petitioners and Esita and accordingly directed them to
pay him P33,518.02 representing separation pay, underpayment of wages, allowances, 13th month,
holiday, premium for holiday, and rest day pays. The claim for overtime pay was however dismissed
for lack of basis, i.e., Esita failed to prove that overtime services were actually rendered.
On 29 November 1990, the Third Division of the National Labor Relations Commission, in Case No.
RAB-IV-2-2206-89, affirmed the decision of Labor Arbiter Villena but reduced the monetary award to
P28,344.60 as it was not proven that Esita worked every day including rest days and on the days before
the legal holidays. On 26 March 1991, petitioners' motion for reconsideration was denied.

In this present recourse, petitioners seek reversal of the ruling of public respondents Labor Arbiter and
NLRC, raising the following arguments: that public respondents have no jurisdiction over the instant
case; that Esita's work in the repair and construction of Dr. Opulencia's residence could not have
ripened into a regular employment; that petitioners' benevolence in allowing Esita to stay inside the
company's premises free of charge for humanitarian reason deserves commendation rather than
imposition of undue penalty; that Esita's name does not appear in the payrolls of the company which
necessarily means that he was not an employee; and, that Esita's statements are inconsistent and
deserving of disbelief. On 13 May 1991, petitioners' prayer for a temporary restraining order to prevent
respondents from enforcing the assailed resolutions of NLRC was granted.

The instant petition lacks merit, hence, must be dismissed.

Petitioners allege that there is no employer-employee relationship between them and Esita;
consequently, public respondents have no jurisdiction over the case. Petitioners even go to the extent of
asserting that "in case like the one at bar where employer-employee relationship has been questioned
from the very start, Labor Arbiters and the NLRC have no jurisdiction and should not assume
jurisdiction therein."

While the Labor Arbiter and the NLRC may subsequently be found without jurisdiction over a case
when it would later appear that no employer-employee relationship existed between the contending
parties, such is not the situation in this case where the employer-employee relationship between the
petitioners and Esita was clearly established. If the argument of petitioners were to be allowed, then
unscrupulous employers could readily avoid the jurisdiction of the Labor Arbiters and NLRC, and may
even elude compliance with labor laws only on the bare assertion that an employer-employee
relationship does not exist.

Petitioners further argue that "complainant miserably failed to present any documentary evidence to
prove his employment. There was no time sheet, pay slip and/or payroll/cash voucher to speak of.
Absence of these material documents are necessary fatal to complainant's cause."

We do not agree. No particular form of evidence is required to prove the existence of an employer-
employee relationship. Any competent and relevant evidence to prove the relationship may be
admitted. For, if only documentary evidence would be required to show that relationship, no scheming
employer would ever be brought before the bar of justice, as no employer would wish to come out with
any trace of the illegality he has authored considering that it should take much weightier proof to
invalidate a written instrument. 2 Thus, as in this case where the employer-employee relationship
between petitioners and Esita was sufficiently proved by testimonial evidence, the absence of time
sheet, time record or payroll has become inconsequential.
The petitioners' reliance on Sevilla v. Court of Appeals 3 is misplaced. In that case, we did not consider
the inclusion of employer's name in the payroll as an independently crucial evidence to prove an
employer-employee relation. Moreover, for a payroll to be utilized to disprove the employment of a
person, it must contain a true and complete list of the employees. But, in this case, the testimonies of
petitioners' witnesses admit that not all the names of the employees were reflected in the payroll.

In their Consolidated Reply, petitioners assert that "employees who were absent were naturally not
included in the weekly payrolls." 4 But this simply emphasizes the obvious. Petitioners' payrolls do not
contain the complete list of the employees, so that the payroll slips cannot be an accurate basis in
determining who are and are not their employees. In addition, as the Solicitor General observes: ". . . .
the payroll slips submitted by petitioners do not cover the entire period of nine years during which
private respondent claims to have been employed by them, but only the periods from November 2 to
November 29, 1986 and April 26 to May 30, 1987 . . . . It should be noted that petitioners repeatedly
failed or refused to submit all payroll slips covering the period during which private respondent claims
to have been employed by them despite repeated directives from the Labor Arbiter . . . ." 5 In this
regard, we can aptly apply the disputable presumption that evidence willfully suppressed would be
adverse if produced.6

Petitioners further contend that the claim of Esita that he worked from seven o'clock in the morning to
five o'clock in the afternoon, which is presumed to be continuous, is hardly credible because otherwise
he would not have had the time to tend his crops. 7 As against this positive assertion of Esita, it
behooves petitioners to prove the contrary. It is not enough that they raise the issue of probability, nay,
improbability, of the conclusions of public respondents based on the facts bared before them, for in
case of doubt, the factual findings of the tribunal which had the opportunity to peruse the conflicting
pieces of evidence should be sustained.

The petitioners point out that even granting arguendo that Esita was indeed a mechanic, he could never
be a regular employee because his presence would be required only when there was a need for repair.
We cannot sustain this argument. This circumstance cannot affect the regular status of employment of
Esita. An employee who is required to remain on call in the employer's premises or so close thereto that
he cannot use the time effectively and gainfully for his own purpose shall be considered as working
while on call. 8 In sum, the determination of regular and casual employment 9 is not affected by the fact
that the employee's regular presence in the place of work is not required, the more significant
consideration being that the work of the employee is usually necessary or desirable in the business of
the employer. More importantly, Esita worked for 9 years and, under the Labor Code, "any employee
who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to that activity in which he is employed . . . ." 10

The petitioners would give the impression that the repair of the ice plant and the renovation of the
residence of Dr. Opulencia were voluntarily extended by Esita because "[r]espondent did it on their
(sic) own." Unfortunately for petitioners, we cannot permit these baseless assertions to prevail against
the factual findings of public respondents which went through the sanitizing process of a public
hearing. The same observation may be made of the alleged inconsistencies in Esita's testimonies.
Moreover, on the claim that Esita's construction work could not ripen into a regular employment in the
ice plant because the construction work was only temporary and unrelated to the ice-making business,
needless to say, the one month spent by Esita in construction is insignificant compared to his nine-year
service as compressor operator in determining the status of his employment as such, and considering
further that it was Dr. Opulencia who requested Esita to work in the construction of his house.

In allowing Esita to stay in the premises of the ice plant and permitting him to cultivate crops to
augment his income, there is no doubt that petitioners should be commended; however, in view of the
existence of an employer-employee relationship as found by public respondents, we cannot treat
humanitarian reasons as justification for emasculating or taking away the rights and privileges of
employees granted by law. Benevolence, it is said, does not operate as a license to circumvent labor
laws. If petitioners were genuinely altruistic in extending to their employees privileges that are not
even required by law, then there is no reason why they should not be required to give their employees
what they are entitled to receive. Moreover, as found by public respondents, Esita was enjoying the
same privileges granted to the other employees of petitioners, so that in thus treating Esita, he cannot
be considered any less than a legitimate employee of petitioners.

WHEREFORE, there being no grave abuse of discretion on the part of public respondents, the instant
petition is DISMISSED. Accordingly, the restraining order we issued on 13 May 1991 is LIFTED.

SO ORDERED.
G.R. No. L-15422 November 30, 1962

NATIONAL DEVELOPMENT COMPANY, petitioner, vs. COURT OF INDUSTRIAL


RELATIONS and NATIONAL TEXTILE WORKERS UNION, respondents.

Government Corporate Counsel Simeon M. Gopengco and Lorenzo R. Mosqueda for petitioner.
Eulogio R. Lerum for respondent National Textile Workers Union. Mariano B. Tuason for respondent
Court of Industrial Relations.

This is a case for review from the Court of Industrial Relations. The pertinent facts are the following:

At the National Development Co., a government-owned and controlled corporation, there were four
shifts of work. One shift was from 8 a.m. to 4 p.m., while the three other shifts were from 6 a.m. to 2
p.m; then from 2 p.m. to 10 p.m. and, finally, from 10 p.m. to 6 a.m. In each shift, there was a one-hour
mealtime period, to wit: From (1) 11 a.m. to 12 noon for those working between 6 a.m. and 2 p.m. and
from (2) 7 p.m. to 8 p.m. for those working between 2 p.m. and 10 p.m.

The records disclose that although there was a one-hour mealtime, petitioner nevertheless credited the
workers with eight hours of work for each shift and paid them for the same number of hours. However,
since 1953, whenever workers in one shift were required to continue working until the next shift,
petitioner instead of crediting them with eight hours of overtime work, has been paying them for six
hours only, petitioner that the two hours corresponding to the mealtime periods should not be included
in computing compensation. On the other hand, respondent National Textile Workers Union whose
members are employed at the NDC, maintained the opposite view and asked the Court of Industrial
Relations to order the payment of additional overtime pay corresponding to the mealtime periods.

After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March 19, 1959, holding
that mealtime should be counted in the determination of overtime work and accordingly ordered
petitioner to pay P101,407.96 by way of overtime compensation. Petitioner filed a motion for
reconsideration but the same was dismissed by the CIR en banc on the ground that petitioner failed to
furnish the union a copy of its motion.

Thereafter, petitioner appealed to this Court, contending, first, that the CIR has no jurisdiction over
claims for overtime compensation and, secondary that the CIR did not make "a correct appraisal of the
facts, in the light of the evidence" in holding that mealtime periods should be included in overtime
work because workers could not leave their places of work and rest completely during those hours.

In support of its contention that the CIR lost its jurisdiction over claims for overtime pay upon the
enactment of the Industrial Peace Act (Republic Act No. 875), petitioner cites a number of decisions of
this Court. On May 23, 1960, however, We ruled in Price Stabilization Corp. v. Court of Industrial
Relations, et al., G.R. No. L-13206, that

Analyzing these cases, the underlying principle, it will be noted in all of them, though not stated in
express terms, is that where the employer-employee relationship is still existing or is sought to be
reestablished because of its wrongful severance, (as where the employee seeks reinstatement) the Court
of Industrial Relations has jurisdiction over all claims arising out of, or in connection with the
employment, such as those related to the Minimum Wage Law and the Eight-Hour Labor Law. After
the termination of their relationship and no reinstatement is sought, such claims become mere money
claims, and come within the jurisdiction of the regular courts,

We are aware that in 2 cases, some statements implying a different view have been made, but we now
hold and declare the principle set forth in the next preceding paragraph as the one governing all cases
of this nature.

This has been the constant doctrine of this Court since May 23, 1960.1

A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v. Manila Railroad
Co., et al., G.R. No. L-17905, May 25, 1962, in which We held that, for such jurisdiction to come into
play, the following requisites must be complied with: (a) there must exist between the parties an
employer-employee relationship or the claimant must seek his reinstatement; and (b) the controversy
must relate to a case certified by the President to the CIR as one involving national interest, or must
arise either under the Eight-Hour Labor Law, or under the Minimum Wage Law. In default of any of
these circumstances, the claim becomes a mere money claim that comes under the jurisdiction of the
regular courts. Here, petitioner does not deny the existence of an employer-employee relationship
between it and the members of the union. Neither is there any question that the claim is based on the
Eight-Hour Labor Law (Com. Act No. 444, as amended). We therefore rule in favor of the jurisdiction
of the CIR over the present claim.

The other issue raised in the appeal is whether or not, on the basis of the evidence, the mealtime breaks
should be considered working time under the following provision of the law;

The legal working day for any person employed by another shall be of not more than eight hours daily.
When the work is not continuous, the time during which the laborer is not working and can leave his
working place and can rest completely shall not be counted.

It will be noted that, under the law, the idle time that an employee may spend for resting and during
which he may leave the spot or place of work though not the premises2 of his employer, is not counted
as working time only where the work is broken or is not continuous.

The determination as to whether work is continuous or not is mainly one of fact which We shall not
review as long as the same is supported by evidence. (Sec. 15, Com. Act No. 103, as amended,
Philippine Newspaper Guild v. Evening News, Inc., 86 Phil. 303).

That is why We brushed aside petitioner's contention in one case that workers who worked under a 6
a.m. to 6 p.m. schedule had enough "free time" and therefore should not be credited with four hours of
overtime and held that the finding of the CIR "that claimants herein rendered services to the Company
from 6:00 a.m. to 6:00 p.m. including Sundays and holidays, . . . implies either that they were not
allowed to leave the spot of their working place, or that they could not rest completely" (Luzon
Stevedoring Co., Inc. v. Luzon Marine Department Union, et al., G.R. No. L-9265, April 29, 1957).

Indeed, it has been said that no general rule can be laid down is to what constitutes compensable work,
rather the question is one of fact depending upon particular circumstances, to be determined by the
controverted in cases. (31 Am. Jurisdiction Sec. 626 pp. 878.)

In this case, the CIR's finding that work in the petitioner company was continuous and did not permit
employees and laborers to rest completely is not without basis in evidence and following our earlier
rulings, shall not disturb the same. Thus, the CIR found:

While it may be correct to say that it is well-high impossible for an employee to work while he is
eating, yet under Section 1 of Com. Act No. 444 such a time for eating can be segregated or deducted
from his work, if the same is continuous and the employee can leave his working place rest completely.
The time cards show that the work was continuous and without interruption. There is also the evidence
adduced by the petitioner that the pertinent employees can freely leave their working place nor rest
completely. There is furthermore the aspect that during the period covered the computation the work
was on a 24-hour basis and previously stated divided into shifts.

From these facts, the CIR correctly concluded that work in petitioner company was continuous and
therefore the mealtime breaks should be counted as working time for purposes of overtime
compensation.

Petitioner gives an eight-hour credit to its employees who work a single shift say from 6 a.m. to 2 p.m.
Why cannot it credit them sixteen hours should they work in two shifts?

There is another reason why this appeal should dismissed and that is that there is no decision by the
CIR en banc from which petitioner can appeal to this Court. As already indicated above, the records
show that petitioner's motion for reconsideration of the order of March 19, 1959 was dismissed by the
CIR en banc because of petitioner's failure to serve a copy of the same on the union.

Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act No. 103, states:

The movant shall file the motion (for reconsideration), in six copies within five (5) days from the date
on which he receives notice of the order or decision, object of the motion for reconsideration, the same
to be verified under oath with respect to the correctness of the allegations of fact, and serving a copy
thereof personally or by registered mail, on the adverse party. The latter may file an answer, in six (6)
copies, duly verified under oath.

In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955), We sustained the
dismissal of a motion for reconsideration filed outside of the period provided in the rules of the CIR. A
motion for reconsideration, a copy of which has not been served on the adverse party as required by the
rules, stands on the same footing. For "in the very nature of things, a motion for reconsideration against
a ruling or decision by one Judge is in effect an appeal to the Court of Industrial Relations, en banc,"
the purpose being "to substitute the decision or order of a collegiate court for the ruling or decision of
any judge." The provision in Commonwealth Act No. 103 authorizing the presentation of a motion for
reconsideration of a decision or order of the judge to the CIR, en banc and not direct appeal therefore to
this Court, is also in accord with the principal of exhaustion of administrative remedies before resort
can be made to this Court. (Broce, et al., v. The Court of Industrial Relations, et al., G.R. No. L-12367,
October 29, 1959).

Petitioner's motion for reconsideration having been dismissed for its failure to serve a copy of the same
on the union, there is no decision of the CIR en banc that petitioner can bring to this Court for review.

WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959 are hereby affirmed
and the appeal is dismissed, without pronouncement as to costs.
G.R. No. L-9265 April 29, 1957

LUZON STEVEDORING CO., INC., petitioner, vs. LUZON MARINE DEPARTMENT UNION

and THE HON. MODESTO CASTILLO, THE HON. JOSE S. BAUTISTA, THE HON. V. JIMENEZ
YANSON and THE HON. JUAN L. LANTING, Judges of the Court of Industrial Relations,
respondents.

This case involves a petition for certiorari filed by the Luzon Stevedoring Co., Inc., to review a
resolution dated June 5, 1955, issued by the Court of Industrial Relations. On September 5, 1955, with
leave of court, a supplemental petition was filed by said petitioner, and both petitions were given due
course by resolution of this Court of September 15, 1955. The facts of the case may be summarized as
follows:

On June 21, 1948, herein respondent Luzon Marine Department Union filed a petition with the Court
of Industrial Relations containing several demands against herein petitioner Luzon Stevedoring Co.,
Inc., among which were the petition for full recognition of the right of COLLECTIVE bargaining,
close shop and check off. However, on July 18, 1948, while the case was still pending with the CIR,
said labor union declared a strike which was ruled down as illegal by this Court in G.R. No. L-2660
promulgated on May 30, 1950. In view of said ruling, the Union filed a "Constancia" with the Court of
Industrial Relations praying that the remaining unresolved demands of the Union presented in their
original petition, be granted. Said unresolved demands are the following:

a. Point No. 2.

That the work performed in excess of eight (8) hours he paid an overtime pay of 50 per cent the regular
rate of pay, and that work performed on Sundays and legal holidays be paid double the regular rate of
pay.

b. Point No. 7.

That all officers, engineers and crew members of motor tugboats who have not received their pay
corresponding to the second half of December, 1941, be paid accordingly.

c. Point No. 11.

That Ciriaco Sarmiento, Chief Mate, M/V Marlin, Rafael Santos, Port Engineer, and Lorenzo de la
Cruz, Chief Engineer, M/V Shark who have been suspended without justifiable cause and for union
activities, be reinstated with pay from time of suspension.

d. Point No. 12.

That all officers, engineers and crew members of the motor tugboats "Shark", "Hearing", "Pike" and
"Ray", who have been discharged without justifiable cause and for union activities, be reinstate with
pay from time of discharge. (p. 65-66, Record).
On the basis of these demands, the case was set for hearing and the parties submitted their respective
evidence, both oral and documentary, from June 8,1951, to January 7, 1954. In one of the hearings of
the case, the original intervenor in Union de Obreros Estibadores de Filipinas (UOEF), through
counsel, moved for the withdraw al of said Union from the case, which motion was granted by the
Court.

After the parties had submitted exhaustive memoranda, the trial Judge rendered a decision on February
10, 1955, finding that the company gave said employees 3 free meals every day and about 20 minutes
rest after each mealtime; that they worked from 6:00 am. to 6:00 p.m. every day including Sundays and
holidays, and for work performed in excess of 8 hours, the officers, patrons and radio operators were
given overtime pay in the amount of P4 each and P2 each for the rest of the crew up to March, 1947,
and after said date, these payments were increased to P5 and P2.50, respectively, until the time of their
separation or the strike of July 19, 1948; that when the tugboats underwent repairs, their personnel
worked only 8 hours a day excluding Sundays and holidays; that although there was an effort on the
part of claimants to show that some had worked beyond 6:00 p.m., the evidence was uncertain and
indefinite and that demand was, therefore, denied; that respondent Company, by the nature of its
business and as defined by law (Section 18-b of Commonwealth Act as amended) is considered a
public service operator by the Public Service Commission in its decision in case No. 3035-C entitled
"Philippine Shipowners. Association vs. Luzon Stevedoring Co., Inc., et al."(Exh. 23), and, therefore,
exempt from paying additional remuneration or compensation for work performed on Sundays and
legal holidays, pursuant to the provisions of section 4 of Commonwealth Act No. 444 (Manila Electric
Co. vs. Public Utilities Employees Association, 79 Phil., 408. 44 Off. Gaz., 1760); and ruled that:

For the above reasons, the aforementioned employees are only entitled to receive overtime pay for
work rendered in excess of 8 hours on ordinary days including Sundays and legal holidays.

However, the respondent company has proved to the satisfaction of the Court that it has paid its
employees for such overtime work as shown above Exhs. 1 to 20-B).

It is, therefore, only a matter of computation whether such over time pay by the respondent for
overtime services rendered covers the actual overtime work performed by the employees concerned
equivalent to 25 per cent which is the minimum rate fixed by law in the absence of other proof to
justify the granting of more beyond said minimum rate.

Demands Nos. 11 and 12 regarding the reinstatement to the service of the employees named therein
were denied and respondent Company was only or to pay the separation pay and overtime work
rendered by Ciriaco Sarmiento, Rafael Santos and Lorenzo de la Cruz, after making the pronouncement
that their separation or dismissal was not due to union activities but for valid and legal grounds.

The Luzon Marine Department Union, through counsel, therefore, filed a motion for reconsideration
praying that the decision of February 10, 1955, be modified so as to declare and rule that the members
of the Union who had rendered services from 6:00 a.m. to 6:00 p.m. were entitled to 4 hours' overtime
pay; that allotted to the taking of their meals should not be deducted from the 4 hours of overtime
rendered by said employees, that the amounts of P3 and P2 set aside for the daily meals of the
employees be considered as part of their actual compensation in determining the amount due to said
employees separated from the service without just cause be paid their unearned wages and salaries
from the date of their separation up to the time the decision in case L-2660 became final; and for such
other relief as may be just and equitable in the premises.

Luzon Stevedoring Co., Inc. also sought for the reconsideration of the decision only in so far as it
interpreted that the period during which a seaman is aboard a tugboat shall be considered as "working
time" for the purpose of the Eight-Hour-Labor Law.

In pursuance of Section 1 of Commonwealth Act No. 103, as amended by Commonwealth Act No. 254
and further amended by Commonwealth Act No. 559, the motions for reconsideration were passed
upon by the Court en banc, and on June 6, 1955, a resolution modifying the decision of February 10,
1955, was issued, in the sense that the 4 hours of overtime work included in the regular daily schedule
of work from 6:00 a.m. to 6:00 p.m. should be paid independently of the so-called "coffee-money",
after making a finding that said extra amounts were given to crew members of some tugboats for work
performed beyond 6:00 p.m. over a period of some 16 weeks. The Company's motion for
reconsideration was denied.

From this resolution, the Luzon Stevedoring Co., Inc. filed the present petition for certiorari and when
the Court of Industrial Relations, acting upon said Company's motion for clarification, ruled that the 20
minutes' rest given the claimants after mealtime should not be deducted from the 4 hours of overtime
worked performed by said claimants, petitioner filed a supplemental petition for certiorari dated
September 5, 1955, and both petitions were given due course by this Court.

Respondent Luzon Marine Labor Union filed within the reglementary period a motion to dismiss,
which this Court considered as an answer by resolution of October 14, 1955, alleging that the decision,
resolution and order of the Court of Industrial Relations sought to be reviewed by petitioner do not
present any question of law, the issues in said CIR case No. 147-V being purely factual. The
respondent Judges of the Court of Industrial Relations, represented by counsel, timely filed an answer
likewise asserting that there could have been no question of law involved or error of law committed by
the said Judges in the resolutions appealed from, same having been based on purely findings of fact.

In this instance, petitioner does not seek to alter the lower court's finding that the regular daily schedule
of work of the members of the herein respondent Union was from 6:00 a.m. to 6:00 p.m. Petitioner,
however, submits several "issues" which We will proceed to discuss one after the other. They are the
following:

I. Is the definition for "hours of work" as presently applied to dryland laborers equally applicable to
seamen? Or should a different criterion be applied by virtue of the fact that the seamen's employment is
completely different in nature as well as in condition of work from that of a dryland laborer?

Petitioner questions the applicability to seamen of the interpretation given to the phrase "hours of
work" for the purpose of the Eight-Hour Labor Law, insinuating that although the seamen concerned
stayed in petitioner's tugboats, or merely within its compound, for 12 hours, yet their work was not
continuous but interrupted or broken. It has been the consistent stand of petitioner that while it is true
that the workers herein were required to report for work at 6:00 a.m. and were made to stay up to 6:00
p.m., their work was not continuous and they could have left the premises of their working place were
it not for the inherent physical impossibility peculiar to the nature of their duty which prevented them
from leaving the tugboats. It is the Company's defense that a literal interpretation of what constitutes
non-working hours would result in absurdity if made to apply to seamen aboard vessels in bays and
rivers, and We are called upon to make an interpretation of the law on "non-working hours" that may
comprehend within its embrace not only the non-working hours of laborers employed in land jobs, but
also of that particular group of seamen, i.e., those employed in vessels plying in rivers and bays, since
admittedly there is no need for such ruling with respect to officers and crew of interisland vessels
which have aboard 2 shifts of said men and strictly follow the 8-hour working period.

Section 1 of Commonwealth Act No. 444, known as the Eight-Hour Labor Law, provides:

SEC. 1. The legal working day for any person employed by another shall be of not more than eight
hours daily. When the work is not continuous, the time during which the laborer is not working AND
CAN LEAVE HIS WORKING PLACE and can rest completely, shall not be counted.

The requisites contained in this section are further implemented by contemporary regulations issued by
administrative authorities (Sections 4 and 5 of Chapter III, Article 1, Code of Rules and Regulations to
Implement the Minimum Wage Law).

For the purposes of this case, We do not need to set for seamen a criterion different from that applied to
laborers on land, for under the provisions of the above quoted section, the only thing to be done is to
determine the meaning and scope of the term "working place" used therein. As We understand this
term, a laborer need not leave the premises of the factory, shop or boat in order that his period of rest
shall not be counted, it being enough that he "cease to work", may rest completely and leave or may
leave at his will the spot where he actually stays while working, to go somewhere else, whether within
or outside the premises of said factory, shop or boat. If these requisites are complied with, the period of
such rest shall not be counted.

In the case at bar We do not need to look into the nature of the work of claimant mariners to ascertain
the truth of petitioners allegation that this kind of seamen have had enough "free time", a task of which
We are relieved, for although after an ocular inspection of the working premises of the seamen affected
in this case the trial Judge declared in his decision that the Company gave the complaining laborers 3
free meals a day with a recess of 20 minutes after each meal, this decision was specifically amended by
the Court en banc in its Resolution of June 6, 1955, wherein it held that the claimants herein rendered
services to the Company from 6:00 a.m. to 6:00 p.m. including Sundays and holidays, which implies
either that said laborers were not given any recess at all, or that they were not allowed to leave the spot
of their working place, or that they could not rest completely. And such resolution being on a question
essentially of fact, this Court is now precluded to review the same (Com. Act No. 103, Sec. 15, as
amended by Sec. 2 of Com. Act No. 559; Rule 44 of the Rules of Court; Kaisahan Ng Mga
Manggagawa sa Kahoy sa Filipinas vs. Gotamco Sawmill, 80 Phil., 521; Operators, Inc. vs. Pelagio, 99
Phil, 893, and others).

II. Should a person be penalized for following an opinion issued by the Secretary of Justice in the
absence of any judicial pronouncement whatsoever?

Petitioner cites Opinion No. 247, Series of 1941 of the Secretary of Justice to a query made by the
Secretary of Labor in connection with a similar subject matter as the one involved, in this issue, but
that opinion has no bearing on the case at bar because it refers to officers and crew on board interisland
boats whose situation is different from that of mariners or sailors working in small tugboats that ply
along bays and rivers and have no cabins or places for persons that man the same. Moreover, We can
not pass upon this second issue because, aside from the fact that there appears nothing on record that
would support petitioner's assertion that in its dealing with its employees, it was guided by an opinion
of the Secretary of Justice, the issue involves a mere theoretical question.

III. When employees with full knowledge of the law, voluntarily agreed to work for so many hours in
consideration of a certain definite wage, and continue working without any protest for a period of
almost two years, is said compensation as agreed upon legally deemed and retroactively presumed to
constitute full payment for all services rendered, including whatever overtime wages might be due?
Especially so if such wages, though received years before the enactment of the Minimum Wage Law,
were already set mostly above said minimum wage?

IV. The members set of respondent Union having expressly manifested acquiescence over a period of
almost two years with reference to the sufficiency of their wages and having made no protest
whatsoever with reference to said compensation does the legal and equitable principle of estoppel
operate to bar them from making a claim for, or making any recovery of, back overtime compensation?

We are going to discuss these two issues jointly. Section 6 of Commonwealth Act No. 444 provides:

Sec. 6. Any agreement or contract between the employer and the laborer or employee contrary to the
provisions of this Act shall be null and void ab initio.

In the case of the Manila Terminal Co. vs. Court of Industrial Relations et al., 91 Phil., 625, 48 Off.
Gaz., 2725, this Court held:

The principles of estoppel and laches cannot be, invoked against employees or laborers in an action for
the recovery of compensation for past overtime work. In the first place, it would be contrary to the
spirit of the Eight-Hour Labor Law, under which. as already seen, the laborers cannot waive their right
to extra compensation. In the second place, the law principally obligates the employer to observe it, so
much so that it punishes the employer for its violation and leaves the employee free and blameless. In
the third place, the employee or laborer is in such a disadvantageous position as to be naturally
reluctant or even apprehensive in asserting a claim which may cause the employer to devise a way for
exercising his right to terminate the employment.
Moreover, if the principle of estoppel and laches is to be applied, it would bring about a situation
whereby the employee or laborer, can not expressly renounce the right to extra compensation under the
Eight-Hour Labor Law, may be compelled to accomplish the same thing by mere silence or lapse of
time, thereby frustrating the purpose of the law by indirection.

This is the law on the matter and We certainly adhere, to it in the present case. We deem it, however,
convenient to say a few words of explanation so that the principle enunciated herein may not lead to
any misconstruction of the law in future cases. There is no question that the right of the laborers to
overtime pay cannot be waived. But there may be cases in which the silence of the employee or laborer
who lets the time go by for quite a long period without claiming or asserting his right to overtime
compensation may favor the inference that he has not worked any such overtime or that his extra work
has been duly compensated. But this is not so in the case at bar. The complaining laborers have
declared that long before the filing of this case, they had informed Mr. Martinez, a sort of overseer of
the petitioner, that they had been working overtime and claiming the corresponding compensation
therefor, and there is nothing on record to show that the claimants, at least the majority of them, had
received wages in excess of the minimum wage later provided by Republic Act No. 602, approved
April 6, 1951. On the contrary, in the decision of the trial Judge, it appears that 34 out of the 58
claimants received salaries less than the minimum wage authorized by said Minimum Wage Law, to
wit:

Consequently, for lack of the necessary supporting evidence for the petitioner, the inference referred to
above cannot be drawn in this case.

V. Granting, without conceding, that any overtime pay in arrears is due, what is the extent and rule of
retro-activity with reference to overtime pay in arrears as set forth and established by the precedents
and policies of the Court of Industrial Relations in past decisions duly affirmed by the Honorable
Supreme Court?

VI. Is the grant of a sizeable amount as back overtime wages by the Court of Industrial Relations in
consonance with the dictates of public policy and the avowed national and government policy on
economic recovery and financial stability?

In connection with issue No. 5, petitioner advances the theory that the computation of the overtime
payment in arrears should be based from the filing of the petition. In support of this contention,
petitioner cites the case of Gotamco Lumber Co. vs- Court of Industrial Relations, 85 Phil., 242; 47
Off. Gaz., 3421. This case is not in point; it merely declares that Commonwealth Act No. 444 imposes
upon the employer the duty to secure the permit for overtime work, and the latter may not therefore be
heard to plead his own negligence as exemption or defense. The employee in rendering extra services
at the request of his employer has a right to assume that the latter has complied with the requirements
of the law and therefore has obtained the required permission from the Department of Labor (47 Off,
Gaz., 3421). The other decisions of the Court of Industrial Relations cited by petitioner, to wit: Cases
6-V, 7-V and 8-V, Gotamco & Co., Dy Pac & Co., Inc. and D. C. Chuan; Case 110-V, National Labor
Union vs. Standard Vacuum Oil Co.; Case No. 76-v, Dee Cho Workers, CLO vs. Dee Cho Lumber Co.,
and Case No. 70-V, National Labor Union vs. Benguet Consolidated Mining Co., do not seem to have
reached this Court and to have been affirmed by Us.

It is of common occurrence that a workingman has already rendered services in excess of the statutory
period of 8 hours for some time before he can be led or he can muster enough courage to confront his
employer with a demand for payment thereof. Fear of possible unemployment sometimes is a very
strong factor that gags the man from asserting his right under the law and it may take him months or
years before he could be made to present a claim against his employer. To allow the workingman to be
compensated only from the date of the filing of the petition with the court would be to penalize him for
his acquiescence or silence which We have declared in the case of the Manila Terminal Co. vs. CIR,
supra, to be beyond the intent of the law. It is not just and humane that he should be deprived of what
is lawfully his under the law, for the true intendent of Commonwealth Act No. 444 is to compensate
the worker for services rendered beyond the statutory period and this should be made to retroact to the
date when such services were actually performed.

Anent issue No. VI, petitioner questions the reasonableness of the law providing for the grant of
overtime wages. It is sufficient for Us to state here that courts cannot go outside of the field of
interpretation so as to inquire into the motive or motives of Congress in enacting a particular piece of
legislation. This question, certainly, is not within Our province to entertain.

It may be alleged, however, that the delay in asserting the right to back overtime compensation may
cause an unreasonable or irreparable injury to the employer, because the accumulation of such back
overtime wages may become so great that their payment might cause the bankruptcy or the closing of
the business of the employer who might not be in a position to defray the same. Perhaps this situation
may occur, but We shall not delve on it this time because petitioner does not claim that the payment of
the back overtime wages it is ordered to pay to its claimant laborers will cause the injury it foresees or
force it to close its business, a situation which it speaks of theoretically and in general.

VII. Should not a Court of Industrial Relations' resolution, en banc, which is clearly unsupported in fact
and in law, patently arbitrary and capricious and absolutely devoid of sustaining reason, be declared
illegal? Especially so, if the trial court's decision which the resolution en banc reversed, is most
detailed, exhaustive and comprehensive in its findings as well as most reasonable and legal in its
conclusions? This issue was raised by petitioner in its supplemental petition and We have this much to
say. The Court of Industrial Relations has been considered "a court of justice" (Metropolitan
Transportation Service vs. Paredes,* G.R. No. L-1232, prom. January 12, 1948), although in another
case. We said that it is "more an administrative board than a part of the integrated judicial system of the
nation" (Ang Tibay vs. Court of Industrial Relations, 69 Phil., 635). But for procedural purposes, the
Court of Industrial Relations is a court with well-defined powers vested by the law creating it and with
such other powers as generally pertain to a court of justice (Sec. 20, Com. Act No. 103). As such, the
general rule that before a judgment becomes final, the Court that rendered the same may alter or
modify it so as to conform with the law and the evidence, is applicable to the Court of Industrial
Relations (Connel Bros. Co.(Phil.) vs. National Labor Union, G.R. No. L-3631, prom. January 30,
1956). The law also provides that after a judge of the Court of Industrial Relations, duly designated by
the Presiding Judge therein to hear a particular case, had rendered a decision, any agrieved party may
request for reconsideration thereof and the judges of said Court shall sit together, the concurrence of
the 3 of them being necessary for the pronouncement of a decision, order or award (See. 1, Com. Act
No. 103). It was in virtue of these rules and upon motions for reconsideration presented by both parties
that resolution subject of the present petition was issued, the Court en banc finding it necessary to
modify a part of the decision of February 10, 1955, which is clearly within its power to do.

On the other hand, the issue under consideration is predicated on a situation which is not obtaining in
the case at bar, for, it presupposes that the resolutions en banc of the respondent Court "are clearly
unsupported in fact and in law, patently arbitrary and capricious and absolutely devoid of any
sustaining reason", which does not seem to be the case as a matter of fact.

Wherefore, and on the strength of the foregoing consideration, the resolutions of the Court of Industrial
Relations appealed from are hereby affirmed, with costs against petitioner. It is so ordered.
G.R. No. L-25094 April 29, 1969

PAN AMERICAN WORLD AIRWAYS INC., petitioner, vs.PAN AMERICAN EMPLOYEES


ASSOCIATION, COURT OF INDUSTRIAL RELATIONS, respondents.

The failure of the respondent Court of Industrial Relations to indulge petitioner Pan American World
Airways, Inc. in its plea to exclude from a return-to-work order five union officials of respondent Pan
American Employees Association on the ground of having led an illegal strike, in itself, according to
petitioner, a sufficient cause for dismissal thus resulting in their losing their incentive and motivation
for doing their jobs properly with the consequent fear that they could cause grave injury to it, is
challenged in this special civil action for certiorari as constituting a grave abuse of discretion.
Whatever may be said against such order complained of respondent Court of Industrial Relations, the
refusal to grant the prayer for such exclusion cannot be characterized as an abuse of discretion, much
less as one that possesses an element of gravity.

So it must be unless we are prepared to restrict the broad scope of authority possessed by respondent
Court of Industrial Relations in discharging its power of compulsory arbitration in cases certified to it
by the President, and what is worse, unless an undeserved reflection on the quality of leadership in the
labor movement, indicative of management refusal to accord to it the presumption of responsibility, is
countenanced. The petition thus carries on its face the seeds of its own infirmity. It cannot hope to
succeed.

It was set forth in the petition, after the usual allegation as to the personality of the parties, that on
August 25, 1965, respondent union filed a notice of strike with the Department of Labor and on August
28, 1965, the same respondent union declared and maintained a strike against the herein petitioner. 1
Then, on September 17, 1965, the President of the Philippines certified the strike to the respondent
Court of Industrial Relations as being an industrial dispute affecting the national interest, the parties
being called to a conference on September 20, 1965. 2

Several conferences were held between petitioner and respondent Union before the Honorable Amando
C. Bugayong, Associate Judge of respondent Court on September 20, 21, 23, 24 and 25, 1965. It was
the position of the Union that its members would not resume the performance of their duties unless its
officers were likewise included in the return-to-work order. Petitioner was of a different mind. It was
agreeable to having the workers return to work but not the five officials of respondent Union. It alleged
that the strike was illegal, being offensive to a no-strike clause of an existing collective bargaining
agreement the result being that the officials could, as the responsible parties, be liable for dismissal.
Consequently, it was not agreeable to their being allowed to return to the positions held by them prior
to the strike as they would not be only lacking in "incentive and motivation for doing their work
properly" but would likewise have the opportunity to cause "grave and irreparable injury to petitioner."
3
Management did offer, however, to deposit their salaries even if they would not be working, with the
further promise that they would not even be required to refund any amount should the right to remain
in their positions be considered as legally terminated by their calling the alleged illegal strike.
Nonetheless, on September 28, 1965, Judge Bugayong issued an order requiring petitioner to accept the
five union officers pending resolution on the merits of the dispute involved in the strike. There was a
motion for reconsideration which was denied by the court on October 8, 1965. Hence, this petition,
alleging a grave abuse of discretion, consisting in the failure to grant petitioner's rather unorthodox
demand.

As already noted, the inherent weakness of the petition cannot escape attention.

1. Considering that this is a case certified by the President, with respondent Court exercising its broad
authority of compulsory arbitration, the discretion it possesses cannot be so restricted and emasculated
that the mere failure to grant a plea to exclude from the return-to-work order the union officials could
be considered as tantamount to a grave abuse thereof. The law is anything but that.

As far back as 1957, this Court, speaking through Justice Labrador, categorically stated: "We agree
with counsel for the Philippine Marine Radio Officers' Association that upon certification by the
President under Section 10 of Republic Act 875, the case comes under the operation of Commonwealth
Act 103, which enforces compulsory arbitration in cases of labor disputes in industries indispensable to
the national interest when the President certifies the case to the Court of Industrial Relations. The
evident intention of the law is to empower the Court of Industrial Relations to act in such cases, not
only in the manner prescribed under Commonwealth Act 103, but with the same broad powers and
jurisdiction granted by that Act. If the Court of Industrial Relations is granted authority to find a
solution in an industrial dispute and such solution consists in ordering of employees to return back to
work, it cannot be contended that the Court of Industrial Relations does not have the power or
jurisdiction to carry that solution into effect. And of what use is its power of conciliation and
arbitration if it does not have the power and jurisdiction to carry into effect the solution it has adopted.
Lastly, if the said court has the power to fix the terms and conditions of employment, it certainly can
order the return of the workers with or without backpay as a term or condition of the employment." 6

Only recently this Court, speaking through Justice Sanchez, emphasized: "The overwhelming
implication from the quoted text of Section 10 is that CIR is granted great breadth of discretion in its
quest for a solution to a labor problem so certified." 7 Hence, as was announced at to the outset of this
opinion, there can be no legal objection to the mode of exercise of authority in such fashion by
respondent Court of Industrial Relations. The allegation as to the grave abuse of discretion is clearly
devoid of merit.

2. That should conclude the matter except for the fact that the question presented possesses an element
of novelty which may require further reflection.

The situation thus presented is the validity of the return to work order insofar as five union officers are
affected, petitioner airline firm rather insistent on their being excluded arguing that since the strike
called by them was illegal, and that in any event there was enough ground for dismissal, there was
present a factor which might make them "lose all their incentive and motivation for doing their work
properly" and which would furnish them "the opportunity to cause grave and irreparable injury to
petitioner."

To be more specific, the apprehension entertained by petitioner was in the petition expressed by it thus:
"The five officers of the union consist of three (3) Passenger Traffic Representatives and a reservation
clerk who in the course of their duties could cause mix-ups in the reservation and accommodation of
passengers which could result in very many suits for damages against petitioner such as the case of
Nicolas Cuenca vs. Northwest Airlines, G.R. No. L-22425 promulgated August 31, 1965 in which this
Honorable Court required the airline to pay P20,000.00 as nominal damages alone. The other union
officer who, is in the cargo department could underweight or overweigh cargo to the great detriment of
the service or even, of the safety of petitioner's aircraft."

Petitioner would attempt to remove the sting from its objection to have the union officers return to
work by offering to deposit the salaries of the five officers with respondent Court to be paid to them,
coupled with what it considered to be a generous concession that if their right to return to work be not
recognized, there would be no need for refund.

Petitioner, perhaps without so intending it, betrayed an inexcusable lack of confidence in the
responsibility of union officials and ultimately in the validity of the collective bargaining process itself.
For it is the basic premise under which a regime of collective bargaining was instituted by the
Industrial Peace Act that through the process of industrial democracy, with both union and
management equally deserving of public trust, labor problems could be susceptible of the just solution
and industrial peace attained. Implicit in such a concept is the confidence that must be displayed by
management in the sense of responsibility of union officials to assure that the two indispensable
elements in industry and production could-work side by side, attending to the problems of each without
neglecting the common welfare that binds them together.lawphi1.nêt

The moment management displays what in this case appears to be grave but unwarranted distrust in the
union officials discharging their functions just because a strike was resorted to, then the integrity of the
collective bargaining process itself is called into question. It would have been different if there were a
rational basis for such fears, purely speculative in character. The record is bereft of slightest indication
that any danger, much less one clear and present, is to be expected from their return to work.
Necessarily, the union officials have the right to feel offended by the fact that, while they will be paid
their salaries in the meanwhile they would not be considered as fit persons to perform the duties
pertaining to the positions held by them. Far from being generous such an offer could rightfully, be
considered insulting.

The greater offense is to the labor movement itself, more specifically to the right of self-organization.
There is both a constitutional and statutory recognition that laborers have the right to form unions to
take care of their interests vis-a-vis their employers. Their freedom organizations would be rendered
nugatory if they could not choose their own leaders to speak on their behalf and to bargain for them.

If petitioner were to succeed in their unprecedented demand, the laborers in this particular union would
thus be confronted with the sad spectacle of the leaders of their choice condemned as irresponsible,
possibly even constituting a menace to the operations of the enterprise. That is an indictment of the
gravest character, devoid of any factual basis. What is worse, the result, even if not intended, would be
to call into question their undeniable right to choose their leaders, who must be treated as such with all
the respect to which they are legitimately entitled. The fact that they would be paid but not be allowed
to work is, to repeat, to add to the infamy that would thus attach to them necessarily, but to respondent
union equally.

Apparently, respondent Court was alive to the implication of such an unwarranted demand, the effect
of which would have been to deprive effectively the rank and file of their freedom of choice as to who
should represent them. For what use are leaders so undeserving of the minimum confidence. To that
extent then, their constitutional and statutory right to freedom of association suffers an impairment
hardly to be characterized as inconsequential.

Fortunately, respondent Court was of a different mind it acted, according to law. It had a realistic
concept of what was in store for labor if its decision were otherwise. Nor did it in the process disregard
the rights of management. There is no occasion then for the supervisory authority of this Court coming
into play. WHEREFORE, this petition for a writ of certiorari is denied. With costs against petitioner.
G.R. No. L-13806 May 23, 1960

PRICE STABILIZATION CORPORATION, petitioner, vs. COURT OF INDUSTRIAL


RELATIONS and PRISCO WORKER'S UNION, ET AL., respondents.

This is a petition for review by certiorari taken by the Price Stabilization Corporation (PRISCO) from
the decision of the Court of Industrial Relations (in Case No. 840-V [6]) of December 27, 1957.

It appears that under date of February 15, 1955, respondent PRISCO Worker's Union, a labor
organization duly registered with the Department of Labor, filed with respondent court, a petition
praying that herein petitioner-employer PRISCO be ordered to pay its present employees, claimants-
members of the said Union, their basic pay and at least 25 per cent additional compensation for one
hour overtime work they had previously rendered as security guards of petitioner, from April 17, 1953
to January 13, 1954, and the additional compensation of at least 25 per cent for the work they have
been rendering on Sundays and legal holidays, from March 7, 1954 and on.

On March 15, 1955, the petitioner filed an answer denying respondent Union's claim for payment of
one hour overtime work, asserting that such overtime, if rendered, not having been authorized;
although some of the said claimants had rendered work in Sundays and legal holidays, the same had
already been paid from March 6, 1954; and finally alleging that the same claim for work on Sundays
and legal holidays had already been withdrawn.

The case was thereafter heard and, after hearing, respondent court, on December 27, 1957, issued an
order requiring petitioner to pay the said claimants, members of respondent Union, their basic pay and
25 per cent additional compensation for the one hour overtime work they had rendered from April 16,
1953 to January 13, 1954. However, for lack of evidence and in view of a petition signed by 59 of the
131 claimants withdrawing their claim for pay for work performed on Sundays and legal holidays, the
court dismissed the second claim.

On January 8, 1958, petitioner corporation filed a motion for reconsideration of said order, which
motion was resolved by respondent court, en banc, as follows: 2 judges voting for straight denial; 2
judges voting for the setting aside of the order as null and void on the ground of lack of jurisdiction;
and 1 judge concurring in the denial of the motion for reconsideration, on the ground that the question
of lack of jurisdiction has not been raised in the pleading. As a result; petitioner corporation has filed
this present petition.

There are two questions of law to be determined in this case, to wit: (1) whether respondent court had
jurisdiction over the present claim for overtime pay filed by respondent Union; and (2) whether the
same court correctly applied Articles 1393 and 1396 to the new Civil Code to the case.

As to the first question, there still seems to be some lack of clear and definite understanding of the
jurisdiction of the Court of Industrial Relations, with regards to money claims of laborers or employees
against their employers. The fact that in the present case the judges themselves of the Court of
Industrial Relations are divided on this matter, attests to the existence of such misapprehension. It is
well therefore to review some of the leading decided cases touching on this point, for the purpose of
clarifying this fundamental question.

In the PAFLU vs. Tan Case,1 we held that the Court of Industrial Relations has jurisdiction over cases
(1) when the labor dispute affects an industry which is indispensable in the national interest and is so
certified by the President to the industrial court (Sec. 10, Rep. Act No. 875); (2) when the controversy
refers to the minimum wage under the Minimum Wage Law (Rep. Act No. 602); (3) when it involves
hours of employment under the Eight-Hour Labor Law (Com. Act No. 444); and (4) when it involves
an unfair labor practice (Sec. 5-a, Rep. Act No. 875).

Later, in the case of Detective and Protective Bureau Incorporated vs. Felipe Guevarra, et al.,2
involving claims for refunds of deductions from respondents' salaries, payment of additional
compensation for work performed on Sundays and holidays, and for night work, and grant of vacation
and sick leave pay, this Court held that the Court of Industrial Relations had jurisdiction, inasmuch as
the claimants were all employees of the Detective and Protective Bureau, Inc., at the time of filing of
their claims in Case No. 764-V in the Court of Industrial Relations. To the same effect is the case of
Isaac Peral Bowling Alley vs. United Employees Welfare Association, et al., (102 Phil., 219).

Subsequently, in the case of Santiago Aguilar vs. Jose Salumbides (G.R. No. L-10124, prom,
December 28, 1957), this Court declared that the Court of Industrial Relations had no longer
jurisdiction to hear and determine claims of ex-employees against their former employer for overtime,
wage differential, and separation pays.

Again, in the case of Roman Catholic Archbishop of Manila vs. Yanson, et al.,(G.R. No. L-12341) and
Elizalde and Co. Inc., vs. Yanson et al., (G.R. No. L-12345) jointly decide on April 30, 1958, this
Court, in a unanimous opinion, declared:

In the present case, it is apparent that the petition below is simply for the collection of unpaid salaries
and wages alleged to be due for the services rendered years ago. No labor dispute appears to be
presently involved since the petition itself indicates that the employment has long terminated and
petitioners are not asking that they be reinstated. Clearly, the petition does not fall under any of the
cases enumerated in the law as coming within the jurisdiction of the Industrial Court, so that it was
error for that court not to have ordered its dismissal.

Indeed, even under Commonwealth Act No. 103, as amended by Com. Act No. 559, the court below
could not have taken cognizance of the present case. For in order for that court to acquire jurisdiction
under that law, the requisites mentioned in section 4 thereof must all be present, one of them being that
there must be an industrial or agricultural dispute which is causing of likely to cause a strike or lockout.
With the employment already terminated years ago, this last mentioned requisite cannot be supposed to
still exist.

Then came the decision in the NASSCO vs. Almin, et al., case (104 Phil., 835;56 Off. Gaz. [9] 1879) in
which this Court upheld again the jurisdiction of the Court of Industrial Relations to hear and
determine the claim of respondents at the time presently and actually in the employ of the petitioner —
for overtime compensation for work they were then rendering since 1950 on Sundays and holidays and
even at night.

On the same theory, this Tribunal and the Chua Workers' Union (NLU) vs. City Automotive Company,
et al., case3 were the claimants for differential and overtime pays were former employees of the
respondent company, ruled that the Court of Industrial Relations had no jurisdiction.

The latest case is that of Monares vs. CNS Enterprises, et al., (G.R. No. L-11749, prom. May 29, 1959)
in which this Court, speaking through the Chief Justice, held that the Court of Industrial Relations and
not the Court of First Instance, has jurisdiction where the claimant, although no longer in the service of
the employer, seeks in his petition the payment of differential and overtime pay and his reinstatement.

Analyzing these cases, the underlying principle, it will be noted in all of them, though not stated in
express terms, is that where the employer-employee relationship is still existing or is sought to be
reestablished because of its wrongful severance (as where the employee seeks reinstatement), the Court
of Industrial Relations has jurisdiction over all claims arising out of, or in connection with
employment, such as those related to the Minimum Wage Law and the Eight-Hour Labor Law. After
the termination of the relationship and no reinstatement is sought, such claims becomes mere money
claims, and come within the jurisdiction of the regular courts.

We are aware that in 2 cases,4 some statements implying a different view have been made, but we now
hold and declare the principle set forth in the preceding paragraph as the one governing all cases of this
nature.

It appearing that in the present case, the respondents-claimants are, or at least were, at the time of
presenting their claims, actually in the employ of herein petitioner, the Court of Industrial Relations
correctly took cognizance of the case.

In respect of the second issue, it appears that claimants-security guards have been employed and
required to observe a 24-hour guard duty divided into 3 shifts of 8 hours each. On April 15, 1953, the
Assistant Chief Security Officer of petitioner corporation, acting for the Chief Security Officer, issued
a Memorandum (Annex A), directing the Security guards to report for duty 2 hours in advance of the
usual time for guard work. Pursuant thereto, claimants had been rendering such overtime work until
January 13, 1954 when the order was revoked after a change of management.

Petitioner, however, contends that said memorandum of the Assistant Chief Security Officer was issued
without authority and, therefore, it is not bound to pay for the alleged overtime. But, as found by
respondent court, shortly after the enforcement of the aforementioned memorandum, the security
guards protested to the management of petitioner corporation, more particularly to Mr. Santiago de la
Cruz, General Manager, Atty. Graciano Borja, Director, and Mr. Espiritu, Director. Instead of revoking
said memorandum on the ground that it was unauthorized by the management, General Manager De la
Cruz told the security guards that the reason why it was being enforced, was to discipline them and that
their work was only light and that 1 hour was of no importance. This, the lower court held, amounted to
a tacit ratification of the memorandum, on the part of the said official who, as claimed by petitioner
itself, had the power to validly act for it. (See also Sec. 6, Exec. Order No. 350, series of 1950.) Hence,
the lower court concluded, applying the provisions of Articles 1393 and 13965 of the new Civil Code,
that any defect, if any which said memorandum of the Assistant Chief Security Officer may have at the
time it was constituted, was, therefore, corrected.

But petitioner urges that Articles 1393 and 1396 refer to voidable contracts and the questioned
memorandum is not such a contract but an order issued by one not authorized and, therefore, is illegal
and cannot be ratified tacitly.

This view is without merit. There is no question that a contract of employment exists between
petitioner and claimants-respondents, and that pursuant to the terms thereof, the latter are to render 8
hours labor. When petitioner's official required respondents to render an additional hour work, and the
respondents had to comply (as non-compliance was punishable and actually punished with disciplinary
action), a supplemental contractual obligation was created both under the terms of the original contract
of employment and of the Eight-hour Labor Law, that such additional work was to be compensated.
That the memorandum giving rise to this situation was originally authorized, did not make it illegal to
the extent of not being capable of ratification by the duly authorized official, the General Manager of
petitioner corporation. Hence, the lower court correctly applied Articles 1393 and 1396, upon the facts
found by it in this case and amply supported by the record. Wherefore, finding no error in the decision
appealed from and the resolution upholding it, the same are hereby affirmed, with costs against the
petitioner. So ordered.
G.R. No. L-59847 October 18, 1982

PHILIPPINES INTER-FASHION, INC., petitioner, vs. NLRC,


SHERIFF'S OFFICE OF THE NATIONAL LABOR RELATIONS COMMISSION, AND NATIONAL FEDERATION
OF LABOR UNIONS (NAFLU), respondents.

Petitioner employer seeks to set aside the resolution of respondent commission of October 1, 1981 and
February 9, 1982, respectively ordering the reinstatement with three months' backwages of its 114
striking employees listed in the case record and represented by respondent National Federation of
Labor Unions (NAFLU) and denying reconsideration.

The established background facts as found by public respondent's commissioner are as follows:

Sometime on 12 December 1979, the workers in the COMPANY grouped themselves and organized a
labor union known as the Philippine Inter-Fashion Workers Union and thereafter directly affiliated the
same with the NAFLU.

Believing that it has a majority of the more or less 600 employees, it filed on 26 December 1979 a
petition for direct certification as the exclusive bargaining agent of the employees which, as of the date
of submission for resolution of this case, remained unresolved.

Sometime in January 1980, the COMPANY conceived and decided to retrench its employees and
selected about 40 employees to be dismissed effective 20 February 1980 allegedly because of lack of
work (Affidavit of Asterio Guanzon, personnel assistant of the company; Annex "A" thereof).

Sometime on 8, 9 and 11 February 1980, Asterio Guanzon, Personnel Assistant of the COMPANY,
called about 20 of the affected employees and informed them of the intended retrenchment and offered
them to voluntarily resign and be paid retrenchment benefit. Since said employees refused, Guanzon
asked them "to acknowledge receipt of the clearance application and the termination letter but except
for two (2) workers, they refused even to acknowledge receipt of the forms. (Affidavit of Guanzon).

The following day, 12 February 1980, during breaktime at 9:15, about 200 employees boarded two
buses and went to the Ministry of Labor and talked with then Deputy Minister who advised them to
return to their work. These employees actually returned in the afternoon but stayed outside the
compound.

On 14 February 1980, the employees returned to the Ministry of Labor and on the same day obtained a
Return to Work Order pertinently reading as follows:

all workers of Inter-Fashion are hereby directed to return to work and the management to take them
back under the same terms and conditions prior to the walkout/lockout. Parties are hereby enjoined to
maintain status quo until final determination of the case.

The following day, 15 February 1980, the employees returned to the company with the aforesaid Order
and were allowed to enter the compound but they merely stayed in the canteen because they were not
given work on the pretext that machines were undergoing repairs and servicing and because the sewing
lines were reorganized and workers were reassigned to new lines ...

On February 1980, more than 200 employees returned and reported for work but again they were only
made to stay at the canteen inside the compound and were not allowed to work but they were
nevertheless paid their wages from 12 February 1980 to 20 February 1980 (Company's Position Paper
dated 13 March 1980).

On the same date, 20 February 1980, the COMPANY filed with this Ministry "applications for
clearance to terminate the workers who participated in the (alleged) walkout for serious misconduct,
effective March 1, 1980 placing the affected employees under preventive suspension in the meantime."
(parenthesis supplied: Affidavit of Guanzon, personnel assistant).

Subsequently, the COMPANY hired "additional workers to be able to complete twelve (12) production
lines and to be able to deliver according to my production schedule." (Affidavit, Solito P. Sandoval,
production services manager).

On 20 October 1980, one hundred fifty (150) employees who were not re- admitted before were
allowed to return to work and in so doing withdrew their case or complaint against the COMPANY
(Annex "A"; Company's Memorandum dated 18 March 1981), thereby leaving 114 employees still
subject of its clearance application.

The Solicitor General has correctly stated in his comment that "from these facts are derived the
following conclusions which are likewise undisputed: that petitioner engaged in an illegal lockout
while the NAFLU engaged in an illegal strike; that the unconditional offer of the 150 striking
employees to return to work and to withdraw their complaint of illegal lockout against petitioner
constitutes condonation of the illegal lock-out; and that the unqualified acceptance of the offer of
the150 striking employees by petitioner likewise constitutes condonation of the illegal strike insofar as
the reinstated employees are concerned."

The issues at bar arise, however, from respondent commission's approval of its commissioner's
conclusions that (1) petitioner must be deemed to have waived its right to pursue the case of illegal
strike against the 114 employees who were not reinstated and who pursued their illegal lockout claim
against petitioner; and (2) the said 114 employees are entitled to reinstatement with three months'
backwages.

The Court approves the stand taken by the Solicitor General that there was no clear and unequivocal
waiver on the part of petitioner and on the contrary the record shows that it tenaciously pursued its
application for their dismissal, but nevertheless in view of the undisputed findings of illegal strike on
the part of the 114 employees and illegal lockout on petitioner's part, both parties are in pari delicto and
such situation warrants the restoration of the status quo ante and bringing the parties back to the
respective positions before the illegal strike and illegal lockout through the reinstatement of the said
114 employees, as follows:
The Bisaya case (102 Phil. 438) is inapplicable to the present case, because in the former, there were
only two strikers involved who were both reinstated by their employer upon their request to return to
work. However, in the present case, there were more than 200 strikers involved, of which 150 who
desired to return to work were reinstated. The rest were not reinstated because they did not signify their
intention to return to work. Thus, the ruling cited in the Bisaya case that the employer waives his
defense of illegality of the strike upon reinstatement of strikers is applicable only to strikers who
signified their intention to return to work and were accepted back ...

Truly, it is more logical and reasonable for condonation to apply only to strikers who signified their
intention to return and did return to work. The reason is obvious. These strikers took the initiative in
normalizing relations with their employer and thus helped promote industrial peace. However, as
regards the strikers who decided to pursue with the case, as in the case of the 114 strikers herein, the
employer could not be deemed to have condoned their strike, because they had not shown any
willingness to normalize relations with it. So, if petitioner really had any intention to pardon the 114
strikers, it would have included them in its motion to withdraw on November 17, 1980. The fact that it
did not, but instead continued to pursue the case to the end, simply means that it did not pardon the,
114 strikers.

The finding of illegal strike was not disputed. Therefore, the 114 strikers employees who participated
therein are liable for termination (Liberal Labor Union v. Phil. Can Co., 91 Phil. 72; Insurefco
Employees Union v. Insurefco, 95 Phil. 761). On the other hard, the finding of illegal lockout was
likewise not, disputed. Therefore, the 114 employees affected by the lockout are also subject to
reinstatement. Petitioner, however, contends that the application for readmission to work by the 150
strikers constitutes condonation of ,the lockout which should likewise bind the l14 remaining strikers.
Suffice it to say that the 150 strikers acted for themselves, not behalf of the 114 remaining strikers, and
therefore the latter could not be deemed to have condoned petitioner's lockout.>

The findings show that both petitioner and the 114 strikers are in pari delicto, a situation which
warrants the maintenance of the status quo. This means that the contending parties must be brought
back to their respective positions before the controversy; that is, before the strike. Therefore, the order
reinstating the 114 employees is proper.

With such restoration of the status quo ante it necessarily follows, as likewise submitted by the
Solicitor General, that the petition must be granted insofar as it seeks the setting aside of the award of
three months' backwages to the 114 employees ordered reinstated on the basis of the general rule that
strikers are not entitled to backwages 1 (with some exceptions not herein applicable, such as where the
employer is guilty of oppression and union-busting activities and strikers ordered reinstated are denied
such reinstatement and therefore are declared entitled to backwages from the date of such denial 2 ).
More so, is the principle of "no work, no pay" applicable to the case at bar, in view of the undisputed
finding of illegality of the strike.

ACCORDINGLY, judgment is hereby rendered affirming respondent commission's Resolution insofar


as it orders the reinstatement of the 114 employees but setting aside the award therein for the payment
of three months' backwages. SO ORDERED.

G.R. No. L-63122, February 20, 1984

UNIVERSITY OF PANGASINAN FACULTY UNION, petitioner, VS. UNIVERSITY OF


PANGASINAN AND NATIONAL LABOR RELATIONS COMMISSION, respondents,.

This is a petition for review on certiorari pursuant to Rule 65 of the Rules of Court to annul and to set
aside the decision of respondent National Labor Relations Commission (NLRC) dated October 25,
1982, dismissing the appeal of petitioner in NLRC Case No. RBI-47-82, entitled "University of
Pangasinan Faculty Union, complainant, versus University of Pangasinan, respondent."

Petitioner is a labor union composed of faculty members of the respondent University of Pangasinan,
an educational institution duly organized and existing by virtue of the laws of the Philippines.

On December 18, 1981, the petitioner, through its President, Miss Consuelo Abad, filed a complaint
against the private respondent with the Arbitration Branch of the NLRC, Dagupan District Office,
Dagupan City. The complaint seeks: (a) the payment of Emergency Cost of Living Allowances
(ECOLA) for November 7 to December 5, 1981, a semestral break; (b) salary increases from the sixty
(60%) percent of the incremental proceeds of increased tuition fees; and (c) payment of salaries for
suspended extra loads.

The petitioner's members are full-time professors, instructors, and teachers of respondent University.
The teachers in the college level teach for a normal duration of ten (10) months a school year, divided
into two (2) semesters of five (5) months each, excluding the two (2) months summer vacation. These
teachers are paid their salaries on a regular monthly basis.

In November and December, 1981, the petitioner's members were fully paid their regular monthly
salaries. However, from November 7 to December 5, during the semestral break, they were not paid
their ECOLA. The private respondent claims that the teachers are not entitled thereto because the
semestral break is not an integral part of the schoolyear and there being no actual services rendered by
the teachers during said period, the principle of "No work, no pay" applies.

During the same schoolyear (1981-1982), the private respondent was authorized by the Ministry of
Education and Culture to collect, as it did collect, from its students a fifteen (15%) percent increase of
tuition fees. Petitioner's members demanded a salary increase effective the first semester of said
schoolyear to be taken from the sixty (60%) percent incremental proceeds of the increased tuition fees.
Private respondent refused, compelling the petitioner to include said demand in the complaint filed in
the case at bar. While the complaint was pending in the arbitration branch, the private respondent
granted an across-the-board salary increase of 5.86%. Nonetheless, the petitioner is still pursuing full
distribution of the 60% of the incremental proceeds as mandated by Presidential Decree No. 451.

Aside from their regular loads, some of petitioner's members were given extra loads to handle during
the same 1981-1982 schoolyear. Some of them had extra loads to teach on September 21, 1981, but
they were unable to teach as classes in all levels throughout the country were suspended, although said
day was proclaimed by the President of the Philippines as a working holiday. Those with extra loads to
teach on said day claimed they were not paid their salaries for those loads, but the private respondent
claim otherwise.

The issues to be resolved in the case at bar are the following:

I "WHETHER OR NOT PETITIONER'S MEMBERS ARE ENTITLED TO ECOLA DURING THE


SEMESTRAL BREAK FROM NOVEMBER 7 TO DECEMBER 5, 1981 OF THE 1981-82 SCHOOL
YEAR.

II "WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF INCREASED TUITION


FEES SHALL BE DEVOTED EXCLUSIVELY SALARY INCREASE.

III "WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR EXTRA LOADS ON


NOVEMBER 21, 1981 WAS PROVEN BY SUBSTANTIAL EVIDENCE."

Anent the first issue, the various Presidential Decrees on ECOLAs to wit: PD's 1614, 1634, 1678 and
1713, provide on "Allowances of Fulltime Employees x x x" that "Employees shall be paid in full the
required monthly allowance regardless of the number of their regular working days if they incur
no absences during the month. If they incur absences without pay, the amounts corresponding to the
absences may be deducted from the monthly allowance x x x"; and on "Leave of Absence Without
Pay", that "All covered employees shall be entitled to the allowance provided herein when they are on
leave of absence with pay."

It is beyond dispute that the petitioner's members are full-time employees receiving their monthly
salaries irrespective of the number of working days or teaching hours in a month. However, they find
themselves in a most peculiar situation whereby they are forced to go on leave during semestral breaks.
These semestral breaks are in the nature of work interruptions beyond the employees control. The
duration of the semestral break varies from year to year dependent on a variety of circumstances
affecting at times only the private respondent but at other times all educational institutions in the
country. As such, these breaks cannot be considered as absences within the meaning of the law for
which deductions may be made from monthly allowances. The "No work, no pay" principle does not
apply in the instant case. The petitioner's members received their regular salaries during this period. It
is clear from the aforequoted provision of law that it contemplates a "no work" situation where the
employees voluntarily absent themselves. Petitioners, in the case at bar, certainly do not, ad
voluntatem, absent themselves during semestral breaks. Rather, they are constrained to take mandatory
leave from work. For this they cannot be faulted nor can they be begrudged that which is due them
under the law. To a certain extent, the private respondent can specify dates when no classes would be
held. Surely, it was not the intention of the framers of the law to allow employers to withhold employee
benefits by the simple expedient of unilaterally imposing "no work" days and consequently avoiding
compliance with the mandate of the law for those days.

Respondent's contention that "the fact of receiving a salary alone should not be the basis of receiving
ECOLA", is, likewise, without merit. Particular attention is brought to the Implementing Rules and
Regulations of Wage Order No. 1 to wit:

SECTION 5. Allowance for Unworked Days. -

"a) All covered employees whether paid on a monthly or daily basis shall be entitled to their daily
living allowance when they are paid their basic wage."

This provision, at once refutes the above contention. It is evident that the intention of the law is to grant
ECOLA upon the payment of basic wages. Hence, we have the principle of "No pay, no ECOLA" the
converse of which finds application in the case at bar. Petitioners cannot be considered to be on leave
without pay so as not to be entitled to ECOLA, for, as earlier stated, the petitioners were paid their
wages in full for the months of November and December of 1981, notwithstanding the intervening
semestral break. This, in itself, is a tacit recognition of the rather unusual state of affairs in which
teachers find themselves. Although said to be on forced leave, professors and teachers are,
nevertheless, burdened with the task of working during a period of time supposedly available for rest
and private matters. There are papers to correct, students to evaluate, deadlines to meet, and periods
within which to submit grading reports. Although they may be considered by the respondent to be on
leave, the semestral break could not be used effectively for the teachers' own purposes for the nature of
a teacher's job imposes upon him further duties which must be done during the said period of time.
Learning is a never ending process. Teachers and professors must keep abreast of developments all the
time. Teachers cannot also wait for the opening of the next semester to begin their work. Arduous
preparation is necessary for the delicate task of educating our children. Teaching involves not only an
application of skill and an imparting of knowledge, but a responsibility which entails self dedication
and sacrifice. The task of teaching ends not with the perceptible efforts of the petitioner's members but
goes beyond the classroom: a continuum where only the visible labor is relieved by academic
intermissions. It would be most unfair for the private respondent to consider these teachers as
employees on leave without pay to suit its purposes and, yet, in the meantime, continue availing of
their services as they prepare for the next semester or complete all of the last semester's requirements.
Furthermore, we may also by analogy apply the principle enunciated in the Omnibus Rules
Implementing the Labor Code to wit:

Sec. 4 Principles in Determining Hours Worked. - The following general principles shall govern in
determining whether the tine spent by an employee is considered hours worked for purposes of this
Rule:

"(d) The time during which an Employee is inactive by reason of interruptions in his work beyond his
control shall be considered time either if the imminence of the resumption of work requires the
employee's presence at the place of work or if the interval is too brief to be utilized effectively and
gainfully in the employee's own interest." (Italics ours)

The petitioner's members in the case at bar, are exactly in such a situation. The semestral break
scheduled is an interruption beyond petitioner's control and it cannot be used "effectively nor gainfully
in the employee's interest". Thus, the semestral break may also be considered as "hours worked". For
this, the teachers are paid regular salaries and, for this, they should be entitled to ECOLA. Not only do
the teachers continue to work during this short recess but much less do they cease to live for which the
cost of living allowance is intended. The legal principles of "No work, no pay; No pay, no ECOLA"
must necessarily give way to the purpose of the law to augment the income of employees to enable
them to cope with the harsh living conditions brought about by inflation, and to protect employees and
their wages against the ravages brought by these conditions. Significantly, it is the commitment of the
State to protect labor and to provide means by which the difficulties faced by the working force may
best be alleviated. To submit to the respondents' interpretation of the no work, no pay policy is to
defeat this noble purpose. The Constitution and the law mandate otherwise.

With regard to the second issue, we are called upon to interpret and apply Section 3 of Presidential
Decree 451 to wit:

SEC. 3. Limitations. - The increase in tuition or other school fees or other charges as well as the new
fees or charges authorized under the next preceding section shall be subject to the following conditions:

"a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%) per
centum of the proceeds is allocated for increase in salaries or wages of the members of the faculty and
all other employees of the school concerned, and the balance for institutional development, student
assistance and extension services, and return to investments: Provided, That in no case shall the return
to investments exceed twelve (12%) per centum of the incremental proceeds; x x x "

This Court had the occasion to rule squarely on this point in the very recent case entitled, University of
the East v. University of the East Faculty Association, 117 SCRA 554. We held that:

"In effect, the problem posed before Us is whether or not the reference in Section 3(a) to 'increase in
salaries or wages of the faculty and all other employees of the schools concerned' as the first purpose to
which the incremental proceeds from authorized increases to tuition fees may be devoted, may be
construed to include allowances and benefits. In the negative, which is the position of respondents, it
would follow that such allowances must be taken from resources of the school not derived from tuition
fees.

"Without delving into the factual issue of whether or not there could be any such other resources, We
note that among the items of the second purpose stated in provision in question is return in investment.
And the law provides only for a maximum, not a minimum. In other words, the schools may get a
return to investment of not more than 12%, but if circumstances warrant, there is no minimum fixed by
law which they should get.

"On this predicate, We are of the considered view that, if the schools happen to have no other resources
to grant allowances and benefits, either mandated by law or secured by collective bargaining, such
allowances and benefits should be charged against the return to investments referred to in the second
purpose stated in Section 3(a) of P.D. 451."
Private respondent argues that the above interpretation "disregarded the intention and spirit of the law"
which intention is clear from the "whereas" clauses as follows: "It is imperative that private educational
institutions upgrade classroom instruction x x x provide salary and or wage increases and other benefits

Respondent further contends that PD 451 was issued to alleviate the sad plight of private schools, their
personnel and all those directly or indirectly on school income as the decree was aimed -

"to upgrade classroom instruction by improving their facilities and bring competent teachers in all
levels of education, provide salary and or wage increases and other benefits to their teaching,
administrative, and other personnel to keep up with the increasing cost of living." (Italics ours)

Respondent overlooks the elemental principle of statutory construction that the general statements in
the whereas clauses cannot prevail over the specific or particular statements in the law itself which
define or limit the purposes of the legislation or proscribe certain acts. True, the whereas clauses of PD
451 provide for salary and or wage increase and other benefits, however, the same do not delineate the
source of such funds and it is only in Section 3 which provides for the limitations wherein the intention
of the framers of the law is clearly outlined. The law is clear. The sixty (60%) percent incremental
proceeds from the tuition increase are to be devoted entirely to wage or salary increases which means
increases in basic salary. The law cannot be construed to include allowances which are benefits over
and above the basic salaries of the employees. To charge such benefits to the 60% incremental
proceeds would be to reduce the increase in basic salary provided by law, an increase intended also to
help the teachers and other workers tide themselves and their families over these difficult economic
times.

This Court is not guilty of usurpation of legislative functions as claimed by the respondents. We
expressed the opinion in the University of the East case that benefits mandated by law and collective
bargaining may be charged to the 12% return on investments within the 40% incremental proceeds of
tuition increase. As admitted by respondent, we merely made this statement as a suggestion in answer
to the respondent's query as to where then, under the law, can such benefits be charged. We were
merely interpreting the meaning of the law within the confines of its provisions. The law provides that
60% should go to wage increases and 40% to institutional developments, student assistance, extension
services, and return on investments (ROI). Under the law, the last item ROI has flexibility sufficient to
accommodate other purposes of the law and the needs of the university. ROI is not set aside for any
one purpose of the university such as profits or returns on investments. The amount may be used to
comply with other duties and obligations imposed by law which the university exercising managerial
prerogatives finds cannot under present circumstances, be funded by other revenue sources. It may be
applied to any other collateral purpose of the university or invested elsewhere. Hence, the framers of
the law intended this portion of the increases in tuition fees to be a general fund to cover up for the
university's miscellaneous expenses and, precisely, for this reason, it was not so delimited. Besides,
ROI is a return or profit over and above the operating expenditures of the university, and still, over and
above the profits it may have had prior to the tuition increase. The earning capacities of private
educational institutions are not dependent on the increases in tuition fees allowed by P.D. 451.
Accommodation of the allowances required by law require wise and prudent management of all the
university resources together with the incremental proceeds of tuition increases. Cognizance should be
taken of the fact that the private respondent had, before PD 451, managed to grant all allowances
required by law. It cannot now claim that it could not afford the same, considering that additional funds
are even granted them by the law in question. We find no compelling reason, therefore, to deviate from
our previous ruling in the University of the East case even as we take the second hard look at the
decision requested by the private respondent. This case was decided in 1982 when PDs 1614, 1634,
1678, and 1713 which are also the various Presidential Decrees on ECOLA were already in force. PD
451 was interpreted in the light of these subsequent legislations which bear upon, but do not modify
nor amend, the same. We need not go beyond the ruling in the University of the East case.

Coming now to the third issue, the respondents are of the considered view that as evidenced by the
payrolls submitted by them during the period September 16 to September 30, 1981, the faculty
members have been paid for the extra loads. We agree with the respondents that this issue involves a
question of fact properly within the competence of the respondent NLRC to pass upon. The findings of
fact of the respondent Commission are binding on this Court there being no indication of their being
unsubstantiated by evidence. We find no grave abuse in the findings of respondent NLRC on this
matter to warrant reversal. Assuming arguendo, however, that the petitioners have not been paid for
these extra loads, they are not entitled to payment following the principle of "No work, no pay". This
time, the rule applies. Involved herein is a matter different from the payment of ECOLA under the first
issue. We are now concerned with extra, not regular loads for which the petitioners are paid regular
salaries every month regardless of the number of working days or hours in such a month. Extra loads
should be paid for only when actually performed by the employee. Compensation is based, therefore,
on actual work done and on the number of hours and days spent over and beyond their regular hours of
duty. Since there was no work on September 21, 1981, it would now be unfair to grant petitioner's
demand for extra wages on that day.

Finally, disposing of the respondent's charge of petitioner's lack of legal capacity to sue, suffice it to
say that this question can no longer be raised initially on appeal or certiorari. It is quite belated for the
private respondent to question the personality of the petitioner after it had dealt with it as a party in the
proceedings below. Furthermore, it was not disputed that the petitioner is a duly registered labor
organization and as such has the legal capacity to sue and be sued. Registration grants it the rights of a
legitimate labor organization and recognition by the respondent University is not necessary for it to
institute this action in behalf of its members to protect their interests and obtain relief from grievances.
The issues raised by the petitioner do not involve pure money claims but are more intricately
intertwined with conditions of employment.

WHEREFORE, the petition for certiorari is hereby GRANTED. The private respondent is ordered to
pay its regular fulltime teachers/employees emergency cost of living allowances for the semestral break
from November 7 to December 5, 1981 and the undistributed balance of the sixty (60%) percent
incremental proceeds from tuition increases for the same schoolyear as outlined above. The respondent
Commission is sustained insofar as it DENIED the payment of salaries for the suspended extra loads on
September 21, 1981. SO ORDERED.
WAGES

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners, vs NLRC

LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.

This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN-
IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the
decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent
to their one month salary (exclusive of commissions, allowances, etc.) for every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department
of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of
petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial losses. This application was seasonably
opposed by petitioners alleging that the company is not suffering from any losses. They alleged further
that they are being dismissed because of their membership in the union. At the last hearing of the case,
however, petitioners manifested that they are no longer contesting their dismissal. The parties then
agreed that the sole issue to be resolved is the basis of the separation pay due to petitioners. Petitioners,
who were in the sales force of Zuellig received monthly salaries of at least P40,000. In addition, they
received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee shall receive from the company a retirement
gratuity in an amount equivalent to one (1) month's salary per year of service. One month of salary as
used in this paragraph shall be deemed equivalent to the salary at date of retirement; years of service
shall be deemed equivalent to total service credits, a fraction of at least six months being considered
one year, including probationary employment.
On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee due to the
installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar
causes, shall entitle the employee affected thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to one
(1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to
prevent losses or other similar causes, or where the employee suffers from a disease and his continued
employment is prohibited by law or is prejudicial to his health or to the health of his co-employees, the
employee shall be entitled to termination pay equivalent at least to his one month salary, or to one-half
month pay for every year of service, whichever is higher, a fraction of at least six (6) months being
considered as one whole year.

Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as
provided herein shall be based on his latest salary rate, unless the same was reduced by the employer to
defeat the intention of the Code, in which case the basis of computation shall be the rate before its
deduction. (Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the


complainants separation pay equivalent to their one month salary (exclusive of commissions,
allowances, etc.) for every year of service that they have worked with the company. SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal
of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to
abide by the decision appealed from" since he had "received, to his full and complete satisfaction, his
separation pay," resolved to dismiss the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the
monthly salary of petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.


Petitioners' position was that in arriving at the correct and legal amount of separation pay due them,
whether under the Labor Code or the CBA, their basic salary, earned sales commissions and
allowances should be added together. They cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee. 'Fair reasonable value' shall not include any profit to the employer or to any person affiliated
with the employer.

Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to
include commission in the computation of separation pay, it could have explicitly said so in clear and
unequivocal terms.

Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or
designations attached to the word remuneration or earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been settled in
the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We
ruled that "in the computation of backwages and separation pay, account must be taken not only of the
basic salary of petitioner but also of her transportation and emergency living allowances." This ruling
was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and
recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should be
included in the monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has
been repeatedly declared by the courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga
v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381).

A plain and unambiguous statute speaks for itself, and any attempt to make it clearer is vain labor and
tends only to obscurity. However, it may be argued that if We correlate Article 97(f) with Article XIV
of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his
decision in this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a
general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any
indication that commission is part of salary. We can say that commission by itself may be considered a
wage. This is not something novel for it cannot be gainsaid that certain types of employees like agents,
field personnel and salesmen do not earn any regular daily, weekly or monthly salaries, but rely mainly
on commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in
conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally separated from the service is 'his latest salary
rates.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of separation pay they mean to be specifically
referring to salary only.

Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is
attached to simplify matters that may arise there from. The general guidelines in (sic) the formation of
specific rules for particular purpose. Thus, that what should be controlling in matters concerning
termination pay should be the specific provisions of both Book VI of the Code and the Rules. At any
rate, settled is the rule that in matters of conflict between the general provision of law and that of a
particular- or specific provision, the latter should prevail.

On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage
is used in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task,
piece or commission basis or other method of calculating the same. It does not, however, mean that
commission, allowances or analogous income necessarily forms part of the employee's salary because
to do so would lead to anomalies (sic), if not absurd, construction of the word "salary." For what will
prevent the employee from insisting that emergency living allowance, 13th month pay, overtime, and
premium pay, and other fringe benefits should be added to the computation of their separation pay.
This situation, to our mind, is not the real intent of the Code and its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article
XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10
of the Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in
essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs.
Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is
the Latin word "salarium," is often used interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary"
(Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same
meaning, and commission is included in the definition of "wage", the logical conclusion, therefore, is,
in the computation of the separation pay of petitioners, their salary base should include also their
earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the petition in favor of the
petitioners.

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker
or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit
to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749,
750). The nature of the work of a salesman and the reason for such type of remuneration for services
rendered demonstrate clearly that commission are part of petitioners' wage or salary. We take judicial
notice of the fact that some salesmen do not receive any basic salary but depend on commissions and
allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the
fact that some salesman do not received any basic salary but depend on commissions and allowances or
commissions alone, although an employer-employee relationship exists. Bearing in mind the
preceeding dicussions, if we adopt the opposite view that commissions, do not form part of wage or
salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary and
therefore, not entitled to separation pay in the event of discharge from employment. Will this not be
absurd? This narrow interpretation is not in accord with the liberal spirit of our labor laws and
considering the purpose of separation pay which is, to alleviate the difficulties which confront a
dismissed employee thrown the streets to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be
used in computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not
properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual market
transactions attributable to petitioners, these should be included in their separation pay. In the
computation thereof, what should be taken into account is the average commissions earned during their
last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate
spirit of the law as provided for in Article 4 of the Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of the Labor Code including its implementing rules
and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July
30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989),
and Article 1702 of the Civil Code which provides that "in case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor
Relations Commission is MODIFIED by including allowances and commissions in the separation pay
of petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the
proper computation of said separation pay. SO ORDERED.
G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, et al, petitioners, vs. NLRC

and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.

FERNAN, C.J.:

The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl
fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises,
and if so, whether or not they were illegally dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of
several fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises
which is primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur.
Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga
and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime
Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio
Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of
private respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of
the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip,
otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief
engineer and master fisherman received a minimum income of P350.00 per week while the assistant
engineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 per
week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman,
president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for
investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private
respondent. Petitioners denied the charge claiming that the same was a countermove to their having
formed a labor union and becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no
criminal charges were formally filed against them. Notwithstanding, private respondent refused to
allow petitioners to return to the fishing vessel to resume their work on the same day, September 11,
1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-
payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the
then Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V,
Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that
they were arbitrarily dismissed without being given ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman,
submitted its position paper denying the employer-employee relationship between private respondent
and petitioners on the theory that private respondent and petitioners were engaged in a joint venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint
hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2)
previously scheduled joint hearings were postponed due to the absence of private respondent, one of
the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others,
on the manner the fishing operations were conducted, mode of payment of compensation for services
rendered by the fishermen-crew members, and the circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde
rendered a joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing
venture" and not one of employer-employee relationship existed between private respondent and
petitioners.

From the adverse decision against them, petitioners appealed to the National Labor Relations
Commission.

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the
decision of the labor arbiter that a "joint fishing venture" relationship existed between private
respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent
and petitioners is a joint venture arrangement and not an employer-employee relationship. To stress
that there is an employer-employee relationship between them and private respondent, petitioners invite
attention to the following: that they were directly hired by private respondent through its general
manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except for
Laurente Bautu, they had been employed by private respondent from 8 to 15 years in various
capacities; that private respondent, through its operations manager, supervised and controlled the
conduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction of
the fishing vessel, the volume or number of tubes of the fish-catch the time to return to the fishing port,
which were communicated to the patron/pilot by radio (single side band); that they were not allowed to
join other outfits even the other vessels owned by private respondent without the permission of the
operations manager; that they were compensated on percentage commission basis of the gross sales of
the fish-catch which were delivered to them in cash by private respondent's cashier, Mrs. Pilar de
Guzman; and that they have to follow company policies, rules and regulations imposed on them by
private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between private
respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or
abused its discretion when it added facts not contained in the records when it stated that the pilot-crew
members do not receive compensation from the boat-owners except their share in the catch produced
by their own efforts; that public respondent ignored the evidence of petitioners that private respondent
controlled the fishing operations; that public respondent did not take into account established
jurisprudence that the relationship between the fishing boat operators and their crew is one of direct
employer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is
now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar
days from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public
respondent that a "joint fishing venture" exists between private respondent and petitioners rests on the
resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing
Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein, from
compulsory coverage of the SSS on the ground that there is no employer-employee relations between
the boat-owner and the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS,
17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there
is no employer-employee relationship between the boat-owner and the pilot and crew members when
the boat-owner supplies the boat and equipment while the pilot and crew members contribute the
corresponding labor and the parties get specific shares in the catch for their respective contribution to
the venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the case
at bar, did not control the conduct of the fishing operations and the pilot and crew members shared in
the catch.

We rule in favor of petitioners.

Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits
rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to
this Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and
Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor
cases before this Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep,
the idea being that its power be exercised according to justice and equity and substantial merits of the
controversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly


engaged in trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7
in the open sea performing their job to earn a living to support their families, convince Us to adopt a
more liberal attitude in applying to petitioners the 10-calendar day rule in the filing of appeals with the
NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on
July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who
received the decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the
circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the
pendency of the case understandably have to earn a living by seeking employment elsewhere, impress
upon Us that in the ordinary course of events, the information as to the adverse decision against them
would not reach them within such time frame as would allow them to faithfully abide by the 10-
calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-
lawyer provide equitable justification to conclude that there is substantial compliance with the ten-
calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven
(7) days after receipt of the decision, their appeal with the NLRC through registered mail.

We have consistently ruled that in determining the existence of an employer-employee relationship, the
elements that are generally considered are the following (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and methods by which the work is to be accomplished.
8
The employment relation arises from contract of hire, express or implied. 9 In the absence of hiring,
no actual employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10
where the person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end. The test calls merely for the existence of
the right to control the manner of doing the work, not the actual exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a
"joint fishing venture" existed between private respondent and petitioners is not applicable in the
instant case. There is neither light of control nor actual exercise of such right on the part of the boat-
owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of the
boat-owners as regards their employment; that they go out to sea not upon directions of the boat-
owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners
do not in any way control the crew-members with whom the former have no relationship whatsoever;
that they simply join every trip for which the pilots allow them, without any reference to the owners of
the vessel; and that they only share in their own catch produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The
conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the
patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's
operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the prerogative of private respondent. 12 While performing
the fishing operations, petitioners received instructions via a single-side band radio from private
respondent's operations manager who called the patron/pilot in the morning. They are told to report
their activities, their position, and the number of tubes of fish-catch in one day. 13 Clearly thus, the
conduct of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B
Sandyman II who is responsible for disseminating the instructions to the crew members.

The conclusion of public respondent that there had been no change in the situation of the parties since
1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment
in Case No. 708 exempting it from compulsory coverage of the SSS law is not supported by evidence
on record. It was erroneous for public respondent to apply the factual situation of the parties in the
1968 case to the instant case in the light of the changes in the conditions of employment agreed upon
by the private respondent and petitioners as discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo case where the crew members
are under no obligation to remain in the outfit for any definite period as one can be the crew member of
an outfit for one day and be the member of the crew of another vessel the next day, the herein
petitioners, on the other hand, were directly hired by private respondent, through its general manager,
Arsenio de Guzman, and its operations manager, Conrado de Guzman and have been under the employ
of private respondent for a period of 8-15 years in various capacities, except for Laurente Bautu who
was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on September 29,
1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968
until he was promoted as chief engineer of the fishing vessel; Jose Parma was employed on September
29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred
as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman
on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the
hiring of petitioners to perform work which is necessary or desirable in the usual business or trade of
private respondent for a period of 8-15 years since 1968 qualify them as regular employees within the
meaning of Article 281 of the Labor Code as they were indeed engaged to perform activities usually
necessary or desirable in the usual fishing business or occupation of private respondent. 14

Aside from performing activities usually necessary and desirable in the business of private respondent,
it must be noted that petitioners received compensation on a percentage commission based on the gross
sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the
crude oil consumed during the fishing trip, otherwise only 10% of the proceeds of the sale. Such
compensation falls within the scope and meaning of the term "wage" as defined under Article 97(f) of
the Labor Code, thus:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and included the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get
paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his
crew members in accordance with their own understanding 15 is not supported by recorded evidence.
Except that such claim appears as an allegation in private respondent's position paper, there is nothing
in the records showing such a sharing scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their
fish-catch at midsea without the knowledge and consent of private respondent, petitioners were
unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their activities
without giving them the opportunity to air their side on the accusation against them unmistakably
reveals the disciplinary power exercised by private respondent over them and the corresponding
sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of
petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the
dismissal of petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes
generally a parity of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 16 and where each party exercises equal
lights in the conduct of the business. 17 It would be inconsistent with the principle of parity of standing
between the joint co-venturers as regards the conduct of business, if private respondent would
outrightly exclude petitioners from the conduct of the business without first resorting to other measures
consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private
respondent should have discussed with an open mind the advantages and disadvantages of petitioners'
action with its joint co-venturers if indeed there is a "joint fishing venture" between the parties. But this
was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal
complaints were filed against them. The lame excuse of private respondent that the non-filing of the
criminal complaints against petitioners was for humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners'
stand. In Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were
recruited by one master fisherman locally known as "maestro" in charge of recruiting others to
complete the crew members are considered employees, not industrial partners, of the boat-owners. In
an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong,
owner of the fishing boat, claimed that he was not the employer of the fishermen crew members
because of an alleged partnership agreement between him, as financier, and Simplicio Panganiban, as
his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the
WCC that there existed an employer-employee relationship between the boat-owner and the fishermen
crew members not only because they worked for and in the interest of the business of the boat-owner
but also because they were subject to the control, supervision and dismissal of the boat-owner, thru its
agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew
members were paid in kind, or by "pakiao basis" still that fact did not alter the character of their
relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA
159 (1982), we held that the employer-employee relationship between the crew members and the
owners of the fishing vessels engaged in deep sea fishing is merely suspended during the time the
vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the next
fishing trip. The said ruling is premised on the principle that all these activities i.e., drydock, repairs,
loading of necessary provisions, form part of the regular operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the
National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE.
Private respondent is ordered to reinstate petitioners to their former positions or any equivalent
positions with 3-year backwages and other monetary benefits under the law. No pronouncement as to
costs. SO ORDERED
G.R. No. L-12444 February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners, vs.

CEBU SEAMEN'S ASSOCIATION, INC., respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine
coastwise transportation, employing therein several steamships of Philippine registry. They had a
collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September 12,
1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No. 740-
V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay; that
the petitioners threatened or coerced them to accept a reduction of salaries, observed by other
shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and officers
were not required to pay their meals and that because Captain Carlos Asensi had refused to yield to the
general reduction of salaries, the petitioners dismissed said captain who now claims for reinstatement
and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.

The petitioners' shipping companies, answering, averred that very much below 30 of the men and
officers in their employ were members of the respondent union; that the work on board a vessel is one
of comparative ease; that petitioners have suffered financial losses in the operation of their vessels and
that there is no law which provides for the payment of sick leave or vacation leave to employees or
workers of private firms; that as regards the claim for overtime pay, the petitioners have always
observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law), notwithstanding the fact that
it does not apply to those who provide means of transportation; that the shipowners and operators in
Cebu were paying the salaries of their officers and men, depending upon the margin of profits they
could realize and other factors or circumstances of the business; that in enacting Rep. Act No. 602
(Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal, furnished the
employees should be deducted from the daily wages; that Captain Asensi was not dismissed for alleged
union activities, but with the expiration of the terms of the contract between said officer and the
petitioners, his services were terminated.

A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for
reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to
resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual
findings of the Court of Industrial Relations should not be disturbed, if supported by substantial
evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.

1. First assignment of error. — The respondent court erred in holding that it had jurisdiction over case
No. 740-V, notwithstanding the fact that those who had dispute with the petitioners, were less than
thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in case No. 740-V, respondent
Union had more than thirty members actually working with the companies, and the court declared itself
with jurisdiction to take cognizance of the case. Against this order, the herein petitioners did not file a
motion for reconsideration or a petition for certiorari. The finding of fact made by the CIR became
final and conclusive, which We are not now authorized to alter or modify. It is axiomatic that once the
CIR had acquired jurisdiction over a case, it continues to have that jurisdiction, until the case is
terminated (Manila Hotel Emp. Association v. Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027).
It was abundantly shown that there were 56 members who signed Exhibits A, A-I to A-8, and that 103
members of the Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the time
of the filing of the petition, the respondent union had a total membership of 159, working with the
herein petitioners, who were presumed interested in or would be benefited by the outcome of the case
(NAMARCO v. CIR, L-17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954),
likewise belies the contention of herein petitioner in this regard. The fact that only 7 claimed for
overtime pay and only 7 witnesses testified, does not warrant the conclusion that the employees who
had some dispute with the present petitioners were less than 30. The ruling of the CIR, with respect to
the question of jurisdiction is, therefore, correct.

2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping articles,
the herein petitioners have bound themselves to supply the crew with provisions and with such "daily
subsistence as shall be mutually agreed upon" between the master and the crew, no deductions for
meals could be made by the aforesaid petitioners from their wages or salaries.

3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to meals
furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule, which section 19
thereof is the exception, the cost of said meals may not be legally deducted from the wages or salaries
of the aforesaid crew members by the herein petitioners.

4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of meals from
the wages or salaries after August 4, 1951, is illegal and same should be reimbursed to the employee
concerned, in spite of said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's
business, all the crew of their vessels have been signing "shipping articles" in which are stated opposite
their names, the salaries or wages they would receive. All seamen, whether members of the crew or
deck officers or engineers, have been furnished free meals by the ship owners or operators. All the
shipping articles signed by the master and the crew members, contained, among others, a stipulation,
that "in consideration of which services to be duly performed, the said master hereby agrees to pay to
the said crew, as wages, the sums against their names respectively expressed in the contract; and to
supply them with provisions as provided herein ..." (Sec. 8, par. [b], shipping articles), and during the
duration of the contract "the master of the vessel will provide each member of the crew such daily
subsistence as shall be mutually agreed daily upon between said master and crew; or, in lieu of such
subsistence the crew may reserve the right to demand at the time of execution of these articles that
adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping articles). It is,
therefore, apparent that, aside from the payment of the respective salaries or wages, set opposite the
names of the crew members, the petitioners bound themselves to supply the crew with ship's
provisions, daily subsistence or daily rations, which include food.

This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After
this date, however, the companies began deducting the cost of meals from the wages or salaries of crew
members; but no such deductions were made from the salaries of the deck officers and engineers in all
the boats of the petitioners. Under the existing laws, therefore, the query converges on the legality of
such deductions. While the petitioners herein contend that the deductions are legal and should not be
reimbursed to the respondent union, the latter, however, claims that same are illegal and reimbursement
should be made.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts. 1äwphï1.ñët

We hold that such deductions are not authorized. In the coastwise business of transportation of
passengers and freight, the men who compose the complement of a vessel are provided with free meals
by the shipowners, operators or agents, because they hold on to their work and duties, regardless of
"the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk ahead in the
midst of the high seas."

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —

(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of any
interested party result in a different determination of the fair and reasonable value, the furnishing of
meals shall be valued at not more than thirty centavos per meal for agricultural employees and not
more than forty centavos for any other employees covered by this Act, and the furnishing of housing
shall be valued at not more than twenty centavos daily for agricultural workers and not more than forty
centavos daily for other employees covered by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in fixing the rate of forty
centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the daily
wage, otherwise, no rate for meals should have been provided.
However, section 19, same law, states —

SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an employee
of the right to seek fair wages, shorter working hours and better working conditions nor justify an
employer in violating any other labor law applicable to his employees, in reducing the wage now paid
to any of his employees in excess of the minimum wage established under this Act, or in reducing
supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f)
and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that
Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are
no supplements given, within the meaning and contemplation of section 19, but merely facilities,
section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized. And
even if there is such a conflict, the respondent CIR should resolve the same in favor of the safety and
decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew
members in question, were mere "facilities" which should be deducted from wages, and not
"supplements" which, according to said section 19, should not be deducted from such wages, because it
is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair wage ... or
in reducing supplements furnished on the date of enactment." In the case of Atok-Big Wedge Assn. v.
Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are defined as follows —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or


received by the laborers over and above their ordinary earnings or wages. "Facilities", on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so that
by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay
for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is part
of the laborers' basic wages, it is a facility. The criterion is not so much with the kind of the benefit or
item (food, lodging, bonus or sick leave) given, but its purpose. Considering, therefore, as definitely
found by the respondent court that the meals were freely given to crew members prior to August 4,
1951, while they were on the high seas "not as part of their wages but as a necessary matter in the
maintenance of the health and efficiency of the crew personnel during the voyage", the deductions
therein made for the meals given after August 4, 1951, should be returned to them, and the operator of
the coastwise vessels affected should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27,
1955, the company used to pay to its drivers and conductors, who were assigned outside of the City
limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the company.
The order CIR to the company to continue granting this privilege, was upheld by this Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep.
Act No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily
furnished by the employer to the employees. If We are to follow the theory of the herein petitioners,
then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with no
deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost of his
meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum wage,
fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will adversely
affect said crew member. Such interpretation does not conform with the avowed intention of Congress
in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to pay
for their meals or food, while the deck officers and marine engineers receiving higher pay and provided
with better victuals, were not. This pictures in no uncertain terms, a great and unjust discrimination
obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31,
1955).

Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a
boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444;
in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito;
and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have
worked overtime and had not been paid for such services. Severino Pepito categorically stated that he
worked during the late hours of the evening and during the early hours of the day when the boat docks
and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the vessel,
which overtime work totalled to 6 hours a day, and of which he has not been paid as yet. This statement
was not rebutted by the petitioners. Nobody working with him on the same boat "M/V Adriana"
contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa), are
incompetent and unreliable. And considering the established fact that the work of Severino Pepito was
continuous, and during the time he was not working, he could not leave and could not completely rest,
because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444, which
states "When the work is not continuous, the time during which the laborer is not working and can
leave his working place and can rest completely shall not be counted", find no application in his case.

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi
to his former position, considering the fact that said officer had been employed since January 9, 1953,
as captain of a vessel belonging to another shipping firm in the City of Cebu.

The CIR held —

Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged lay-off
on March 20, 1952, is not supported by the evidence on record, the same is hereby dismissed.
Considering, however, that Captain Asensi had been laid-off for a long time and that his failure to
report for work is not sufficient cause for his absolute dismissal, respondents are hereby ordered to
reinstate him to his former job without back salary but under the same terms and conditions of
employment existing prior to his lay-off, without loss of seniority and other benefits already acquired
by him prior to March 20, 1952. This Court is empowered to reduce the punishment meted out to an
erring employee (Standard Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30,
1957). This step taken is in consonance with section 12 of Comm. Act 103, as amended." (p. 16,
Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new
trial, and in overruling petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid
defense and the same is based on three orders of the WAS (Wage Administration Service), dated
November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The
motion for new trial is without merit. Having the said wage Orders in their possession, while the case
was pending decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation of
meals and facilities, are irrelevant to the present issue, it having been found and held that the meals or
food in question are not facilities but supplements. The original petition in the CIR having been filed
on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to express its views
on the matter. At any rate, the admission of the three wage orders have not altered the decision reached
in this case.

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
G.R. No. 118506. April 18, 1997

NORMA MABEZA, petitioner, vs. NLRC,

PETER NG/HOTEL SUPREME, respondents.

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the
preservation of the constitutionally enshrined rights of the working class. Without the protection
accorded by our laws and the tempering of courts, the natural and historical inclination of capital to
ride roughshod over the rights of labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees
at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument
attesting to the latter's compliance with minimum wage and other labor standard provisions of law. The
instrument provides:

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA,


ADELAIDA NONOG, NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal
ages (sic), Filipinos and residents of Baguio City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay
Ave., Baguio City;

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid
accordingly and that we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose
of informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA

JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity
and contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on
the same day to the Regional Office of the Department of Labor and Employment in Baguio City.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2,
1991) apparently adverse to the private respondent.

After she refused to proceed to the City Prosecutor's Office - on the same day the affidavit was
submitted to the Cordillera Regional Office of DOLE - petitioner avers that she was ordered by the
hotel management to turn over the keys to her living quarters and to remove her belongings from the
hotel premises.

According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor's Office
to attest to the affidavit.

She thereafter reluctantly filed a leave of absence from her job which was denied by management.
When she attempted to return to work on May 10, 1991, the hotel's cashier, Margarita Choy, informed
her that she should not report to work and, instead, continue with her unofficial leave of absence.
Consequently, on May 13, 1991, three days after her attempt to return to work, petitioner filed a
complaint for illegal dismissal before the Arbitration Branch of the National Labor Relations
Commission - CAR Baguio City. In addition to her complaint for illegal dismissal, she alleged
underpayment of wages, non-payment of holiday pay, service incentive leave pay, 13th month pay,
night differential and other benefits. The complaint was docketed as NLRC Case No. RAB-CAR-05-
0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management" and that she actually abandoned her work. He maintained that there
was no basis for the money claims for underpayment and other benefits as these were paid in the form
of facilities to petitioner and the hotel's other employees.

Pointing to the Affidavit of May 7, 1991, the private respondent asserted that his employees actually
have no problems with management. In a supplemental answer submitted eleven (11) months after the
original complaint for illegal dismissal was filed, private respondent raised a new ground, loss of
confidence, which was supported by a criminal complaint for Qualified Theft he filed before the
prosecutor's office of the City of Baguio against petitioner on July 4, 1991.

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the
ground of loss of confidence. His disquisitions in support of his conclusion read as follows:

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1
piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14
TSN, December 1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant
for qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant
committed the crime of qualified theft issued a resolution for its filing in court but dismissing the
charge of perjury (Exhibit '4' for respondent and Exhibit 'B-7' for complainant). As a consequence,
complainant was charged in court for the said crime (Exhibit '5' for respondent and Exhibit 'B-6' for the
complainant).

With these pieces of evidence, complainant committed serious misconduct against her employer which
is one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor
Code as amended).

On April 28, 1994, respondent NLRC promulgated its assailed Resolution affirming the Labor Arbiter's
decision. The resolution substantially incorporated the findings of the Labor Arbiter.

Unsatisfied, petitioner instituted the instant special civil action for certiorari under Rule 65 of the
Rules of Court on the following grounds:

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS


COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE
ABUSE OF DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF
CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE
RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE
COMPLAINANT FROM HER EMPLOYMENT;

2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS


COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE
ABUSE OF DISCRETION IN ADOPTING THE RULING OF THE LABOR ARBITER THAT
THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON THE BASIS OF EXHIBIT
"8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN
EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS;

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS


COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE
ABUSE OF DISCRETION IN FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE
THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED BY
THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public respondent's
assailed resolution.

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal
is for just cause, the failure of which would mean that the dismissal is not justified and the employee is
entitled to reinstatement.

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she
failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there
existed sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of
confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and two towels
from the hotel.

Appended to his last complaint was a suit for qualified theft filed with the Baguio City prosecutor's
office.

From the evidence on record, it is crystal clear that the circumstances upon which private respondent
anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to
sanction the termination of her services under Article 283 of the Labor Code. For abandonment to
arise, there must be concurrence of two things: 1) lack of intention to work:and 2) the presence of overt
acts signifying the employee's intention not to work.

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence
when she learned that the hotel management was displeased with her refusal to attest to the affidavit.
The fact that she made this attempt clearly indicates not an intention to abandon but an intention to
return to work after the period of her leave of absence, had it been granted, shall have expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act
(absence) ought to unerringly point to the fact that the employee has no intention to return to work,
which is patently not the case here. In fact, several days after she had been advised to take an informal
leave, petitioner tried to resume working with the hotel, to no avail. It was only after she had been
repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against the private
respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed:

Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see
her in the hotel premises. But two days later or on the 10th of May, after realizing that she had to
clarify her employment status, she again reported for work. However, she was prevented from working
by private respondents.

We now come to the second cause raised by private respondent to support his contention that petitioner
was validly dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank
check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of
the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust and confidence or to those
situations where the employee is routinely charged with the care and custody of the employer's money
or property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions; and to the
second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property.
Evidently, an ordinary chambermaid who has to sign out for linen and other hotel property from the
property custodian each day and who has to account for each and every towel or bedsheet utilized by
the hotel's guests at the end of her shift would not fall under any of these two classes of employees for
which loss of confidence, if ably supported by evidence, would normally apply. Illustrating this
distinction, this Court, in Marina Port Services, Inc. vs. NLRC, has stated that:

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that
is one reason why he was employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The keys he holds are the symbol of
that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of
his employer, whose property he is safeguarding. Like the janitor, he has access to this property. He
too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting
that property. The employer's trust and confidence in him is limited to that ministerial function. He is
not entrusted, in the Labor Arbiter's words, 'with the duties of safekeeping and safeguarding company
policies, management instructions, and company secrets such as operation devices.' He is not privy to
these confidential matters, which are shared only in the higher echelons of management. It is the
persons on such levels who, because they discharge these sensitive duties, may be considered holding
positions of trust and confidence. The security guard does not belong in such category.

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to
justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be
used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a
mere afterthought to justify an earlier action taken in bad faith."

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against
petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as employer under
the Labor Code) by her act of filing illegal dismissal charges against the private respondent would
hardly warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the
Solicitor General has himself taken a position opposite the public respondent and has observed that:

If petitioner had really committed the acts charged against her by private respondents (stealing supplies
of respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced.

Clearly, the efforts to justify petitioner's dismissal - on top of the private respondent's scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code -
taints with evident bad faith and deliberate malice petitioner's summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion,
against his employee's right to institute concerted action for better terms and conditions of employment.
Without doubt, the act of compelling employees to sign an instrument indicating that the employer
observed labor standards provisions of law when he might have not, together with the act of
terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and
conditions of employment through concerted action.

We agree with the Solicitor General's observation in his manifestation that "[t]his actuation... is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" which distinctly
makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate against
an employee for having given or being about to give testimony" under the Labor Code. For in not
giving positive testimony in favor of her employer, petitioner had reserved not only her right to dispute
the claim and proffer evidence in support thereof but also to work for better terms and conditions of
employment.

For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an
example to all of the hotel's employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of
charges against her was the warning that they would not only be deprived of their means of livelihood,
but also possibly, their personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the
same are ably supported by the evidence on record. However, where such conclusions are based on a
misperception of facts or where they patently fly in the face of reason and logic, we will not hesitate to
set aside those conclusions. Going into the issue of petitioner's money claims, we find one more salient
reason in this case to set things right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises
the suspicion that something more than the facts, the law and jurisprudence may have influenced the
decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the
monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was
because petitioner did not factor in the meals, lodging, electric consumption and water she received
during the period in her computations.

Granting that meals and lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal requirements. Without
satisfying these requirements, the employer simply cannot deduct the value from the employee's wages.
First, proof must be shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value.

These requirements were not met in the instant case. Private respondent "failed to present any company
policy or guideline to show that the meal and lodging . . . (are) part of the salary;" he failed to provide
proof of the employee's written authorization; and, he failed to show how he arrived at the valuations.

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointed out in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR."

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose. Considering, therefore, that hotel workers are required to work
different shifts and are expected to be available at various odd hours, their ready availability is a
necessary matter in the operations of a small hotel, such as the private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent
to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated benefits.

However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues.

We depart from the settled rule that an employee who is unjustly dismissed from work normally should
be reinstated without loss of seniority rights and other privileges. Owing to the strained relations
between petitioner and private respondent, allowing the former to return to her job would only subject
her to possible harassment and future embarrassment. In the instant case, separation pay equivalent to
one month's salary for every year of continuous service with the private respondent would be proper,
starting with her job at the Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in
Osmalik Bustamante, et al. vs. National Labor Relations Commission, petitioner is entitled to full
backwages from the time of her illegal dismissal up to the date of promulgation of this decision without
qualification or deduction.

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be
terminated from employment with two written notices before the same may be legally effected. The
first is a written notice containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating the basis of the dismissal.
During the process leading to the second notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy
that the private respondent never even bothered to inform petitioner of the charges against her. Neither
was petitioner given the opportunity to explain the loss of the articles. It was only almost two months
after petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was reported
to the police and added as a supplemental answer to petitioner's complaint. Clearly, the dismissal of
petitioner without the benefit of notice and hearing prior to her termination violated her constitutional
right to due process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on top of
payment of the deficiency in wages and benefits for the period aforestated would be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission
dated April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits
due the petitioner are hereby summarized as follows:

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal
dismissal;

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the
private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up
to the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC.

5) P1.000.00. SO ORDERED.
G.R. No. 128845. June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON.


LEONARDO A. QUISUMBING

in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO in
his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his
capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL,
INC., respondents.

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents.

To enable the School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to

employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine
whether a faculty member should be classified as a foreign-hire or a local hire:

a.....What is one's domicile?

b.....Where is one's home economy?

c.....To which country does one owe economic allegiance?


d.....Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines?

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after
his term: that he will eventually and inevitably return to his home country where he will have to
confront the uncertainty of obtaining suitable employment after a long period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education.

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members" of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included
in the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires.the
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires:

The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local
hires.
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided
to these people in order to entice them to render their services in the Philippines and in the process
remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike
the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits
would also require parity in other terms and conditions of employment which include the employment
contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers
from abroad, under terms and conditions that are consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the agreed value of system displacement and contracted
status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of
two types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily,
there is a substantial distinction between foreign hires and local hires, the former enjoying only a
limited tenure, having no amenities of their own in the Philippines and have to be given a good
compensation package in order to attract them to join the teaching faculty of the School.

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution in the Article on Social Justice and Human
Rights exhorts Congress to "give highest priority to the enactment of measures that protect and
enhance the right of all people to human dignity, reduce social, economic, and political inequalities."
The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in
the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and
good faith."
International law, which springs from general principles of law, likewise proscribes discrimination.
General principles of law include principles of equity,i.e., the general principles of fairness and justice,
based on the test of what is reasonable.The Universal Declaration of Human Rights, the International
Covenant on Economic, Social, and Cultural Rights, the International Convention on the Elimination
of All Forms of Racial Discrimination, the Convention against Discrimination in Education, the
Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation - all
embody the general principle against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include
as well the manner by which employers treat their employees.

The Constitution also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code] provides that the State shall "ensure equal work opportunities regardless of
sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and ensure equal employment opportunities, closes its
eyes to unequal and discriminatory terms and conditions of employment.

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes the payment of lesser compensation to a female employee as against
a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any
labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:

a.....Remuneration which provides all workers, as a minimum, with:

i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in
particular women being guaranteed conditions of work not inferior to those enjoyed by men, with
equal pay for equal work.

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism
of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort
and responsibility, under similar conditions, should be paid similar salaries. This rule applies to the
School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires. The Court finds this argument a little cavalier. If an employer accords employees
the same position and rank, the presumption is that these employees perform equal work. This
presumption is borne by logic and human experience. If the employer pays one employee less than the
rest, it is not for that employee to explain why he receives less or why the others receive more. That
would be adding insult to injury. The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-
hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar
functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission] we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered.

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor"
and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates.
The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by
certain benefits accorded them which are not enjoyed by local-hires, such as housing, transportation,
shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"] "to
afford labor full protection." The State, therefore, has the right and duty to regulate the relations
between labor and capital. These relations are not merely contractual but are so impressed with public
interest that labor contracts, collective bargaining agreements included, must yield to the common
good.] Should such contracts contain stipulations that are contrary to public policy, courts will not
hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of
the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does
not deserve the sympathy of this Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of
the entire body of employees, consistent with equity to the employer indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law.] The factors in determining the appropriate collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status
The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their collective bargaining rights.

It does not appear that foreign-hires have indicated their intention to be grouped together with local-
hires for purposes of collective bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under the same working
conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires.
These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel
allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the
former from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are
hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local-hires. SO ORDERED.

GR. No. L-9742 Oct. 27, 1955

CEBU AUTOBUS CO., petitioner vs UNITED CEBU AUTOBUS EMPLOYEES ASSN., respondent

FACTS:

The company used to pay to its drivers and conductors, who were assigned outside of the City limits,
aside from their regular salary, a certain percentage of their daily wage, as allowance for food. Upon
the effectivity of the Minimum Wage Law, however, that privilege was stopped by the company. The
order of CIR to the company to continue granting this privilege, was upheld by this Court.

The shipping company argue that the furnishing of meals to the crew before the effectivity of Rep. Act
No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that “wage” includes the fair and reasonable value of boards customarily
furnished by the employer to the employees.

ISSUE:

WON “wage” includes the fair and reasonable value of boards customarily furnished by the employer
to the employees.

HELD:

No.

If We are to follow the theory of the herein petitioners, then a crew member, who used to receive a
monthly wage of P100.00, before August 4, 1951, with no deduction for meals, after said date, would
receive only P86.00 monthly (after deducting the cost of his meals at P.40 per meal), which would be
very much less than the P122.00 monthly minimum wage, fixed in accordance with the Minimum
Wage Law. Instead of benefiting him, the law will adversely affect said crew member. Such
interpretation does not conform with the avowed intention of Congress in enacting the said law

G.R. No. 74156 June 29, 1988

GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS
SANTIAGO, petitioners, vs. NLRC,

FFW-GLOBE MACKAY EMPLOYEES UNION and EDA CONCEPCION, respondents.

MELENCIO-HERRERA, J.:

A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin
respondents from enforcing the Decision of 10 March 1986 of the National Labor Relations
Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees Union, et
al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive portion of which reads:

WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and another
one issued:

1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-of-living


allowance;

2. Ordering respondents-appellees to pay complainants-appellants their back allowances reckoned from


the time of illegal deduction; and

3. Ordering respondents-appellees from further illegally deducting the allowances of complainants-


appellants.

SO ORDERED.

Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner
Cleto T. Villaltuya dissented and voted to affirm in toto the Labor Arbiter's Decision.

On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing
the assailed Decision. On 2 September 1987, we gave due course to the petition and required the
submittal of memoranda, by the parties, which has been complied with.

The facts follow:

Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of
non-agricultural workers in the private sector. Petitioner corporation complied with the said Wage
Order by paying its monthly-paid employees the mandated P3.00 per day COLA. However, in
computing said COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by 22 days, which is
the number of working days in the company.

Respondent Union disagreed with the computation of the monthly COLA claiming that the daily
COLA rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The union
alleged furthermore that prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been
computing and paying the monthly COLA on the basis of thirty (30) days per month and that this
constituted an employer practice, which should not be unilaterally withdrawn.

After several grievance proceedings proved futile, the Union filed a complaint against Petitioner
Corporation, its President, F. White, and Vice-President, J. Santiago, for illegal deduction,
underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and Santiago
were sought to be held personally liable for the money claims thus demanded.

Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that
since the individual petitioners acted in their corporate capacity they should not have been impleaded;
and that the monthly COLA should be computed on the basis of twenty two (22) days, since the
evidence showed that there are only 22 paid days in a month for monthly-paid employees in the
company. His reasoning, inter alia, was as follows:

To compel the respondent company to use 30 days in a month to compute the allowance and retain 22
days for vacation and sick leave, overtime pay and other benefits is inconsistent and palpably unjust. If
30 days is used as divisor, then it must be used for the computation of all benefits, not just the
allowance. But this is not fair to complainants, not to mention that it will contravene the provision of
the parties' CBA.

On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner
Corporation was guilty of illegal deductions, upon the following considerations: (1) that the P3.00 daily
COLA under Wage Order No. 6 should be paid and computed on the basis of thirty (30) days instead of
twenty-two (22) days since workers paid on a monthly basis are entitled to COLA on Saturdays,
Sundays and legal holidays "even if unworked;" (2) that the full allowance enjoyed by Petitioner
Corporation's monthly-paid employees before the CBA executed between the parties in 1982
constituted voluntary employer practice, which cannot be unilaterally withdrawn; and (3) that
petitioners White and Santiago were properly impleaded as respondents in the case below.

Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.

We are constrained to reverse the reversal.

Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:

Section 5. Allowance for Unworked Days.

All covered employees shall be entitled to their daily living allowance during the days that they are
paid their basic wage, even if unworked. (Emphasis supplied)

The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In
other words, the payment of COLA is mandated only for the days that the employees are paid their
basic wage, even if said days are unworked. So that, on the days that employees are not paid their basic
wage, the payment of COLA is not mandated. As held in University of Pangasinan Faculty Union vs.
University of Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):

it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence,
we have the principle of 'No Pay, No ECOLA.

Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are
deemed paid their basic wages for all those days and they should be entitled to their COLA on those
days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the circumstance
that pursuant to the Collective Bargaining Agreement (CBA) between Petitioner Corporation and
Respondent Union, the monthly basic pay is computed on the basis of five (5) days a week, or twenty
two (22) days a month. Thus, the pertinent provisions of that Agreement read:

Art. XV(a)—Eight net working hours shall constitute the regular work day for five days.

Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work week.

Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in excess of 5 days
weekly shall be computed on hourly basis at the rate of time and one half.

The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for
purposes of computing overtime pay, the monthly wage is divided by the number of actual work days
in a month and then, by eight (8) working hours. If a monthly-paid employee renders overtime work,
he is paid his basic salary rate plus one-half thereof. For example, after examining the specimen payroll
of employee Jesus L. Santos, the Labor Arbiter found:

the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50%
premium. This is over and above his monthly basic pay as supported by the fact that base pay was paid.
If the 6th and 7th days of the week are deemed paid even if unworked and included in the monthly
salary, Santos should not have been paid his base pay for Saturday and Sunday but should have
received only the 50% overtime premium.

Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in
computing the vacation and sick leaves of the employees, Petitioner Corporation consistently used
twenty-two (22) days.

Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work
week, it will have to be held that the COLA should be computed on the basis of twenty two (22) days,
which is the period during which the monthly-paid employees of Petitioner Corporation receive their
basic wage. The CBA is the law between the parties and, if not acceptable, can be the subject of future
re-negotiation.

2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and
in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed
as constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by
petitioner. To be considered as such, it should have been practiced over a long period of time, and must
be shown to have been consistent and deliberate. Adequate proof is wanting in this respect. The test of
long practice has been enunciated thus:

Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are
not covered by the law requiring payment of holiday pay.' (Oceanic Pharmacal Employees Union
[FFW] vs. Inciong, L-50568, November 7, 1979, 94 SCRA 270). (Emphasis ours)

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage Order No. 4 were
issued on 21 May 1984 that a formula for the conversion of the daily allowance to its monthly
equivalent was laid down, thus:

Section 3. Application of Section 2--

(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:
(3) For workers who do not work and are not considered paid on Saturdays and Sundays:

P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)

As the Labor Arbiter had analyzed said formula:

Under the aforecited formula/guideline, issued for the first time, when applied to a company like
respondent which observes a 5-day work week (or where 2 days in a week, not necessarily Saturday
and Sunday, are not considered paid), the monthly equivalent of a daily allowance is arrived at by
multiplying the daily allowance by 262 divided by 12. This formula results in the equivalent of 21.8
days in a month.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in relation to
Article 2154 2 of the Civil Code). Since it is a past error that is being corrected, no vested right may be
said to have arisen nor any diminution of benefit under Article 100 of the Labor Code3 may be said to
have resulted by virtue of the correction.

With the conclusions thus reached, there is no further need to discuss the liability of the officers of
Petitioner Corporation.

WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated
10 March 1986, is SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby
REINSTATED. The Temporary Restraining Order heretofore issued is hereby made permanent.

SO ORDERED.
G.R. No. 113856. September 7, 1998

SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS


OF THE PHILIPPINES (SMTFM-UWP), its officers and members, petitioners, vs. NLRC,

HON. JOSE G. DE VERA and TOP FORM MANUFACTURING PHIL., INC., respondents.

ROMERO, J.:

The issue in this petition for certiorari is whether or not an employer committed an unfair labor
practice by bargaining in bad faith and discriminating against its employees. The charge arose from the
employers refusal to grant across-the-board increases to its employees in implementing Wage Orders
Nos. 01 and 02 of the Regional Tripartite Wages and Productivity Board of the National Capital
Region (RTWPB-NCR). Such refusal was aggravated by the fact that prior to the issuance of said wage
orders, the employer allegedly promised at the collective bargaining conferences to implement any
government-mandated wage increases on an across-the-board basis.

Petitioner Samahang Manggagawa sa Top Form Manufacturing United Workers of the


Philippines (SMTFM) was the certified collective bargaining representative of all regular rank and file
employees of private respondent Top Form Manufacturing Philippines, Inc. At the collective
bargaining negotiation held at the Milky Way Restaurant in Makati, Metro Manila on February 27,
1990, the parties agreed to discuss unresolved economic issues. According to the minutes of the
meeting, Article VII of the collective bargaining agreement was discussed. The following appear in
said Minutes:

ARTICLE VII. Wages

Section 1. Defer

Section 2. Status quo

Section 3. Union proposed that any future wage increase given by the government should be
implemented by the company across-the-board or non-conditional.

Management requested the union to retain this provision since their sincerity was already proven when
the P25.00 wage increase was granted across-the-board. The union acknowledges managements
sincerity but they are worried that in case there is a new set of management, they can just show their
CBA. The union decided to defer this provision.

In their joint affidavit dated January 30, 1992, union members Salve L. Barnes, Eulisa Mendoza,
Lourdes Barbero and Concesa Ibaez affirmed that at the subsequent collective bargaining negotiations,
the union insisted on the incorporation in the collective bargaining agreement (CBA) of the union
proposal on automatic across-the-board wage increase. They added that:

11. On the strength of the representation of the negotiating panel of the company and the above
undertaking/promise made by its negotiating panel, our union agreed to drop said proposal relying on
the undertakings made by the officials of the company who negotiated with us, namely, Mr. William
Reynolds, Mr. Samuel Wong and Mrs. Remedios Felizardo. Also, in the past years, the company has
granted to us government mandated wage increases on across-the-board basis.

On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of
P17.00 per day in the salary of workers. This was followed by Wage Order No. 02 dated December 20,
1990 providing for a P12.00 daily increase in salary.

As expected, the union requested the implementation of said wage orders. However, they
demanded that the increase be on an across-the-board basis. Private respondent refused to accede to
that demand. Instead, it implemented a scheme of increases purportedly to avoid wage distortion. Thus,
private respondent granted the P17.00 increase under Wage Order No. 01 to workers/employees
receiving salary of P125.00 per day and below. The P12.00 increase mandated by Wage Order No. 02
was granted to those receiving the salary of P140.00 per day and below. For employees receiving
salary higher than P125.00 or P140.00 per day, private respondent granted an escalated increase
ranging from P6.99 to P14.30 and from P6.00 to P10.00, respectively.

On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter
demanding that it should fulfill its pledge of sincerity to the union by granting an across-the-board
wage increases (sic) to all employees under the wage orders. The union reiterated that it had agreed to
retain the old provision of CBA on the strength of private respondents promise and assurance of an
across-the-board salary increase should the government mandate salary increases Several conferences
between the parties notwithstanding, private respondent adamantly maintained its position on the salary
increases it had granted that were purportedly designed to avoid wage distortion.

Consequently, the union filed a complaint with the NCR NLRC alleging that private respondents
act of reneging on its undertaking/promise clearly constitutes an act of unfair labor practice through
bargaining in bad faith. It charged private respondent with acts of unfair labor practices or violation of
Article 247 of the Labor Code, as amended, specifically bargaining in bad faith, and prayed that it be
awarded actual, moral and exemplary damages. In its position paper, the union added that it was
charging private respondent with violation of Article 100 of the Labor Code.

Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and
02, it had avoided the existence of a wage distortion that would arise from such implementation. It
emphasized that only after a reasonable length of time from the implementation of the wage orders that
the union surprisingly raised the question that the company should have implemented said wage orders
on an across-the-board basis. It asserted that there was no agreement to the effect that future wage
increases mandated by the government should be implemented on an across-the-board basis.
Otherwise, that agreement would have been incorporated and expressly stipulated in the CBA. It
quoted the provision of the CBA that reflects the parties intention to fully set forth therein all their
agreements that had been arrived at after negotiations that gave the parties unlimited right and
opportunity to make demands and proposals with respect to any subject or matter not removed by law
from the area of collective bargaining. The same CBA provided that during its effectivity, the parties
each voluntarily and unqualifiedly waives the right, and each agrees that the other shall not be
obligated, to bargain collectively, with respect to any subject or matter not specifically referred to or
covered by this Agreement, even though such subject or matter may not have been within the
knowledge or contemplation of either or both of the parties at the time they negotiated or signed this
Agreement.]

On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint
for lack of merit He considered two main issues in the case: (a) whether or not respondents are guilty of
unfair labor practice, and (b) whether or not the respondents are liable to implement Wage Orders Nos.
01 and 02 on an across-the-board basis. Finding no basis to rule in the affirmative on both issues, he
explained as follows:

The charge of bargaining in bad faith that the complainant union attributes to the respondents is bereft
of any certitude inasmuch as based on the complainant unions own admission, the latter vacillated on
its own proposal to adopt an across-the-board stand or future wage increases. In fact, the union
acknowledges the managements sincerity when the latter allegedly implemented Republic Act 6727 on
an across-the-board basis. That such union proposal was not adopted in the existing CBA was due to
the fact that it was the union itself which decided for its deferment. It is, therefore, misleading to claim
that the management undertook/promised to implement future wage increases on an across-the-board
basis when as the evidence shows it was the union who asked for the deferment of its own proposal to
that effect.

The alleged discrimination in the implementation of the subject wage orders does not inspire belief at
all where the wage orders themselves do not allow the grant of wage increases on an across-the-board
basis. That there were employees who were granted the full extent of the increase authorized and some
others who received less and still others who did not receive any increase at all, would not ripen into
what the complainants termed as discrimination. That the implementation of the subject wage orders
resulted into an uneven implementation of wage increases is justified under the law to prevent any
wage distortion. What the respondents did under the circumstances in order to deter an eventual wage
distortion without any arbitral proceedings is certainly commendable.

The alleged violation of Article 100 of the Labor Code, as amended, as well as Article XVII, Section 7
of the existing CBA as herein earlier quoted is likewise found by this Branch to have no basis in fact
and in law. No benefits or privileges previously enjoyed by the employees were withdrawn as a result
of the implementation of the subject orders. Likewise, the alleged company practice of implementing
wage increases declared by the government on an across-the-board basis has not been duly established
by the complainants evidence. The complainants asserted that the company implemented Republic Act
No. 6727 which granted a wage increase of P25.00 effective July 1, 1989 on an across-the-board basis.
Granting that the same is true, such isolated single act that respondents adopted would definitely not
ripen into a company practice. It has been said that `a sparrow or two returning to Capistrano does not a
summer make.

Finally, on the second issue of whether or not the employees of the respondents are entitled to an
across-the-board wage increase pursuant to Wage Orders Nos. 01 and 02, in the face of the above
discussion as well as our finding that the respondents correctly applied the law on wage increases, this
Branch rules in the negative.
Likewise, for want of factual basis and under the circumstances where our findings above are adverse
to the complainants, their prayer for moral and exemplary damages and attorneys fees may not be
granted.

Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution
of April 29, 1993 dismissing the appeal for lack of merit. Still dissatisfied, petitioner sought
reconsideration which, however, was denied by the NLRC in the Resolution dated January 17, 1994.
Hence, the instant petition for certiorari contending that:
-A- THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE PRIVATE RESPONDENTS
GUILTY OF ACTS OF UNFAIR LABOR PRACTICES WHEN, OBVIOUSLY, THE LATTER HAS BARGAINED IN
BAD FAITH WITH THE UNION AND HAS VIOLATED THE CBA WHICH IT EXECUTED WITH THE HEREIN
PETITIONER UNION.

-B- THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE PRIVATE RESPONDENTS
GUILTY OF ACTS OF DISCRIMINATION IN THE IMPLEMENTATION OF NCR WAGE ORDER NOS. 01 AND
02.

-C- THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE PRIVATE RESPONDENTS
GUILTY OF HAVING VIOLATED SECTION 4, ARTICLE XVII OF THE EXISTING CBA.

-D- THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE PRIVATE RESPONDENTS
GUILTY OF HAVING VIOLATED ARTICLE 100 OF THE LABOR CODE OF THE PHILIPPINES, AS AMENDED.

-E- ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE CORRECTLY RULED
THAT THE PRIVATE RESPONDENTS ARE GUILTY OF ACTS OF UNFAIR LABOR PRACTICES, THEY
COMMITTED SERIOUS ERROR IN NOT FINDING THAT THERE IS A SIGNIFICANT DISTORTION IN THE
WAGE STRUCTURE OF THE RESPONDENT COMPANY.

-F- THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE PETITIONERS HEREIN ACTUAL,
MORAL, AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.

As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a) whether
or not private respondent committed an unfair labor practice in its refusal to grant across-the-board
wage increases in implementing Wage Orders Nos. 01 and 02, and (b) whether or not there was a
significant wage distortion of the wage structure in private respondent as a result of the manner by
which said wage orders were implemented.

With respect to the first issue, petitioner union anchors its arguments on the alleged commitment
of private respondent to grant an automatic across-the-board wage increase in the event that a statutory
or legislated wage increase is promulgated. It cites as basis therefor, the aforequoted portion of the
Minutes of the collective bargaining negotiation on February 27, 1990 regarding wages, arguing
additionally that said Minutes forms part of the entire agreement between the parties.

The basic premise of this argument is definitely untenable. To start with, if there was indeed a
promise or undertaking on the part of private respondent to obligate itself to grant an automatic across-
the-board wage increase, petitioner union should have requested or demanded that such promise or
undertaking be incorporated in the CBA. After all, petitioner union has the means under the law to
compel private respondent to incorporate this specific economic proposal in the CBA. It could have
invoked Article 252 of the Labor Code defining duty to bargain, thus, the duty includes executing a
contract incorporating such agreements if requested by either party. Petitioner unions assertion that it
had insisted on the incorporation of the same proposal may have a factual basis considering the
allegations in the aforementioned joint affidavit of its members. However, Article 252 also states that
the duty to bargain does not compel any party to agree to a proposal or make any concession. Thus,
petitioner union may not validly claim that the proposal embodied in the Minutes of the negotiation
forms part of the CBA that it finally entered into with private respondent.

The CBA is the law between the contracting parties the collective bargaining representative and
the employer-company. Compliance with a CBA is mandated by the expressed policy to give
protection to labor.]

In the same vein, CBA provisions should be construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended to serve."[This is
founded on the dictum that a CBA is not an ordinary contract but one impressed with public interest It
goes without saying, however, that only provisions embodied in the CBA should be so interpreted and
complied with. Where a proposal raised by a contracting party does not find print in the CBA, it is not a
part thereof and the proponent has no claim whatsoever to its implementation.

Hence, petitioner unions contention that the Minutes of the collective bargaining negotiation
meeting forms part of the entire agreement is pointless. The Minutes reflects the proceedings and
discussions undertaken in the process of bargaining for worker benefits in the same way that the
minutes of court proceedings show what transpired therein. At the negotiations, it is but natural for
both management and labor to adopt positions or make demands and offer proposals and counter-
proposals. However, nothing is considered final until the parties have reached an agreement. In fact,
one of managements usual negotiation strategies is to x x x agree tentatively as you go along with the
understanding that nothing is binding until the entire agreement is reached. If indeed private respondent
promised to continue with the practice of granting across-the-board salary increases ordered by the
government, such promise could only be demandable in law if incorporated in the CBA.

Moreover, by making such promise, private respondent may not be considered in bad faith or at
the very least, resorting to the scheme of feigning to undertake the negotiation proceedings through
empty promises. As earlier stated, petitioner union had, under the law, the right and the opportunity to
insist on the foreseeable fulfillment of the private respondents promise by demanding its incorporation
in the CBA. Because the proposal was never embodied in the CBA, the promise has remained just that,
a promise, the implementation of which cannot be validly demanded under the law.

Petitioners reliance on this Courts pronouncements in Kiok Loy v. NLRC ] is, therefore, misplaced.
In that case, the employer refused to bargain with the collective bargaining representative, ignoring all
notices for negotiations and requests for counter proposals that the union had to resort to conciliation
proceedings. In that case, the Court opined that (a) Companys refusal to make counter-proposal, if
considered in relation to the entire bargaining process, may indicate bad faith and this is specially true
where the Unions request for a counter-proposal is left unanswered. Considering the facts of that case,
the Court concluded that the company was unwilling to negotiate and reach an agreement with the
Union.

In the case at bench, however, petitioner union does not deny that discussion on its proposal that
all government-mandated salary increases should be on an across-the-board basis was deferred,
purportedly because it relied upon the undertaking of the negotiating panel of private respondent.

Neither does petitioner union deny the fact that there is no provision of the 1990 CBA containing a
stipulation that the company will grant across-the-board to its employees the mandated wage increase.
They simply assert that private respondent committed acts of unfair labor practices by virtue of its
contractual commitment made during the collective bargaining processf] The mere fact, however, that
the proposal in question was not included in the CBA indicates that no contractual commitment thereon
was ever made by private respondent as no agreement had been arrived at by the parties. Thus:

Obviously the purpose of collective bargaining is the reaching of an agreement resulting in a contract
binding on the parties; but the failure to reach an agreement after negotiations continued for a
reasonable period does not establish a lack of good faith. The statutes invite and contemplate a
collective bargaining contract, but they do not compel one. The duty to bargain does not include the
obligation to reach an agreement.

With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the parties
thereto. All provisions in the CBA are supposed to have been jointly and voluntarily incorporated
therein by the parties. This is not a case where private respondent exhibited an indifferent attitude
towards collective bargaining because the negotiations were not the unilateral activity of petitioner
union. The CBA is proof enough that private respondent exerted reasonable effort at good faith
bargaining.

Indeed, the adamant insistence on a bargaining position to the point where the negotiations reach
an impasse does not establish bad faith. Neither can bad faith be inferred from a partys insistence on
the inclusion of a particular substantive provision unless it concerns trivial matters or is obviously
intolerable.]

The question as to what are mandatory and what are merely permissive subjects of collective
bargaining is of significance on the right of a party to insist on his position to the point of stalemate. A
party may refuse to enter into a collective bargaining contract unless it includes a desired provision as
to a matter which is a mandatory subject of collective bargaining; but a refusal to contract unless the
agreement covers a matter which is not a mandatory subject is in substance a refusal to bargain about
matters which are mandatory subjects of collective bargaining; and it is no answer to the charge of
refusal to bargain in good faith that the insistence on the disputed clause was not the sole cause of the
failure to agree or that agreement was not reached with respect to other disputed clauses."]

On account of the importance of the economic issue proposed by petitioner union, it could have
refused to bargain and to enter into a CBA with private respondent. On the other hand, private
respondents firm stand against the proposal did not mean that it was bargaining in bad faith. It had the
right to insist on (its) position to the point of stalemate. On the part of petitioner union, the importance
of its proposal dawned on it only after the wage orders were issued after the CBA had been entered
into. Indeed, from the facts of this case, the charge of bad faith bargaining on the part of private
respondent was nothing but a belated reaction to the implementation of the wage orders that private
respondent made in accordance with law. In other words, petitioner union harbored the notion that its
members and the other employees could have had a better deal in terms of wage increases had it
relentlessly pursued the incorporation in the CBA of its proposal. The inevitable conclusion is that
private respondent did not commit the unfair labor practices of bargaining in bad faith and
discriminating against its employees for implementing the wage orders pursuant to law.

The Court likewise finds unmeritorious petitioner unions contention that by its failure to grant
across-the-board wage increases, private respondent violated the provisions of Section 5, Article VII of
the existing CBA as well as Article 100 of the Labor Code. The CBA provision states:
Section 5. The COMPANY agrees to comply with all the applicable provisions of the Labor Code of
the Philippines, as amended, and all other laws, decrees, orders, instructions, jurisprudence, rules and
regulations affecting labor.

Article 100 of the Labor Code on prohibition against elimination or diminution of benefits provides
that (n)othing in this Book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.

We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously enjoyed
by petitioner union and the other employees were withdrawn as a result of the manner by which private
respondent implemented the wage orders. Granted that private respondent had granted an across-the-
board increase pursuant to Republic Act No. 6727, that single instance may not be considered an
established company practice. Petitioner unions argument in this regard is actually tied up with its
claim that the implementation of Wage Orders Nos. 01 and 02 by private respondent resulted in wage
distortion.

The issue of whether or not a wage distortion exists is a question of fact that is within the
jurisdiction of the quasi-judicial tribunals below. Factual findings of administrative agencies are
accorded respect and even finality in this Court if they are supported by substantial evidence.Thus, in
Metropolitan Bank and Trust Company, Inc. v. NLRC, the Court said:

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, we agree, is, by and large, a question of fact the determination of which is the
statutory function of the NLRC. Judicial review of labor cases, we may add, does not go beyond the
evaluation of the sufficiency of the evidence upon which the labor officials findings rest. As such, the
factual findings of the NLRC are generally accorded not only respect but also finality provided that its
decisions are supported by substantial evidence and devoid of any taint of unfairness or arbitrariness.
When, however, the members of the same labor tribunal are not in accord on those aspects of a case, as
in this case, this Court is well cautioned not to be as so conscious in passing upon the sufficiency of the
evidence, let alone the conclusions derived therefrom.

Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC
Decision in this case which was penned by the dissenter in that case, Presiding Commissioner Edna
Bonto-Perez, unanimously ruled that no wage distortions marred private respondents implementation
of the wage orders. The NLRC said:

On the issue of wage distortion, we are satisfied that there was a meaningful implementation of Wage
Orders Nos. 01 and 02. This debunks the claim that there was wage distortion as could be shown by the
itemized wages implementation quoted above. It should be noted that this itemization has not been
successfully traversed by the appellants.

The NLRC then quoted the labor arbiters ruling on wage distortion.

We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It is
apropos to note, moreover, that petitioners contention on the issue of wage distortion and the resulting
allegation of discrimination against the private respondents employees are anchored on its dubious
position that private respondents promise to grant an across-the-board increase in government-
mandated salary benefits reflected in the Minutes of the negotiation is an enforceable part of the CBA.
In the resolution of labor cases, this Court has always been guided by the State policy enshrined
in the Constitution that the rights of workers and the promotion of their welfare shall be protected.The
Court is likewise guided by the goal of attaining industrial peace by the proper application of the law. It
cannot favor one party, be it labor or management, in arriving at a just solution to a controversy if the
party has no valid support to its claims. It is not within this Courts power to rule beyond the ambit of
the law. WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned
Resolutions of the NLRC AFFIRMED. No costs. SO ORDERED

G.R. No. 88168. August 30, 1990

TRADERS ROYAL BANK, Petitioner, v. NLRC


& TRADERS ROYAL BANK EMPLOYEES UNION, Respondents.

This petition for certiorari seeks to nullify or set aside the decision dated September 2,
1988 of the National Labor Relations Commission, which found the petitioner, Traders
Royal Bank (or TRB), guilty of diminution of benefits due the private respondents and
ordered it to pay the said employees’ claims for differentials in their holiday, mid-year,
and year-end bonuses.

On November 18, 1986, the Union, through its president, filed a letter-complaint against
TRB with the Conciliation Division of the Bureau of Labor Relations claiming that:

"First, the management of TRB per memo dated October 10, 1986 paid the employees
their HOLIDAY PAY, but has withheld from the Union the basis of their computation.

"Second, the computation in question, has allegedly decreased the daily salary rate of the
employees. This diminution of existing benefits has decreased our overtime rate and has
affected the employees’ take home pay.

"Third, the diminution of benefits being enjoyed by the employees since time
immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2) months basic
and year-end bonus from three (3) months gross to only two (2) months.

"Fourth, the refusal by management to recall active union members from the branches
which were being transferred without prior notice, solely at the instance of the branch
manager." (p. 26, Rollo.).

In its answer to the union’s complaint, TRB pointed out that the NLRC, not the Bureau of
Labor Relations, had jurisdiction over the money claims of the employees.

On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for
resolution of the following issues raised by the complainants:

"1) The Management of TRB per memo dated October 10, 1986 paid the employees their
holiday pay but has withheld from the union the basis of their computation.

"2) The computation in question has allegedly decreased the daily salary rate of the
employees. This diminution of existing benefits has decreased our overtime rate and has
affected the employees’ take home pay.

"3) The diminution of benefits being enjoyed by the employees since the (sic)
immemorial, e.g. mid-year bonus, from two (2) months gross pay to two (2) months basic
and year-end bonus from three (3) months gross to only two (2) months.

"4) The refusal by management to recall active union members from the branches which
were being transferred without prior notice, solely at the instance of the branch,
manager." (p. 28, Rollo.)

In the meantime, the parties who had been negotiating for a collective bargaining
agreement, agreed on the terms of the CBA, to wit:

"1. The whole of the bonuses given in previous years is not demandable, i.e., there is no
diminution, as to be liable for a differential, if the bonus given is less than that in previous
years.

"2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed
part of regular compensation.

"3. As regards the third and fourth bonuses, they are entirely dependent on the income of
the bank, and not demandable as part of compensation." (pp. 67-68, Rollo.).

Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing
that the CBA would apply prospectively only to claims arising after its effectivity.

Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The
practice of giving them bonuses at year’s end, would depend on how profitable the
operation of the bank had been. Generally, the bonus given was two (2) months basic
mid-year and two (2) months gross end-year.

On September 2, 1988, the NLRC rendered a decision in favor of the employees, the
dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering


respondent bank to pay petitioner members-employees the following:

"1. Holiday differential for the period covering 1983-1986 as embodied in Resolution No.
4984-1986 of respondent’s Board of Directors but to start from November 11, 1983 and
using the Divisor 251 days in determining the daily rate of the employees;

"2. Mid-year bonus differential representing the difference between two (2) months gross
pay and two (2) months basic pay and end-year bonus differential of one (1) month gross
pay for 1986.

"The claim for holiday differential for the period earlier than November 11, 1983 is
hereby dismissed, the same having prescribed.

"Likewise, the charge of unfair labor practice against the respondent company is hereby
dismissed for lack of merit." (pp. 72-73, Rollo.).

A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for
certiorari.

There is merit in the petitioner’s contention that the NLRC gravely abused its discretion
in ordering it to pay mid-year/year-end bonus differential for 1986 to its employees.

A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right" (Aragon v. Cebu Portland Cement Co., 61 O.G. 4597). "It is
something given in addition to what is ordinarily received by or strictly due the recipient."
The granting of a bonus is basically a management prerogative which cannot be forced
upon the employer "who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employee’s basic salaries or wages . . ." (Kamaya
Point Hotel v. National Labor Relations Commission, Federation of Free Workers and
Nemia Quiambao, G.R. No. 75289, August 31, 1989).

It is clear from the above-cited rulings that the petitioner may not be obliged to pay
bonuses to its employees. The matter of giving them bonuses over and above their lawful
salaries and allowances is entirely dependent on the profits, if any, realized by the Bank
from its operations during the past year.

From 1979-1985, the bonuses were less because the income of the Bank had decreased. In
1986, the income of the Bank was only 20.2 million pesos, but the Bank still gave out the
usual two (2) months basic mid-year and two months gross year-end bonuses. The
petitioner pointed out, however, that the Bank weakened considerably after 1986 on
account of political developments in the country. Suspected to be a Marcos-owned or
controlled bank, it was placed under sequestration by the present administration and is
now managed by the Presidential Commission on Good Government (PCGG).

In the light of these submissions of the petitioner, the contention of the Union that the
granting of bonuses to the employees had ripened into a company practice that may not
be adjusted to the prevailing financial condition of the Bank has no legal and moral bases.
Its fiscal condition having declined, the Bank may not be forced to distribute bonuses
which it can no longer afford to pay and, in effect, be penalized for its past generosity to
its employees.

Private respondent’s contention, that the decrease in the mid-year and year-end bonuses
constituted a diminution of the employees’ salaries, is not correct, for bonuses are not part
of labor standards in the same class as salaries, cost of living allowances, holiday pay, and
leave benefits, which are provided by the Labor Code.

WHEREFORE, the petition for certiorari is granted. The decision of the National Labor
Relations Commission is modified by deleting the award of bonus differentials to the
employees for 1986. In other respects, the decision is affirmed. Costs against the
respondent union. SO ORDERED.
G.R. No. L-60337 August 21, 1987

UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA


CORPORATION), petitioner, vs. NLRC

and JOSE ARMAS, et al, respondents.

The petitioner invokes National Federation of Sugar Workers (NFSW) v. Ovejera, 1 in


which we held that Presidential Decree No. 851, 2 the 13th-month pay law, does not
cover employers already paying their employees an "equivalent" to the 13th month pay.

There is no dispute as to the facts.

Sometime in May, 1972, the petitioner and the Universal Corn Products Workers Union
entered into a collective bargaining agreement in which it was provided, among other
things, that:

The COMPANY agrees to grant all regular workers within the bargaining unit with at
least one (1) year of continuous service, a Christmas bonus equivalent to the regular
wages for seven (7) working days, effective December, 1972. The bonus shall be given to
the workers on the second week of December.

In the event that the service of a worker is not continuous due to factory shutdown,
machine breakdown or prolonged absences or leaves, the Christmas bonus shall be
prorated in accordance with the length of services that worker concerned has served
during the year . 3

The agreement had a duration of three years, effective June 1, 1971, or until June 1, 1974.

On account however of differences between the parties with respect to certain economic
issues, the collective bargaining agreement in question expired without being renewed.
On June 1, 1979, the parties entered into an "addendum" stipulating certain wage
increases covering the years from 1974 to 1977. Simultaneously, they entered into a
collective bargaining agreement for the years from 1979 to 1981. Like the "addendum,"
the new collective bargaining agreement did not refer to the "Christmas bonus"
theretofore paid but dealt only with salary adjustments. According to the petitioner, the
new agreements deliberately excluded the grant of Christmas bonus with the enactment of
Presidential Decree No. 851 4 on December 16, 1975. It further claims that since 1975, it
had been paying its employees 13th-month pay pursuant to the Decree. 5

For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to 1978
inclusive, in accordance with the 1972 CBA, the union went to the labor arbiter for relief.
In his decision, 6 the labor arbiter ruled that the payment of the 13th month pay precluded
the payment of further Christmas bonus. The union appealed to the National Labor
Relations Commission (NLRC). The NLRC set aside the decision of the labor arbiter
appealed from and entered another one, "directing respondent company [now the
petitioner] to pay the members concerned of complainants [sic] union their 7-day wage
bonus in accordance with the 1972 CBA from 1975 to 1978." Justifying its reversal of the
arbiter's decision, the NLRC held:

It is clear that the company implemented the aforequoted provision of the CBA in 1972,
1973 and 1974. In view thereof it is our considered opinion that the crediting of said
benefit to the 13th month pay cannot be sanctioned on the ground that it is contrary to
Section 10 of the Rules and Regulations Implementing Presidential Decree No. 85 1,
which provides, to wit;

Section 10. Prohibition against reduction or elimination of benefits. — Nothing herein


shall be construed to authorize any employer to eliminate, or diminish in any way,
supplements, or other employee benefits or favorable practice being enjoyed by the
employee at the time of promulgation of this issuance.

More so because the benefit involved was not magnanimously extended by the company
to its employees but was obtained by the latter thru bargaining negotiations. The
aforementioned CBA was the law between the parties and the provisions thereof must be
faithfully observed by them during its effectivity. In this connection, it should be noted
that the same parties entered into another 3-year CBA on June 11, 1979, which no longer
provides for a 7-day wage Christmas bonus. In effect, therefore, the parties agreed to
discontinue the privilege, which agreement should also be respected. 7

We hold that in the case at bar, Ovejera (La Carlota) case does not apply.

We apply instead, United CMC Textile Workers Union v. Valenzuela 8 a recent decision.
In that case this Court, speaking through Mr. Justice Edgardo Paras, held:

If the Christmas bonus was included in the 13th month pay, then there would be no need
for having a specific provision on Christmas bonus in the CBA. But it did not provide for
a bonus in graduated amounts depending on the length of service of the employee. The
intention is clear therefore that the bonus provided in the CBA was meant to be in
addition to the legal requirement. Moreover, why exclude the payment of the 1978
Christmas bonus and pay only the 1979-1980 bonus. The classification of the company's
workers in the CBA according to their years of service supports the allegation that the
reason for the payment of bonus was to give bigger award to the senior employees-a
purpose which is not found by P.D. 851. A bonus under the CBA is an obligation created
by the contract between the management and workers while the 13th month pay is
mandated by the law (P. D. 851). 9
In the same vein, we consider the seven-day bonus here demanded "to be in addition to
the legal requirement." Although unlike the Valenzuela CBA, which took effect after the
promulgation of Presidential Decree No. 851 in 1975, the subject agreement was entered
into as early as 1972, that is no bar to our application of Valenzuela. What is significant
for us is the fact that, like the Valenzuela, agreement, the Christmas bonus provided in the
collective bargaining agreement accords a reward, in this case, for loyalty, to certain
employees. This is evident from the stipulation granting the bonus in question to workers
"with at least one (1) year of continuous service." As we said in Valenzuela" this is "a
purpose not found in P.D. 851."

It is claimed, however, that as a consequence of the impasse between the parties


beginning 1974 through 1979, no collective bargaining agreement was in force during
those intervening years. Hence, there is allegedly no basis for the money award granted
by the respondent labor body. But it is not disputed that under the 1972 collective
bargaining agreement, [i]f no agreement and negotiations are continued, all the provisions
of this Agreement shall remain in full force up to the time a new agreement is executed."
11 The fact, therefore, that the new agreements are silent on the seven-day bonus
demanded should not preclude the private respondents' claims thereon. The 1972
agreement is basis enough for such claims for the whole writing is " "instinct with an
obligation," imperfectly express." 12

WHEREFORE, premises considered, the petition is hereby DISMISSED. The Decision


of the public respondent NLRC promulgated on February 11, 1982, and its Resolution
dated March 23, 1982, are hereby AFFIRMED. The temporary restraining order issued on
May 19, 1982 is LIFTED. This Decision is IMMEDIATELY EXECUTORY. No
pronouncement as to costs. SO ORDERED.
G.R. No. L-49774 February 24, 1981

SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner, vs.

Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA


FREE WORKERS UNION, respondents.

DE CASTRO, J.:

Petition for certiorari and prohibition, with preliminary injunction to review the Order 1
dated December 19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case
No. 009-77 docketed as "Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-
Cola Plant, San Miguel Corporation, " which denied herein petitioner's motion for
reconsideration and ordered the immediate execution of a prior Order 2 dated June 7,
1978.

On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein,
filed a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner
herein, alleging failure or refusal of the latter to include in the computation of 13th-
month pay such items as sick, vacation or maternity leaves, premium for work done on
rest days and special holidays, including pay for regular holidays and night differentials.

An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the
complaint was filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-
Cola Plant) "to pay the difference of whatever earnings and the amount actually received
as 13th month pay excluding overtime premium and emergency cost of living allowance.
"

Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the
Deputy Minister of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978
affirming the Order of Regional Office No. X and dismissing the appeal for lack of merit.
Petitioner's motion for reconsideration having been denied, it filed the instant petition.

On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining
respondents from enforcing the Order dated December 19, 1978.

The crux of the present controversy is whether or not in the computation of the 13th-
month pay under Presidential Decree 851, payments for sick, vacation or maternity
leaves, premium for work done on rest days and special holidays, including pay for
regular holidays and night differentials should be considered.

Public respondent's consistent stand on the matter since the effectivity of Presidential
Decree 851 is that "payments for sick leave, vacation leave, and maternity benefits, as
well as salaries paid to employees for work performed on rest days, special and regular
holidays are included in the computation of the 13th-month pay. 6 On its part, private
respondent cited innumerable past rulings, opinions and decisions rendered by then
Acting Labor Secretary Amado G. Inciong to the effect that, "in computing the mandatory
bonus, the basis is the total gross basic salary paid by the employer during the calendar
year. Such gross basic salary includes: (1) regular salary or wage; (2) payments for sick,
vacation and maternity leaves; (3) premium for work performed on rest days or holidays:
(4) holiday pay for worked or unworked regular holiday; and (5) emergency allowance if
given in the form of a wage adjustment." 7

Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions,
vigorously contends that Presidential Decree 851 speaks only of basic salary as basis for
the determination of the 13th-month pay; submits that payments for sick, vacation, or
maternity leaves, night differential pay, as well as premium paid for work performed on
rest days, special and regular holidays do not form part of the basic salary; and concludes
that the inclusion of those payments in the computation of the 13th-month pay is clearly
not sanctioned by Presidential Decree 851.

The Court finds petitioner's contention meritorious.

The provision in dispute is Section 1 of Presidential Decree 851 and provides:

All employers are hereby required to pay all their employees receiving a basic salary of
not more than Pl,000 a month, regardless of the nature of the employment, a 13th-month
pay not later than December 24 of every year.

Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851
provides:

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 on 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.

Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th-month pay. Any
compensations or remunerations which are deemed not part of the basic pay is excluded
as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of


Instructions No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of
the regular basic salary of tile employee at the time of the promulgation of the Decree on
December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential


Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and
other remunerations are excluded as part of the basic salary and in the computation of the
13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of
Instructions No. 174, and profit sharing payments indicate the intention to strip basic
salary of other payments which are properly considered as "fringe" benefits. Likewise, the
catch-all exclusionary phrase "all allowances and monetary benefits which are not
considered or integrated as part of the basic salary" shows also the intention to strip basic
salary of any and all additions which may be in the form of allowances or "fringe"
benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree


851 is even more emphatic in declaring that earnings and other remunerations which are
not part of the basic salary shall not be included in the computation of the 13th-month
pay.

While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or
earnings paid by an employer to an employee, this cloud is dissipated in the later and
more controlling Supplementary Rules and Regulations which categorically, exclude
from the definition of basic salary earnings and other remunerations paid by employer to
an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto
been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary rules and Regulations cure the seeming tendency of the former rules to
include all remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other renumeration" which are deemed not part
of the basic salary includes within its meaning payments for sick, vacation, or maternity
leaves. Maternity premium for works performed on rest days and special holidays pays
for regular holidays and night differentials. As such they are deemed not part of the basic
salary and shall not be considered in the computation of the 13th-month they, were not so
excluded, it is hard to find any "earnings and other remunerations" expressly excluded in
the computation of the 13th-month pay. Then the exclusionary provision would prove to
be Idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a
few provisions:

Art. 87. — overtime work. Work may be performed beyond eight hours a day provided
what the employee is paid for the overtime work, additional compensation equivalent to
his regular wage plus at least twenty-five (25%) percent thereof.

It is clear that overtime pay is an additional compensation other than and added to the
regular wage or basic salary, for reason of which such is categorically excluded from the
definition of basic salary under the Supplementary Rules and Regulations Implementing
Presidential Decree 851.

In Article 93 of the same Code, paragraph

c) work performed on any special holiday shall be paid an additional compensation of at


least thirty percent (30%) of the regular wage of the employee.

It is likewise clear that prernium for special holiday which is at least 30% of the regular
wage is an additional compensation other than and added to the regular wage or basic
salary. For similar reason it shall not be considered in the computation of the 13th- month
pay.

WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and
December 19, 1978 are hereby set aside and a new one entered as above indicated. The
Temporary Restraining Order issued by this Court on February 14, 1979 is hereby made
permanent. No pronouncement as to costs. SO ORDERED.
G.R. No. 92174 December 10, 1993

BOIE-TAKEDA CHEMICALS, INC., petitioner, vs. HON. DIONISIO DE LA SERNA, Acting


Secretary of the Department of Labor and Employment, respondent..

What items or items of employee remuneration should go into the computation of thirteenth month pay
is the basic issue presented in these consolidated petitions. Otherwise stated, the question is whether or
not the respondent labor officials in computing said benefit, committed "grave abuse of discretion
amounting to lack of jurisdiction," by giving effect to Section 5 of the Revised Guidelines on the
implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated by then
Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling petitioner's contention that
said provision constituted a usurpation of legislative power because not justified by or within the
authority of the law sought to be implemented besides being violative of the equal protection of the law
clause of the Constitution.

Resolution of the issue entails, first, a review of the pertinent provisions of the laws and implementing
regulations.

Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows:

Sec 1. All employees are hereby required to pay all their employees receiving basic salary of not more
than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than
December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered
by this Decree.

The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on
December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth
month pay" and the employers exempted from giving it, to wit:

Sec. 2. Definition of certain terms. — . . .

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.

Sec. 3. Employers covered. — . . . (The law applies) to all employers except to:

c) Employers already paying their employers a 13-month pay or more in calendar year or is equivalent
at the time of this issuance;

e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the employer
shall be covered by this issuance insofar as such workers are concerned.

The term "its equivalent" as used in paragraph (c) shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary
but shall not include cash and stock dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less
than 1/12th of the employee's basic salary, the employer shall pay the difference.

Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by Minister
Ople which inter alia set out items of compensation not included in the computation of the 13th month
pay, viz.:

Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not
be included in the computation of the 13th month pay.

On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which
contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of
P1,000.00 a month set by the latter, as follows:

Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby
required to pay all their rank-and-file employees a 13th month pay not later than December 24, of
every year.

Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of
the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among
other things, defined with particularity what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed
wage plus commission. The relevant provisions read:

4. Amount and payment of 13th Month Pay.


The basic salary of an employee for the purpose of computing the 13th month pay shall include all
remunerations or earnings paid by the employer for services rendered but does not include allowances
and monetary benefits which are not considered or 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.

5. 13th Month Pay for Certain Types of Employees.

(a) Employees Paid by Results. — Employees who are paid on piece work basis are by law entitled to
the 13th month pay.

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated
13th month pay based on their total earnings during the calendar year, i.e., on both their fixed or
guaranteed wage and commission.

This was the state of the law when the controversies at bar arose out of the following antecedents:

(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of petitioner
Boie-Takeda Chemicals, Inc. by Labor

and Development Officer Reynaldo B. Ramos under Inspection Authority

No. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its medical
representatives in the computation of their 13th month pay, Ramos served a Notice of Inspection
Results 1 on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda within ten
(10) calendar days from notice to effect restitution or correction of "the underpayment of 13th month
pay for the year(s) 1986, 1987 and 1988 of Med Rep (Revised Guidelines on the Implementation of
13th month pay # 5) in the total amount of P558,810.89."

Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing
the view "that the commission paid to our medical representatives are not to be included in the
computation of the 13th month pay . . . (since the) law and its implementing rules speak of REGULAR
or BASIC salary and therefore exclude all other remunerations which are not part of the REGULAR
salary." It pointed out that, "if no sales is (sic) made under the effort of a particular representative, there
is no commission during the period when no sale was transacted, so that commissions are not and
cannot be legally defined as regular in nature. 2

Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and 16,
1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda, and
the matter had perforce to be resolved on the basis of the evidence at hand. On July 24, 1989, Director
Piezas issued an Order 3 directing Boie-Takeda:
. . . to pay . . . (its) medical representatives and its managers the total amount of FIVE HUNDRED
SIXTY FIVE THOUSAND SEVEN HUNDRED FORTY SIX AND FORTY SEVEN CENTAVOS
(P565,746.47) representing underpayment of thirteenth (13th) month pay for the years 1986, 1987,
1988, inclusive, pursuant to the . . . revised guidelines within ten (10) days from receipt of this Order.

A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August 3, 1989.
Treated as an appeal, it was resolved on

January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the July 24, 1989
Order with modification that the sales commissions earned by Boie-Takeda's medical representatives
before August 13, 1989, the effectivity date of Memorandum Order No. 28 and its Implementing
Guidelines, shall be excluded in the computation of their 13th month pay. 5

Hence the petition docketed as G.R. No. 92174.

(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji
Xerox Corp. on September 7, 1989 pursuant to Routine Inspection Authority No. NCR-LSED-RI-494-
89. In his Notice of Inspection Results, 6 addressed to the Manager, Mr. Nicolas O. Katigbak, Senior
Labor and Employment Officer Nicanor M. Torres noted the following violation committed by
Philippine Fuji Xerox Corp., to wit:

Underpayment of 13th month pay of 62 employees, more or less — pursuant to Revised Guidelines on
the Implementation of the 13th month pay law for the period covering 1986, 1987 and 1988.

Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation
within five (5) working days from notice.

No action having been taken thereon by Philippine Fuji Xerox,

Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor Secretary
Franklin Drilon requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were
summoned to appear before Labor Employment and Development Officer Mario F. Santos, NCR
Office, Department of Labor for a conciliation conference. When no amicable settlement was reached,
the parties were required to file their position papers.

Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23, 1990, 7 disposing as
follows:

WHEREFORE, premises considered, Respondent PHILIPPINE FUJI XEROX is hereby ordered to


restitute to its salesmen the portion of the 13th month pay which arose out of the non-implementation
of the said revised guidelines, ten (10) days from receipt hereof, otherwise,

MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is hereby Ordered to proceed
to the premises of the Respondent for the purpose of computing the said deficiency (sic) should
respondent fail to heed his Order.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an
Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of
merit. Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No. 92174 as
involving the same issue.

In their almost identically-worded petitioner, petitioners, through common counsel, attribute grave
abuse of discretion to respondent labor officials

Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned Orders
of January 17, 1990 and October 10, 1991, respectively. They maintain that under P.D. 851, the 13th
month pay is based solely on basic salary. As defined by the law itself and clarified by the
implementing and Supplementary Rules as well as by the Supreme Court in a long line of decisions,
remunerations which do not form part of the basic or regular salary of an employee, such as
commissions, should not be considered in the computation of the 13th month pay. This being the case,
the Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then Secretary
Drilon providing for the inclusion of commissions in the 13th month pay, were issued in excess of the
statutory authority conferred by P.D. 851. According to petitioners, this conclusion becomes even more
evident when considered in light of the opinion rendered by Labor Secretary Drilon himself in "In Re:
Labor Dispute at the Philippine Long Distance Telephone Company" which affirmed the
contemporaneous interpretation by then Secretary Ople that commissions are excluded from the basic
salary. Petitioners further contend that assuming that Secretary Drilon did not exceed the statutory
authority conferred by P.D. 851, still the Revised Guidelines are null and void as they violate the equal
protection of the law clause.

Respondents through the Office of the Solicitor General question the propriety of petitioners' attack on
the constitutionality of the Revised Guidelines in a petition for certiorari which, they contend, should
be confined purely to the correction of errors and/or defects of jurisdiction, including matters of grave
abuse of discretion amounting to lack or excess of jurisdiction and not extend to a collateral attack on
the validity and/or constitutionality of a law or statute. They aver that the petitions do not advance any
cogent reason or state any valid ground to sustain the allegation of grave abuse of discretion, and that at
any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has already been amended by
Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986 so that
commissions are now imputed into the computation of the 13th Month Pay. They add that the Revised
Guidelines issued by then Labor Secretary Drilon merely clarified a gray area occasioned by the silence
of the law as to the nature of commissions; and worked no violation of the equal protection clause of
the Constitution, said Guidelines being based on reasonable classification. Respondents point to the
case of Songco vs. National Labor Relations Commission, 183 SCRA 610, wherein the Court declared
that Article 97(f) of the Labor Code is explicit that commission is included in the definition of the term
"wage".

We rule for the petitioners.

Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or abrogate
P.D. 851. As may be gleaned from the language of the Memorandum Order No. 28, it merely
"modified" Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of 13th
Month Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and while
entitlement to said benefit was no longer limited to employees receiving a monthly basic salary of not
more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the employee-
recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic salary" as
defined in P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28.

In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the coverage of the
term "basic salary" as used in P.D. 851. We said at some length:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as
the basis in the determination of his 13th month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations implementing Presidential Decree 851, the following compensations
are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No.
174;

b) Profit-sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the regular
basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
Presidential Decree 851 issued by then Labor Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the computation of the 13th month pay.

The exclusion of the cost-of-living allowances under Presidential Decree 525 and Letter of Instructions
No. 174, and profit-sharing payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic salary"
shows also the intention to strip basic salary of any and all additions which may be in the form of
allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more emphatic in declaring that earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to
an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically exclude from the definitions of basic salary earnings and other
remunerations paid by an employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former rules to
include all remunerations and earnings within the definition of basic salary.

The all embracing phrase "earnings and other remunerations" which are deemed not part of the basic
salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for works
performed on rest days and special holidays, pays for regular holidays and night differentials. As such
they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-
month pay. If they were not excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in the computation of the 13th month pay. Then the exclusionary provision would
prove to be idle and with no purpose.

This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions:

Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at
least twenty-five (25%) percent thereof.

It is clear that overtime pay is an additional compensation other than and added to the regular wage or
basic salary, for reason of which such is categorically excluded from the definition of basic salary
under the Supplementary Rules and Regulations Implementing Presidential Decree 851.

In Article 93 of the same Code, paragraph

c) work performed on any special holiday shall be paid an additional compensation of at least thirty
percent (30%) of the regular wage of the employee.

It is likewise clear the premiums for special holiday which is at least 30% of the regular wage is an
additional pay other than and added to the regular wage or basic salary. For similar reason, it shall not
be considered in the computation of the 13th month pay.

Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common,
generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime. 8 This is how the term was also understood in the case of
Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes providing that
pension should not less than 50 percent of "basic salary" at the time of retirement, the quoted words
meant the salary that an employee (e.g., a policeman) was receiving at the time he retired without
taking into consideration any extra compensation to which he might be entitled for extra work. 9

In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard
work period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court has made clear do not form part of the
"basic salary."

Respondents would do well to distinguish this case from Songco vs. National Labor Relations
Commission, supra, upon which they rely so heavily. What was involved therein was the term "salary"
without the restrictive adjective "basic". Thus, in said case, we construed the term in its generic sense
to refer to all types of "direct remunerations for services rendered," including commissions. In the same
case, we also took judicial notice of the fact "that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions alone, although an employer-employee
relationship exists," which statement is quite significant in that it speaks of a "basic salary" apart and
distinct from "commissions" and "allowances". Instead of supporting respondents' stand, it would
appear that Songco itself recognizes that commissions are not part of "basic salary."

In including commissions in the computation of the 13th month pay, the second paragraph of Section
5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded the
concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules cannot
add to or detract from the provisions of the law it is designed to implement. Administrative regulations
adopted under legislative authority by a particular department must be in harmony with the provisions
of the law they are intended to carry into effect. They cannot widen its scope. An administrative agency
cannot amend an act of Congress. 10

Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these
petitions.

WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5
(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November
126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of
the law said Guidelines were issued to implement, hence issued with grave abuse of discretion
correctible by the writ of prohibition and certiorari. The assailed Orders of January 17, 1990 and
October 10, 1991 based thereon are SET ASIDE. SO ORDERED.
G.R. No. 107994 August 14, 1995

PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION


(PACIWU)-TUCP, petitioner, vs. NLRC

AND VALLACAR TRANSIT, INC., respondents.

This is a petition for certiorari seeking to reverse the decision of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union
and in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of
petitioner for payment of 13th month pay to the drivers and conductors of respondent company.

Petitioner Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the
exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc.
Petitioner union instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City,
for payment of 13th month pay in behalf of the drivers and conductors of respondent company's
Visayan operation on the ground that although said drivers and conductors are compensated on a
"purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are
automatically entitled to the basic minimum pay mandated by law should said commission be less than
their basic minimum for eight (8) hours work.1

In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and conductors
are compensated on a purely commission basis, they are not entitled to 13th month pay pursuant to the
exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of
the Thirteenth Month Pay Law.2 It further contended that Section 2 of Article XIV of the Collective
Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that "drivers and
conductors paid on a purely commission are not legally entitled to 13th month pay." Said CBA, being
the law between the parties, must be respected, respondent opined.

On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint.3
4
The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed so
was the motion for reconsideration of the said decision.5

Hence, the present petition.

The principal issue posed for consideration is whether or not the bus drivers and conductors of
respondent Vallacar Transit, Inc. are entitled to 13th month pay.

We rule in the affirmative.

It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay"
Law, was promulgated. The same prescribed payment of 13th month pay in the following terms:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of not
more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later
than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered
by this Decree.

The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and
Employment on December 22, 1975, defined the following basic terms:

(a) 13th 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 employer for
services rendered, but may not include cost of living allowances granted pursuant to Presidential
Decree No. 525 or Letter of Instructions No. 174, profitsharing 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 August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative authority,
issued Memorandum Order No. 28 which provided as follows:

Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby
required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every
year.

In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor
and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a)
of the said issuance read:

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated
13th month pay, based on their total earning(s) during the calendar year, i.e., on both their fixed and
guaranteed wage and commission.

From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a
fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and
file employees a 13th month pay, it is immaterial whether the employees concerned are paid a
guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton line
is that they receive a guaranteed wage. This is correctly construed in the MOLE Explanatory Bulletin
No. 86-12.

In the case at bench, while the bus drivers and conductors of respondent company are considered by the
latter as being compensated on a commission basis, they are not paid purely by what they receive as
commission. As admitted by respondent company, the said bus drivers and conductors are
automatically entitled to the basic minimum pay mandated by law in case the commissions they earned
be less than their basic minimum for eight (8) hours work.6 Evidently therefore, the commissions form
part of the wage or salary of the bus drivers and conductors. A contrary interpretation would allow an
employer to skirt the law and would result in an absurd situation where an employee who receives a
guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is technically
referred to by his employer per the CBA as an employee compensated on a purely commission basis.
Such would be a narrow interpretation of the law, certainly not in accord with the liberal spirit of our
labor laws. Moreover, what is controlling is not the label attached to the remuneration that the
employee receives but the nature of the remuneration7 and the purpose for which the 13th month pay
was given to alleviate the plight of the working masses who are receiving low wages. This is extant
from the "WHEREASES" of PD 851, to wit:

WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-wide
inflation.

WHEREAS, there has been no increase in the legal minimum wage since 1970.

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of
the working masses so they may properly celebrate Christmas and New Year.

Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to
them under the law.

Commission is the recompense, compensation, reward of an employee, agent, salesman, executor,


trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of
his transactions or on the profit of the principal.8 While said commissions may be in the form of
incentives or encouragement to inspire said bus drivers and conductors to put a little more zeal and
industry on their jobs, still, it is safe to say that the same are direct remunerations for services rendered,
given the small remuneration they receive for the services they render,9 which is precisely the reason
why private respondent allowed the drivers and conductors a guaranteed minimum wage. The
conclusion is ineluctable that said commissions are part of their salary. In Philippine Duplicators, Inc.
v. National Labor Relations Commission,10 we had the occasion to estate that:

Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as used in
P.D. No. 851 and Memorandum Order No. 28) in the following terms:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in term of money, money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by an employer
to employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not include any profit to the employer or to any person
affiliated with the employer.

In the instant case, there is no question that the sales commissions earned by salesmen who make or
close a sale of duplicating machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the
"wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the
sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary
structure was intended for the benefit of petitioner corporation, on the apparent assumption that thereby
its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation
of increasing their sales commissions. This, however, does not detract from the character of such
commissions as part of the salary or wage paid to each or its salesmen for rendering services to
petitioner corporation. 11

In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed
minimum wage in case their commissions be less than the statutory minimum, and commissions only
in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth
(1/12) of their total earnings during the calendar year.

WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor
Relations Commission is hereby REVERSED and SET ASIDE. The case is remanded to the labor
Arbiter for the proper computation of 13th month pay. SO ORDERED.
G.R. Nos. 83380-81 November 15, 1989

MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G. INOCENCIO,


petitioners, vs. NLRC,

FERNAN, C.J.:

This petition for certiorari involving two separate cases filed by private respondents against herein
petitioners assails the decision of respondent National Labor Relations Commission in NLRC CASE
No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.
Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.",
affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding: (a)
petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and (b) the
existence of employer-employee relationship and granting respondent workers by reason thereof their
various monetary claims.

The undisputed facts are as follows:

Individual complainants, private respondents herein, have been working for petitioner Makati
Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They are paid
on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid on a monthly basis. In
addition to their piece-rate, they are given a daily allowance of three (P 3.00) pesos provided they
report for work before 9:30 a.m. everyday.

Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from
Monday to Saturday and during peak periods even on Sundays and holidays.

On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the respondent
workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a) underpayment of the
basic wage; (b) underpayment of living allowance; (c) non-payment of overtime work; (d) non-
payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th month pay; and (g) benefits
provided for under Wage Orders Nos. 1, 2, 3, 4 and 5.1

During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello left
with Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was discovered
to contain a "jusi" barong tagalog. When confronted, Pelobello replied that the same was ordered by
respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he copied the design of
petitioner Haberdashery. But in the afternoon, when again questioned about said barong, Pelobello and
Zapata denied ownership of the same. Consequently a memorandum was issued to each of them to
explain on or before February 4, 1985 why no action should be taken against them for accepting a job
order which is prejudicial and in direct competition with the business of the company. 2 Both
respondents allegedly did not submit their explanation and did not report for work. 3 Hence, they were
dismissed by petitioners on February 4, 1985. They countered by filing a complaint for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4

On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85 finding respondents
guilty of illegal dismissal and ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata to
their respective or similar positions without loss of seniority rights, with full backwages from July 4,
1985 up to actual reinstatement. The charge of unfair labor practice is dismissed for lack of merit.

In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment re violation of the
minimum wage law is hereby ordered dismissed for lack of merit.

Respondents are hereby found to have violated the decrees on the cost of living allowance, service
incentive leave pay and the 13th Month Pay. In view thereof, the economic analyst of the Commission
is directed to compute the monetary awards due each complainant based on the available records of the
respondents retroactive as of three years prior to the filing of the instant case.

SO ORDERED. 5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed
said decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro Zapata to only
one (1) year. 6

After their motion for reconsideration was denied, petitioners filed the instant petition raising the
following issues:

I THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-


EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND
RESPONDENTS WORKERS.

II THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS


WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY
ARE NOT ENTITLED TO MINIMUM WAGE.

III THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS


PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor of private respondents. We
have repeatedly held in countless decisions that the test of employer-employee relationship is four-fold:
(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct. It is the so called "control test" that is
the most important element. 8 This simply means the determination of whether the employer controls or
has reserved the right to control the employee not only as to the result of the work but also as to the
means and method by which the same is to be accomplished. 9

The facts at bar indubitably reveal that the most important requisite of control is present. As gleaned
from the operations of petitioner, when a customer enters into a contract with the haberdashery or its
proprietor, the latter directs an employee who may be a tailor, pattern maker, sewer or "plantsadora" to
take the customer's measurements, and to sew the pants, coat or shirt as specified by the customer.
Supervision is actively manifested in all these aspects — the manner and quality of cutting, sewing and
ironing.

Furthermore, the presence of control is immediately evident in this memorandum issued by Assistant
Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati Tailors which
reads in part:

4. Effective immediately, new procedures shall be followed:

A. To follow instruction and orders from the undersigned Roger Valderama, Ruben Delos Reyes and
Ofel Bautista. Other than this person (sic) must ask permission to the above mentioned before giving
orders or instructions to the tailors.

B. Before accepting the job orders tailors must check the materials, job orders, due dates and other
things to maximize the efficiency of our production. The materials should be checked (sic) if it is
matched (sic) with the sample, together with the number of the job order.

C. Effective immediately all job orders must be finished one day before the due date. This can be done
by proper scheduling of job order and if you will cooperate with your supervisors. If you have many
due dates for certain day, advise Ruben or Ofel at once so that they can make necessary adjustment on
due dates.

D. Alteration-Before accepting alteration person attending on customs (sic) must ask first or must
advise the tailors regarding the due dates so that we can eliminate what we call 'Bitin'.

E. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once
settle the problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum
will be subject to disciplinary action.

For strict compliance. 10

From this memorandum alone, it is evident that petitioner has reserved the right to control its
employees not only as to the result but also the means and methods by which the same are to be
accomplished. That private respondents are regular employees is further proven by the fact that they
have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional
allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is forfeited when they
arrive at or after 9:30 a.m. 11

Since private respondents are regular employees, necessarily the argument that they are independent
contractors must fail. As established in the preceding paragraphs, private respondents did not exercise
independence in their own methods, but on the contrary were subject to the control of petitioners from
the beginning of their tasks to their completion. Unlike independent contractors who generally rely on
their own resources, the equipment, tools, accessories, and paraphernalia used by private respondents
are supplied and owned by petitioners. Private respondents are totally dependent on petitioners in all
these aspects.

Coming now to the second issue, there is no dispute that private respondents are entitled to the
Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing
Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential Decree
1713 which explicitly states that, "All employees paid by the result shall receive not less than the
applicable new minimum wage rates for eight (8) hours work a day, except where a payment by result
rate has been established by the Secretary of Labor. ..." 12 No such rate has been established in this
case.

But all these notwithstanding, the question as to whether or not there is in fact an underpayment of
minimum wages to private respondents has already been resolved in the decision of the Labor Arbiter
where he stated: "Hence, for lack of sufficient evidence to support the claims of the complainants for
alleged violation of the minimum wage, their claims for underpayment re violation of the Minimum
Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13

The records show that private respondents did not appeal the above ruling of the Labor Arbiter to the
NLRC; neither did they file any petition raising that issue in the Supreme Court. Accordingly, insofar
as this case is concerned, that issue has been laid to rest. As to private respondents, the judgment may
be said to have attained finality. For it is a well-settled rule in this jurisdiction that "an appellee who
has not himself appealed cannot obtain from the appellate court-, any affirmative relief other than the
ones granted in the decision of the court below. " 14

As a consequence of their status as regular employees of the petitioners, they can claim cost of living
allowance. This is apparent from the provision defining the employees entitled to said allowance, thus:
"... All workers in the private sector, regardless of their position, designation or status, and irrespective
of the method by which their wages are paid. " 15

Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and
Regulations Implementing P.D. No. 851 which provides:

Section 3. Employers covered. — The Decree shall apply to all employers except to:
(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the employer
shall be covered by this issuance insofar as such workers are concerned. (Emphasis supplied.)

On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th Month
Pay, they are not entitled to service incentive leave pay because as piece-rate workers being paid at a
fixed amount for performing work irrespective of time consumed in the performance thereof, they fall
under one of the exceptions stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor
Code. For the same reason private respondents cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).

With respect to the last issue, it is apparent that public respondents have misread the evidence, for it
does show that a violation of the employer's rules has been committed and the evidence of such
transgression, the copied barong tagalog, was in the possession of Pelobello who pointed to Zapata as
the owner. When required by their employer to explain in a memorandum issued to each of them, they
not only failed to do so but instead went on AWOL (absence without official leave), waited for the
period to explain to expire and for petitioner to dismiss them. They thereafter filed an action for illegal
dismissal on the far-fetched ground that they were dismissed because of union activities. Assuming that
such acts do not constitute abandonment of their jobs as insisted by private respondents, their blatant
disregard of their employer's memorandum is undoubtedly an open defiance to the lawful orders of the
latter, a justifiable ground for termination of employment by the employer expressly provided for in
Article 283(a) of the Labor Code as well as a clear indication of guilt for the commission of acts
inimical to the interests of the employer, another justifiable ground for dismissal under the same Article
of the Labor Code, paragraph (c). Well established in our jurisprudence is the right of an employer to
dismiss an employee whose continuance in the service is inimical to the employer's interest. 16

In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted gave
no credence to their version and found their excuses that said barong tagalog was the one they got from
the embroiderer for the Assistant Manager who was investigating them, unbelievable.

Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus, We
have ruled that:

No employer may rationally be expected to continue in employment a person whose lack of morals,
respect and loyalty to his employer, regard for his employer's rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared.

That there should be concern, sympathy, and solicitude for the rights and welfare of the working class,
is meet and proper. That in controversies between a laborer and his master, doubts reasonably arising
from the evidence, or in the interpretation of agreements and writings should be resolved in the
former's favor, is not an unreasonable or unfair rule. But that disregard of the employer's own rights
and interests can be justified by that concern and solicitude is unjust and unacceptable. (Stanford
Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).

The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer. 17 More importantly, while the Constitution is committed to the policy of social justice and
the protection of the working class, it should not be supposed that every labor dispute will
automatically be decided in favor of labor. 18

Finally, it has been established that the right to dismiss or otherwise impose discriplinary sanctions
upon an employee for just and valid cause, pertains in the first place to the employer, as well as the
authority to determine the existence of said cause in accordance with the norms of due process. 19

There is no evidence that the employer violated said norms. On the contrary, private respondents who
vigorously insist on the existence of employer-employee relationship, because of the supervision and
control of their employer over them, were the very ones who exhibited their lack of respect and regard
for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to terminate the
services of private respondents.

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and
that of the Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello
and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of
factual and legal bases. Award of service incentive leave pay to private respondents is deleted.

SO ORDERED.

.
G. R. No. 123938. May 21, 1998

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its members, et al,
petitioners, vs. NLRC,

EMPIRE FOOD PRODUCTS, respondents.

DAVIDE, JR., J.:

In this special civil action for certiorari under Rule 65, petitioners seek to reverse the 29 March 1995
resolution of the National Labor Relations Commission (NLRC) in NLRC RAB III Case No. 01-1964-
91 which affirmed the Decision of Labor Arbiter Ariel C. Santos dismissing their complaint for utter
lack of merit.

The antecedents of this case as summarized by the Office of the Solicitor General in its Manifestation
and Motion in Lieu of Comment, are as follows:

The 99 persons named as petitioners in this proceeding were rank-and-file employees of respondent
Empire Food Products, which hired them on various dates (Paragraph 1, Annex A of Petition, Annex
B; Page 2, Annex F of Petition).

Petitioners filed against private respondents a complaint for payment of money claim[s] and for
violation of labor standard[s] laws (NLRC Case No. RAB-111-10-1817-90). They also filed a petition
for direct certification of petitioner Labor Congress of the Philippines as their bargaining representative
(Case No. R0300-9010-RU-005).

On October 23, 1990, petitioners represented by LCP President Benigno B. Navarro, Sr. and private
respondents Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire Food Products, Inc. entered
into a Memorandum of Agreement which provided, among others, the following:

1. That in connection with the pending Petition for Direct Certification filed by the Labor Congress
with the DOLE, Management of the Empire Food Products has no objection [to] the direct certification
of the LCP Labor Congress and is now recognizing the Labor Congress of the Philippines (LCP) and
its Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and Representative for all rank and
file employees of the Empire Food Products regarding WAGES, HOURS OF WORK, AND OTHER
TERMS AND CONDITIONS OF EMPLOYMENT;
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with the NLRC parties
jointly and mutually agreed that the issues thereof, shall be discussed by the parties and resolve[d]
during the negotiation of the Collective Bargaining Agreement;

3. That Management of the Empire Food Products shall make the proper adjustment of the Employees
Wages within fifteen (15) days from the signing of this Agreement and further agreed to register all the
employees with the SSS;

4. That Employer, Empire Food Products thru its Management agreed to deduct thru payroll deduction
UNION DUES and other Assessment[s] upon submission by the LCP Labor Congress individual
Check-Off Authorization[s] signed by the Union Members indicating the amount to be deducted and
further agreed all deduction[s] made representing Union Dues and Assessment[s] shall be remitted
immediately to the LCP Labor Congress Treasurer or authorized representative within three (3) or five
(5) days upon deductions [sic], Union dues not deducted during the period due, shall be refunded or
reimbursed by the Employer/Management. Employer/Management further agreed to deduct Union dues
from non-union members the same amount deducted from union members without need of individual
Check-Off Authorizations [for] Agency Fee;

5. That in consideration [of] the foregoing covenant, parties jointly and mutually agreed that NLRC
CASE NO. RAB-III-10-1817-90 shall be considered provisionally withdrawn from the Calendar of the
National Labor Relations Commission(NLRC), while the Petition for direct certification of the LCP
Labor Congress parties jointly move for the direct certification of the LCP Labor Congress;

6. That parties jointly and mutually agreed that upon signing of this Agreement, no Harassments [sic],
Threats, Interferences [sic] of their respective rights under the law, no Vengeance or Revenge by each
partner nor any act of ULP which might disrupt the operations of the business;

7. Parties jointly and mutually agreed that pending negotiations or formalization of the propose[d]
CBA, this Memorandum of Agreement shall govern the parties in the exercise of their respective rights
involving the Management of the business and the terms and condition[s] of employment, and
whatever problems and grievances may arise by and between the parties shall be resolved by them, thru
the most cordial and good harmonious relationship by communicating the other party in writing
indicating said grievances before taking any action to another forum or government agencies;

8. That parties [to] this Memorandum of Agreement jointly and mutually agreed to respect, abide and
comply with all the terms and conditions hereof. Further agreed that violation by the parties of any
provision herein shall constitute an act of ULP. (Annex A of Petition).

In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez approved the memorandum of
agreement and certified LCP as the sole and exclusive bargaining agent among the rank-and-file
employees of Empire Food Products for purposes of collective bargaining with respect to wages, hours
of work and other terms and conditions of employment (Annex B of Petition).

On November 9, 1990, petitioners through LCP President Navarro submitted to private respondents a
proposal for collective bargaining (Annex C of Petition).

On January 23, 1991, petitioners filed a complaint docketed as NLRC Case No. RAB-III-01-1964-91
against private respondents for:

a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;

b. Union busting thru Harassments [sic], threats, and interfering with the rights of employees to self-
organization;

c. Violation of the Memorandum of Agreement dated October 23, 1990;

d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board;

e. Actual, Moral and Exemplary Damages. (Annex D of Petition)

After the submission by the parties of their respective position papers and presentation of testimonial
evidence, Labor Arbiter Ariel C. Santos absolved private respondents of the charges of unfair labor
practice, union busting, violation of the memorandum of agreement, underpayment of wages and
denied petitioners prayer for actual, moral and exemplary damages. Labor Arbiter Santos, however,
directed the reinstatement of the individual complainants:

The undersigned Labor Arbiter is not oblivious to the fact that respondents have violated a cardinal rule
in every establishment that a payroll and other papers evidencing hours of work, payments, etc. shall
always be maintained and subjected to inspection and visitation by personnel of the Department of
Labor and Employment. As such penalty, respondents should not escape liability for this technicality,
hence, it is proper that all individual complainants except those who resigned and executed quitclaim[s]
and releases prior to the filing of this complaint should be reinstated to their former position[s] with the
admonition to respondents that any harassment, intimidation, coercion or any form of threat as a result
of this immediately executory reinstatement shall be dealt with accordingly.

SO ORDERED. (Annex G of Petition)

On appeal, the National Labor Relations Commission vacated the Decision dated April 14, 1972 [sic]
and remanded the case to the Labor Arbiter for further proceedings for the following reasons:

The Labor Arbiter, through his decision, noted that xxx complainant did not present any single witness
while respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo,
Evelyn Kehyeng and Elvira Bulagan xxx (p. 183, Records), that xxx complainant before the National
Labor Relations Commission must prove with definiteness and clarity the offense charged. xxx
(Record, p. 183); that xxx complainant failed to specify under what provision of the Labor Code
particularly Art. 248 did respondents violate so as to constitute unfair labor practice xxx (Record, p.
183); that complainants failed to present any witness who may describe in what manner respondents
have committed unfair labor practice xxx (Record, p. 185); that xxx complainant LCP failed to present
anyone of the so-called 99 complainants in order to testify who committed the threats and intimidation
xxx (Record, p. 185).

Upon review of the minutes of the proceedings on record, however, it appears that complainant
presented witnesses, namely, BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8
March 1991, RECORD, p. 92, who adopted its POSITION PAPER AND CONSOLIDATED
AFFIDAVIT, as Exhibit A and the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the
proceedings on record show that complainant further presented other witnesses, namely: ERLINDA
BASILIO (13 March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE
GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May
1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial
Evidence was made by complainant on June 24, 1991 (Record, p. 106-109)

The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which
are now on record. Other individual complainants should have been summoned with the end in view of
receiving their testimonies. The complainants should be afforded the time and opportunity to fully
substantiate their claims against the respondents. Judgment should be rendered only based on the
conflicting positions of the parties. The Labor Arbiter is called upon to consider and pass upon the
issues of fact and law raised by the parties.

Toward this end, therefore, it is Our considered view [that] the case should be remanded to the Labor
Arbiter of origin for further proceedings.(Annex H of Petition)

In a Decision dated July 27, 1994, Labor Arbiter Santos made the following determination:

Complainants failed to present with definiteness and clarity the particular act or acts constitutive of
unfair labor practice.

It is to be borne in mind that a declaration of unfair labor practice connotes a finding of prima facie
evidence of probability that a criminal offense may have been committed so as to warrant the filing of a
criminal information before the regular court. Hence, evidence which is more than a scintilla is
required in order to declare respondents/employers guilty of unfair labor practice. Failing in this regard
is fatal to the cause of complainants. Besides, even the charge of illegal lockout has no leg to stand on
because of the testimony of respondents through their guard Orlando Cairo (TSN, July 31, 1991
hearing; p. 5-35) that on January 21, 1991, complainants refused and failed to report for work, hence
guilty of abandoning their post without permission from respondents. As a result of complainants[]
failure to report for work, the cheese curls ready for repacking were all spoiled to the prejudice of
respondents. Under cross-examination, complainants failed to rebut the authenticity of respondents
witness testimony.

As regards the issue of harassments [sic], threats and interference with the rights of employees to self-
organization which is actually an ingredient of unfair labor practice, complainants failed to specify
what type of threats or intimidation was committed and who committed the same. What are the acts or
utterances constitutive of harassments [sic] being complained of? These are the specifics which should
have been proven with definiteness and clarity by complainants who chose to rely heavily on its
position paper through generalizations to prove their case.

Insofar as violation of [the] Memorandum of Agreement dated October 23, 1990 is concerned, both
parties agreed that:

2 - That with regards [sic] to the NLRC Case No. RAB III-10-1817-90 pending with the NLRC, parties
jointly and mutually agreed that the issues thereof shall be discussed by the parties and resolve[d]
during the negotiation of the CBA.

The aforequoted provision does not speak of [an] obligation on the part of respondents but on a
resolutory condition that may occur or may not happen. This cannot be made the basis of an imposition
of an obligation over which the National Labor Relations Commission has exclusive jurisdiction
thereof.

Anent the charge that there was underpayment of wages, the evidence points to the contrary. The
enumeration of complainants wages in their consolidated Affidavits of merit and position paper which
implies underpayment has no leg to stand on in the light of the fact that complainants admission that
they are piece workers or paid on a pakiao [basis] i.e. a certain amount for every thousand pieces of
cheese curls or other products repacked. The only limitation for piece workers or pakiao workers is that
they should receive compensation no less than the minimum wage for an eight (8) hour work [sic]. And
compliance therewith was satisfactorily explained by respondent Gonzalo Kehyeng in his testimony
(TSN, p. 12-30) during the July 31, 1991 hearing. On cross-examination, complainants failed to rebut
or deny Gonzalo Kehyengs testimony that complainants have been even receiving more than the
minimum wage for an average workers [sic]. Certainly, a lazy worker earns less than the minimum
wage but the same cannot be attributable to respondents but to the lazy workers.

Finally, the claim for moral and exemplary damages has no leg to stand on when no malice, bad faith
or fraud was ever proven to have been perpetuated by respondents.

WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter lack of merit.
(Annex I of Petition).

On appeal, the NLRC, in its Resolution dated 29 March 1995, affirmed in toto the decision of Labor
Arbiter Santos. In so doing, the NLRC sustained the Labor Arbiters findings that: (a) there was a dearth
of evidence to prove the existence of unfair labor practice and union busting on the part of private
respondents; (b) the agreement of 23 October 1990 could not be made the basis of an obligation within
the ambit of the NLRCs jurisdiction, as the provisions thereof, particularly Section 2, spoke of a
resolutory condition which could or could not happen; (c) the claims for underpayment of wages were
without basis as complainants were admittedly pakiao workers and paid on the basis of their output
subject to the lone limitation that the payment conformed to the minimum wage rate for an eight-hour
workday; and (d) petitioners were not underpaid.

Their motion for reconsideration having been denied by the NLRC in its Resolution of 31 October
1995, petitioners filed the instant special civil action for certiorari raising the following issues:

I WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR RELATIONS


COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT DISREGARDED OR
IGNORED NOT ONLY THE EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN DECISIONS AND THAT OF THIS
HONORABLE HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT NOT ONLY TO THE
DEPRIVATION OF PETITIONERS RIGHT TO DUE PROCESS BUT WOULD RESULT [IN]
MANIFEST INJUSTICE.

II WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION


WHEN IT DEPRIVED THE PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELF-
ORGANIZATION, SECURITY OF TENURE, PROTECTION TO LABOR, JUST AND HUMANE
CONDITIONS OF WORK AND DUE PROCESS.

III WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF] OR
CONSTRUCTIVELY DISMISSED FROM THEIR ONLY MEANS OF LIVELIHOOD.

IV WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE DATE OF


THEIR DISMISSAL UP TO THE TIME OF THEIR REINSTATEMENT, WITH BACKWAGES,
STATUTORY BENEFITS, DAMAGES AND ATTORNEYS FEES

We required respondents to file their respective Comments.

In their Manifestation and Comment, private respondents asserted that the petition was filed out of
time. As petitioners admitted in their Notice to File petition for Review on Certiorari that they received
a copy of the resolution (denying their motion for reconsideration) on 13 December 1995, they had
only until 29 December 1995 to file the petition. Having failed to do so, the NLRC thus already entered
judgment in private respondents favor.

In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the notice to file a petition
for review on their behalf, mistook which reglementary period to apply. Instead of using the reasonable
time criterion for certiorari under Rule 65, he used the 15-day period for petitions for review on
certiorari under Rule 45. They hastened to add that such was a mere technicality which should not bar
their petition from being decided on the merits in furtherance of substantial justice, especially
considering that respondents neither denied nor contradicted the facts and issues raised in the petition.

In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General (OSG) sided
with petitioners. It pointed out that the Labor Arbiter, in finding that petitioners abandoned their jobs,
relied solely on the testimony of Security Guard Rolando Cairo that petitioners refused to work on 21
January 1991, resulting in the spoilage of cheese curls ready for repacking. However, the OSG argued,
this refusal to report for work for a single day did not constitute abandonment, which pertains to a
clear, deliberate and unjustified refusal to resume employment, and not mere absence. In fact, the OSG
stressed, two days after allegedly abandoning their work, petitioners filed a complaint for, inter alia,
illegal lockout or illegal dismissal. Finally, the OSG questioned the lack of explanation on the part of
Labor Arbiter Santos as to why he abandoned his original decision to reinstate petitioners.

In view of the stand of the OSG, we resolved to require the NLRC to file its own Comment.

In its Comment, the NLRC invokes the general rule that factual findings of an administrative agency
bind a reviewing court and asserts that this case does not fall under the exceptions. The NLRC further
argues that grave abuse of discretion may not be imputed to it, as it affirmed the factual findings and
legal conclusions of the Labor Arbiter only after carefully reviewing, weighing and evaluating the
evidence in support thereof, as well as the pertinent provisions of law and jurisprudence.

In their Reply, petitioners claim that the decisions of the NLRC and the Labor Arbiter were not
supported by substantial evidence; that abandonment was not proved; and that much credit was given
to self-serving statements of Gonzalo Kehyeng, owner of Empire Foods, as to payment of just wages.

On 7 July 1997, we gave due course to the petition and required the parties to file their respective
memoranda. However, only petitioners and private respondents filed their memoranda, with the NLRC
merely adopting its Comment as its Memorandum.

We find for petitioners.

Invocation of the general rule that factual findings of the NLRC bind this Court is unavailing under the
circumstances. Initially, we are unable to discern any compelling reason justifying the Labor Arbiters
volte face from his 14 April 1992 decision reinstating petitioners to his diametrically opposed 27 July
1994 decision, when in both instances, he had before him substantially the same evidence. Neither do
we find the 29 March 1995 NLRC resolution to have sufficiently discussed the facts so as to comply
with the standard of substantial evidence. For one thing, the NLRC confessed its reluctance to inquire
into the veracity of the Labor Arbiters factual findings, staunchly declaring that it was not about to
substitute [its] judgment on matters that are within the province of the trier of facts. Yet, in the 21 July
1992 NLRC resolution,it chastised the Labor Arbiter for his errors both in judgment and procedure, for
which reason it remanded the records of the case to the Labor Arbiter for compliance with the
pronouncements therein.

What cannot escape from our attention is that the Labor Arbiter did not heed the observations and
pronouncements of the NLRC in its resolution of 21 July 1992, neither did he understand the purpose
of the remand of the records to him. In said resolution, the NLRC summarized the grounds for the
appeal to be:

1. that there is a prima facie evidence of abuse of discretion and acts of gross incompetence committed
by the Labor Arbiter in rendering the decision.

2. that the Labor Arbiter in rendering the decision committed serious errors in the findings of facts.

After which, the NLRC observed and found:


Complainant alleged that the Labor Arbiter disregarded the testimonies of the 99 complainants who
submitted their Consolidated Affidavit of Merit and Position Paper which was adopted as direct
testimonies during the hearing and cross-examined by respondents counsel.

The Labor Arbiter, through his decision, noted that x x x complainant did not present any single
witness while respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando
Cairo, Evelyn Kehyeng and Elvira Bulagan x x x (Records, p. 183), that x x x complainant before the
National Labor Relations Commission must prove with definiteness and clarity the offense charged. x x
x (Record, p. 183; that x x x complainant failed to specify under what provision of the Labor Code
particularly Art. 248 did respondents violate so as to constitute unfair labor practice x x x (Record, p.
183); that complainants failed to present any witness who may describe in what manner respondents
have committed unfair labor practice x x x (Record, p. 185); that x x x complainant a [sic] LCP failed
to present anyone of the so called 99 complainants in order to testify who committed the threats and
intimidation x x x (Record, p. 185).

Upon review of the minutes of the proceedings on record, however, it appears that complainant
presented witnesses, namely BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8
March 1991, RECORD, p. 92), who adopted its POSITION PAPER AND CONSOLIDATED
AFFIDAVIT, as Exhibit A and the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the
proceedings on record show that complainant further presented other witnesses, namely: ERLINDA
BASILIO (13 March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENI
GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May
1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial
Evidence was made by the complainant on June 24, 1991 (Record, p. 106-109).

The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which
are now on record. Other individual complainants should have been summoned with the end in view of
receiving their testimonies. The complainants should [have been] afforded the time and opportunity to
fully substantiate their claims against the respondents. Judgment should [have been] rendered only
based on the conflicting positions of the parties. The Labor Arbiter is called upon to consider and pass
upon the issues of fact and law raised by the parties.

Toward this end, therefore, it is Our considered view the case should be remanded to the Labor Arbiter
of origin for further proceedings.

Further, We take note that the decision does not contain a dispositive portion or fallo. Such being the
case, it may be well said that the decision does not resolve the issues at hand. On another plane, there is
no portion of the decision which could be carried out by way of execution.

It may be argued that the last paragraph of the decision may be categorized as the dispositive portion
thereof:
The undersigned Labor Arbiter is not oblivious [to] the fact that respondents have violated a cardinal
rule in every establishment that a payroll and other papers evidencing hour[s] of work, payment, etc.
shall always be maintained and subjected to inspection and visitation by personnel of the Department
of Labor and Employment. As such penalty, respondents should not escape liability for this
technicality, hence, it is proper that all the individual complainants except those who resigned and
executed quitclaim[s] and release[s] prior to the filing of this complaint should be reinstated to their
former position with the admonition to respondents that any harassment, intimidation, coercion or any
form of threat as a result of this immediately executory reinstatement shall be dealt with accordingly.

SO ORDERED.

It is Our considered view that even assuming arguendo that the respondents failed to maintain their
payroll and other papers evidencing hours of work, payment etc., such circumstance, standing alone,
does not warrant the directive to reinstate complainants to their former positions. It is [a] well settled
rule that there must be a finding of illegal dismissal before reinstatement be mandated.

In this regard, the LABOR ARBITER is hereby directed to include in his clarificatory decision, after
receiving evidence, considering and resolving the same, the requisite dispositive portion.[if

Apparently, the Labor Arbiter perceived that if not for petitioners, he would not have fallen victim to
this stinging rebuke at the hands of the NLRC. Thus does it appear to us that the Labor Arbiter, in
concluding in his 27 July 1994 Decision that petitioners abandoned their work, was moved by, at worst,
spite, or at best, lackadaisically glossed over petitioners evidence. On this score, we find the following
observations of the OSG most persuasive:

In finding that petitioner employees abandoned their work, the Labor Arbiter and the NLRC relied on
the testimony of Security Guard Rolando Cairo that on January 21, 1991, petitioners refused to work.
As a result of their failure to work, the cheese curls ready for repacking on said date were spoiled.

The failure to work for one day, which resulted in the spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the reported abandonment of work or on January 23,
1991, petitioners filed a complaint for, among others, unfair labor practice, illegal lockout and/or illegal
dismissal. In several cases, this Honorable Court held that one could not possibly abandon his work and
shortly thereafter vigorously pursue his complaint for illegal dismissal (De Ysasi III v. NLRC, 231
SCRA 173; Ranara v. NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas
Consolidated Mining and Development Corp. v. NLRC, 190 SCRA 505; Hua Bee Shirt Factory v.
NLRC, 186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570 and Flexo Manufacturing v. NLRC, 135
SCRA 145). In Atlas Consolidated, supra, this Honorable Court explicitly stated:

It would be illogical for Caballo, to abandon his work and then immediately file an action seeking for
his reinstatement. We can not believe that Caballo, who had worked for Atlas for two years and ten
months, would simply walk away from his job unmindful of the consequence of his act, i.e. the
forfeiture of his accrued employment benefits. In opting to finally to [sic] contest the legality of his
dismissal instead of just claiming his separation pay and other benefits, which he actually did but which
proved to be futile after all, ably supports his sincere intention to return to work, thus negating Atlas
stand that he had abandoned his job.

In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the clear, deliberate and
unjustified refusal to resume employment and not mere absence that constitutes abandonment. The
absence of petitioner employees for one day on January 21, 1991 as testified [to] by Security Guard
Orlando Cairo did not constitute abandonment.

In his first decision, Labor Arbiter Santos expressly directed the reinstatement of the petitioner
employees and admonished the private respondents that any harassment, intimidation, coercion or any
form of threat as a result of this immediately executory reinstatement shall be dealt with accordingly.

In his second decision, Labor Arbiter Santos did not state why he was abandoning his previous decision
directing the reinstatement of petitioner employees.

By directing in his first decision the reinstatement of petitioner employees, the Labor Arbiter impliedly
held that they did not abandon their work but were not allowed to work without just cause.

That petitioner employees are pakyao or piece workers does not imply that they are not regular
employees entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit
processing company. In Tabas v. California Manufacturing Co., Inc. (169 SCRA 497), this Honorable
Court held that the work of merchandisers of processed food, who coordinate with grocery stores and
other outlets for the sale of the processed food is necessary in the day-to-day operation[s] of the
company. With more reason, the work of processed food repackers is necessary in the day-to-day
operation[s] of respondent Empire Food Products

It may likewise be stressed that the burden of proving the existence of just cause for dismissing an
employee, such as abandonment, rests on the employer, a burden private respondents failed to
discharge.

Private respondents, moreover, in considering petitioners employment to have been terminated by


abandonment, violated their rights to security of tenure and constitutional right to due process in not
even serving them with a written notice of such termination Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code provides:

SEC. 2. Notice of Dismissal. - Any employer who seeks to dismiss a worker shall furnish him a written
notice stating the particular acts or omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the workers last known address.

Petitioners are therefore entitled to reinstatement with full back wages pursuant to Article 279 of the
Labor Code, as amended by R.A. No. 6715. Nevertheless, the records disclose that taking into account
the number of employees involved, the length of time that has lapsed since their dismissal, and the
perceptible resentment and enmity between petitioners and private respondents which necessarily
strained their relationship, reinstatement would be impractical and hardly promotive of the best
interests of the parties. In lieu of reinstatement then, separation pay at the rate of one month for every
year of service, with a fraction of at least six (6) months of service considered as one (1) year, is in
order.

That being said, the amount of back wages to which each petitioner is entitled, however, cannot be
fully settled at this time. Petitioners, as piece-rate workers having been paid by the piece, there is need
to determine the varying degrees of production and days worked by each worker. Clearly, this issue is
best left to the National Labor Relations Commission.

As to the other benefits, namely, holiday pay, premium pay, 13th month pay and service incentive leave
which the labor arbiter failed to rule on but which petitioners prayed for in their complaint, we hold
that petitioners are so entitled to these benefits. Three (3) factors lead us to conclude that petitioners,
although piece-rate workers, were regular employees of private respondents. First, as to the nature of
petitioners tasks, their job of repacking snack food was necessary or desirable in the usual business of
private respondents, who were engaged in the manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year, their employment not having been
dependent on a specific project or season; and third, the length of time that petitioners worked for
private respondents. Thus, while petitioners mode of compensation was on a per piece basis, the status
and nature of their employment was that of regular employees.

The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as
nighttime pay, holiday pay, service incentive leave and 13th month pay,inter alia, field personnel and
other employees whose time and performance is unsupervised by the employer, including those who
are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance thereof. Plainly, petitioners
as piece-rate workers do not fall within this group. As mentioned earlier, not only did petitioners labor
under the control of private respondents as their employer, likewise did petitioners toil throughout the
year with the fulfillment of their quota as supposed basis for compensation. Further, in Section 8 (b),
Rule IV, Book III which we quote hereunder, piece workers are specifically mentioned as being
entitled to holiday pay.

SEC. 8. Holiday pay of certain employees.-

(b) Where a covered employee is paid by results or output, such as payment on piece work, his holiday
pay shall not be less than his average daily earnings for the last seven (7) actual working days
preceding the regular holiday: Provided, however, that in no case shall the holiday pay be less than the
applicable statutory minimum wage rate.

In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the
modifications to P.D. No. 851 by Memorandum Order No. 28, clearly exclude the employer of piece
rate workers from those exempted from paying 13th month pay, to wit:

2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:

d. Employers of those who are paid on purely commission, boundary or task basis, and those who are
paid a fixed amount for performing specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the employer
shall grant the required 13th month pay to such workers. (italics supplied)

The Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the
piece-rate category as those who are paid a standard amount for every piece or unit of work produced
that is more or less regularly replicated, without regard to the time spent in producing the same.

As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results including those who are paid on piece-work,
takay, pakiao, or task basis, if their output rates are in accordance with the standards prescribed under
Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been fixed by the Secretary of
Labor in accordance with the aforesaid section, are not entitled to receive overtime pay. Here, private
respondents did not allege adherence to the standards set forth in Sec. 8 nor with the rates prescribed by
the Secretary of Labor. As such, petitioners are beyond the ambit of exempted persons and are
therefore entitled to overtime pay. Once more, the National Labor Relations Commission would be in a
better position to determine the exact amounts owed petitioners, if any.

As to the claim that private respondents violated petitioners right to self-organization, the evidence on
record does not support this claim. Petitioners relied almost entirely on documentary evidence which,
per se, did not prove any wrongdoing on private respondents part. For example, petitioners presented
their complaint to prove the violation of labor laws committed by private respondents. The complaint,
however, is merely the pleading alleging the plaintiffs cause or causes of action. Its contents are merely
allegations, the verity of which shall have to be proved during the trial. They likewise offered their
Consolidated Affidavit of Merit and Position Paper which, like the offer of their Complaint, was a
tautological exercise, and did not help nor prove their cause. In like manner, the petition for
certification election and the subsequent order of certification merely proved that petitioners sought and
acquired the status of bargaining agent for all rank-and-file employees. Finally, the existence of the
memorandum of agreement offered to substantiate private respondents non-compliance therewith, did
not prove either compliance or non-compliance, absent evidence of concrete, overt acts in
contravention of the provisions of the memorandum.

IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the National Labor
Relations Commission of 29 March 1995 and the Decision of the Labor Arbiter of 27 July 1994 in
NLRC Case No. RAB-III-01-1964-91 are hereby SET ASIDE, and another is hereby rendered:

1. DECLARING petitioners to have been illegally dismissed by private respondents, thus entitled to
full back wages and other privileges, and separation pay in lieu of reinstatement at the rate of one
months salary for every year of service with a fraction of six months of service considered as one year;

2. REMANDING the records of this case to the National Labor Relations Commission for its
determination of the back wages and other benefits and separation pay, taking into account the
foregoing observations; and

3. DIRECTING the National Labor Relations Commission to resolve the referred issues within sixty
(60) days from its receipt of a copy of this decision and of the records of the case and to submit to this
Court a report of its compliance hereof within ten (10) days from the rendition of its resolution. Costs
against private respondents. SO ORDERED.

G.R. No. 145561. June 15, 2005

HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA


HONDA, respondent.

This petition for review under Rule 45 seeks the reversal of the Court of Appeals decision [1] dated
September 14, 2000[2] and its resolution[3] dated October 18, 2000, in CA-G.R. SP No. 59052. The
appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who
ruled that petitioner Honda Philippines, Inc.s (Honda) pro-rated payment of the 13th and 14th month pay
and financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA)
forged between petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda
(respondent union) which contained the following provisions:

Section 3. 13th Month Pay


The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th
Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial
assistance to covered employees in December of each year, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for
the fourth and fifth years of their CBA. When the talks between the parties bogged down, respondent
union filed a Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice
of Lockout. On March 31, 1999, then Department of Labor and Employment (DOLE) Secretary
Laguesma assumed jurisdiction over the labor dispute and ordered the parties to cease and desist from
committing acts that would aggravate the situation. Both parties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair
labor practice alleging that Honda illegally contracted out work to the detriment of the workers.
Respondent union went on strike and picketed the premises of Honda on May 19, 1999. On June 16,
1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certified the
same to the National Labor Relations Commission (NLRC) for compulsory arbitration. The striking
employees were ordered to return to work and the management accepted them back under the same
terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum[4] announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-one
(31)-day long strike shall be considered unworked days for purposes of computing said benefits. As per
the companys new formula, the amount equivalent to 1/12 of the employees basic salary shall be
deducted from these bonuses, with a commitment however that in the event that the strike is declared
legal, Honda shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letter dated November 25,
1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In a letter
dated January 4, 2000,[5] the BWC agreed with the pro-rata payment of the 13th month pay as proposed
by Honda.

The matter was brought before the Grievance Machinery in accordance with the parties existing CBA
but when the issue remained unresolved, it was submitted for voluntary arbitration. In his decision [6]
dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Hondas computation, to
wit:

WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby
ruled that the Companys implementation of pro-rated 13th Month pay, 14th Month pay and Financial
Assistance [is] invalid. The Company is thus ordered to compute each provision in full month basic pay
and pay the amounts in question within ten (10) days after this Decision shall have become final and
executory.

The three (3) days Suspension of the twenty one (21) employees is hereby affirmed. SO ORDERED

Hondas Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a
petition was filed with the Court of Appeals, however, the petition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the 13th
month pay and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.[8] As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy.[9] Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.[10]

In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda
wanted to implement a pro-rated computation of the benefits based on the no work, no pay rule.
According to the company, the phrase present practice as mentioned in the CBA refers to the manner
and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and the other
50% in December of each year. Respondent union, however, insists that the CBA provisions relating to
the implementation of the 13th month pay necessarily relate to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions are far from being
unequivocal. A cursory reading of the provisions will show that they did not state categorically whether
the computation of the 13th month pay, 14th month pay and the financial assistance would be based on
one full months basic salary of the employees, or pro-rated based on the compensation actually
received. The arbitrator thus properly resolved the ambiguity in favor of labor as mandated by Article
1702 of the Civil Code.[11] The Court of Appeals affirmed the arbitrators finding and added that the
computation of the 13th month pay should be based on the length of service and not on the actual wage
earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind us when supported by substantial evidence. It is
not our function to assess and evaluate the evidence all over again, particularly where the findings of
both the arbiter and the Court of Appeals coincide.[12]

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all
employers to pay their employees a 13th month pay, was issued to protect the level of real wages from
the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted that there
had been no increase in the minimum wage since 1970 and the Christmas season was an opportune
time for society to show its concern for the plight of the working masses so that they may properly
celebrate Christmas and New Year.[13]

Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16,
1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided 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. The guidelines pertinently provides:

The basic salary of an employee for the purpose of computing the 13th month pay shall include all
remunerations or earnings paid by his employer for services rendered but does not include allowances
and monetary benefits which are not considered or 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.[14] (Emphasis supplied)

For employees receiving regular wage, we have interpreted basic salary to mean, not the amount
actually received by an employee, but 1/12 of their standard monthly wage multiplied by their length of
service within a given calendar year. Thus, we exclude from the computation of basic salary payments
for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums for work
done on rest days and special holidays.[15] In Hagonoy Rural Bank v. NLRC,[16] St. Michael Academy v.
NLRC,[17] Consolidated Food Corporation v. NLRC,[18] and similar cases, the 13th month pay due an
employee was computed based on the employees basic monthly wage multiplied by the number of
months worked in a calendar year prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or
separation from work. As the rules state, under these circumstances, an employee is entitled to a pay in
proportion to the length of time he worked during the year, reckoned from the time he started working
during the calendar year.[19] The Court of Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker. In the present case, there being no gap in the
service of the workers during the calendar year in question, the computation of the 13th month pay
should not be pro-rated but should be given in full.[20] (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13th
month pay before the instant case. Honda did not adduce evidence to show that the 13th month, 14th
month and financial assistance benefits were previously subject to deductions or pro-rating or that these
were dependent upon the companys financial standing. As held by the Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a
pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in
1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that
prior to the strike, a full month basic pay computation was the present practice intended to be
maintained in the CBA.

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-
rating scheme was to be implemented in the company. It was a convenient coincidence for the
company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one
month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount for
computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice at Honda is further
bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that when
they were absent from work due to motorcycle accidents, and after they have exhausted all their leave
credits and were no longer receiving their monthly salary from Honda, they still received the full
amount of their 13th month, 14th month and financial assistance pay.[22]

The case of Davao Fruits Corporation v. Associated Labor Unions, et al.[23] presented an example of a
voluntary act of the employer that has ripened into a company practice. In that case, the employer, from
1975 to 1981, freely and continuously included in the computation of the 13th month pay those items
that were expressly excluded by the law. We have held that this act, which was favorable to the
employees though not conforming to law, has ripened into a practice and therefore can no longer be
withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading Company
v. Semana,[24] we stated:

With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above
quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted for
six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer,
for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of
the sick leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the
employer carried on the practice of giving a fixed monthly emergency allowance from November 1976
to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the
grant of these benefits has ripened into company practice or policy which cannot be peremptorily
withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic
benefits such as paid leaves for unused sick leave and vacation leave in the computation of their 13 th-
month pay for at least two (2) years. This, we rule likewise constitutes voluntary employer practice
which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code.

Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying
principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help
them cope with the exorbitant increases in the cost of living. To allow the pro-ration of the 13th month
pay in this case is to undermine the wisdom behind the law and the mandate that the workingmans
welfare should be the primordial and paramount consideration.[26] What is more, the factual milieu of
this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers
from the free exercise of their constitutional rights to self-organization and to strike in accordance with
law.

WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of
Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052,
affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in
toto. SO ORDERED.
G.R. No. 151966 July 8, 2005

JPL MARKETING PROMOTIONS, Petitioner,


vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES,
RAMON ABESA III and FAUSTINO ANINIPOT, Respondents.

Tinga, J.:

This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 62631 dated
03 October 2001 and its Resolution2 dated 25 January 2002 denying petitioner’s Motion for
Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC),
Second Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13th
month pay to private respondents.

JPL Marketing and Promotions (hereinafter referred to as "JPL") is a domestic corporation engaged in
the business of recruitment and placement of workers. On the other hand, private respondents Noel
Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on
separate dates and assigned at different establishments in Naga City and Daet, Camarines Norte as
attendants to the display of California Marketing Corporation (CMC), one of petitioner’s clients.

On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising
activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996.3 They were
advised to wait for further notice as they would be transferred to other clients. However, on 17 October
1996,4 private respondents Abesa and Gonzales filed before the National Labor Relations Commission
Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation
pay, 13th month pay, service incentive leave pay and payment for moral damages.5 Aninipot filed a
similar case thereafter.

After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings,
the complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L.
Rivera, Jr. dismissed the complaints for lack of merit.6 The Labor Arbiter found that Gonzales and
Abesa applied with and were employed by the store where they were originally assigned by JPL even
before the lapse of the six (6)-month period given by law to JPL to provide private respondents a new
assignment. Thus, they may be considered to have unilaterally severed their relation with JPL, and
cannot charge JPL with illegal dismissal.7 The Labor Arbiter held that it was incumbent upon private
respondents to wait until they were reassigned by JPL, and if after six months they were not reassigned,
they can file an action for separation pay but not for illegal dismissal.8 The claims for 13th month pay
and service incentive leave pay was also denied since private respondents were paid way above the
applicable minimum wage during their employment.9

Private respondents appealed to the NLRC. In its Resolution,10 the Second Division of the NLRC
agreed with the Labor Arbiter’s finding that when private respondents filed their complaints, the six-
month period had not yet expired, and that CMC’s decision to stop its operations in the areas was
beyond the control of JPL, thus, they were not illegally dismissed. However, it found that despite JPL’s
effort to look for clients to which private respondents may be reassigned it was unable to do so, and
hence they are entitled to separation pay.11 Setting aside the Labor Arbiter’s decision, the NLRC
ordered the payment of:

1. Separation pay, based on their last salary rate and counted from the first day of their employment
with the respondent JPL up to the finality of this judgment;

2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.12

Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals, imputing grave abuse of discretion on the part of the NLRC. It claimed that private
respondents are not by law entitled to separation pay, service incentive leave pay and 13th month pay.

The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While
conceding that there was no illegal dismissal, it justified the award of separation pay on the grounds of
equity and social justice.13 The Court of Appeals rejected JPL’s argument that the difference in the
amounts of private respondents’ salaries and the minimum wage in the region should be considered as
payment for their service incentive leave and 13th month pay.14 Notwithstanding the absence of a
contractual agreement on the grant of 13th month pay, compliance with the same is mandatory under
the law. Moreover, JPL failed to show that it was exempt from paying service incentive leave pay. JPL
filed a motion for reconsideration of the said resolution, but the same was denied on 25 January 2002.15

In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.16 The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of labor-saving devices, redundancy,
retrenchment or closing or cessation of business operation,17 or disease of an employee whose
continued employment is prejudicial to him or co-employees,18 or illegal dismissal of an employee but
reinstatement is no longer feasible.19 Meanwhile, an employee who voluntarily resigns is not entitled to
separation unless stipulated in the employment contract, or the collective bargaining agreement, or is
sanctioned by established practice or policy of the employer.20 It argues that private respondents’ good
record and length of service, as well as the social justice precept, are not enough to warrant the award
of separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years, while
Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period could
not have shown their worth to JPL so as to reward them with payment of separation pay.21

In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the
computation thereof should only be from their first day of employment with JPL up to 15 August 1996,
the date of termination of CMC’s contract, and not up to the finality of the 27 July 2000 resolution of
the NLRC.22 To compute separation pay, 13th month pay, and service incentive leave pay up to 27 July
2000 would negate the findings of both the Court of Appeals and the NLRC that private respondents
were not unlawfully terminated.23 Additionally, it would be erroneous to compute service incentive
leave pay from the first day of their employment up to the finality of the NLRC resolution since an
employee has to render at least one (1) year of service before he is entitled to the same. Thus, service
incentive leave pay should be counted from the second year of service.24

On the other hand, private respondents maintain that they are entitled to the benefits being claimed as
per the ruling of this Court in Serrano v. NLRC, et al.25 They claim that their dismissal, while not
illegal, was tainted with bad faith.26 They allege that they were deprived of due process because the
notice of termination was sent to them only two (2) days before the actual termination.27 Likewise, the
most that JPL offered to them by way of settlement was the payment of separation pay of seven (7)
days for every year of service.28

Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them was a notice
of actual termination. The said memo merely notified them of the end of merchandising for CMC, and
that they will be transferred to other clients.29 Moreover, JPL is not bound to observe the thirty (30)-
day notice rule as there was no dismissal to speak of. JPL counters that it was private respondents who
acted in bad faith when they sought employment with another establishment, without even the courtesy
of informing JPL that they were leaving for good, much less tender their resignation.30 In addition, the
offer of seven (7) days per year of service as separation pay was merely an act of magnanimity on its
part, even if private respondents are not entitled to a single centavo of separation pay.31

The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so entitled,
what should be the reckoning point for computing said awards.

Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals
due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment;
(d) cessation of the employer's business; and (e) when the employee is suffering from a disease and his
continued employment is prohibited by law or is prejudicial to his health and to the health of his co-
employees. However, separation pay shall be allowed as a measure of social justice in those cases
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on
his moral character, but only when he was illegally dismissed.32 In addition, Sec. 4(b), Rule I, Book VI
of the Implementing Rules to Implement the Labor Code provides for the payment of separation pay to
an employee entitled to reinstatement but the establishment where he is to be reinstated has closed or
has ceased operations or his present position no longer exists at the time of reinstatement for reasons
not attributable to the employer.
The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer.33 In the instant case, there was no dismissal to speak of.
Private respondents were simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo informing them of the
termination of CMC’s contract with JPL. More importantly, they were advised that they were to be
reassigned. At that time, there was no severance of employment to speak of.

Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business
or undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed
on the so-called "floating status." When that "floating status" of an employee lasts for more than six
months, he may be considered to have been illegally dismissed from the service. Thus, he is entitled to
the corresponding benefits for his separation, and this would apply to suspension either of the entire
business or of a specific component thereof.34

As clearly borne out by the records of this case, private respondents sought employment from other
establishments even before the expiration of the six (6)-month period provided by law. As they
admitted in their comment, all three of them applied for and were employed by another establishment
after they received the notice from JPL.35 JPL did not terminate their employment; they themselves
severed their relations with JPL. Thus, they are not entitled to separation pay.

The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases36 wherein the Court awarded separation pay to legally
dismissed employees on the grounds of equity and social consideration. Said cases involved employees
who were actually dismissed by their employers, whether for cause or not. Clearly, the principle
applies only when the employee is dismissed by the employer, which is not the case in this instance. In
seeking and obtaining employment elsewhere, private respondents effectively terminated their
employment with JPL.

In addition, the doctrine enunciated in the case of Serrano37 cited by private respondents has already
been abandoned by our ruling in Agabon v. National Labor Relations Commission.38 There we ruled
that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee if,
in effecting such dismissal, the employer failed to comply with the requirements of due process.
However, private respondents are not entitled to the payment of damages considering that there was no
violation of due process in this case. JPL’s memo dated 13 August 1996 to private respondents is not a
notice of termination, but a mere note informing private respondents of the termination of CMC’s
contract and their re-assignment to other clients. The thirty (30)-day notice rule does not apply.

Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to
private respondents. Said benefits are mandated by law and should be given to employees as a matter
of right.

Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a
13th month pay not later than 24 December of every year. However, employers not paying their
employees a 13th month pay or its equivalent are not covered by said law.39 The term "its equivalent"
was defined by the law’s implementing guidelines as including Christmas bonus, mid-year bonus, cash
bonuses and other payment amounting to not less than 1/12 of the basic salary but shall not include
cash and stock dividends, cost-of-living-allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.40

On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of
service. Unless specifically excepted, all establishments are required to grant service incentive leave to
their employees. The term "at least one year of service" shall mean service within twelve (12) months,
whether continuous or broken reckoned from the date the employee started working.41 The Court has
held in several instances that "service incentive leave is clearly demandable after one year of service."42

Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above
the minimum wage. The Court rules that the difference between the minimum wage and the actual
salary received by private respondents cannot be deemed as their 13th month pay and service incentive
leave pay as such difference is not equivalent to or of the same import as the said benefits contemplated
by law. Thus, as properly held by the Court of Appeals and by the NLRC, private respondents are
entitled to the 13th month pay and service incentive leave pay.

However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay and service
incentive leave pay should be computed from the start of employment up to the finality of the NLRC
resolution. While computation for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after commencement of service, for it
is only then that the employee is entitled to said benefit. On the other hand, the computation for both
benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL.
To extend the period to the date of finality of the NLRC resolution would negate the absence of illegal
dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair to
require JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not
render any service to JPL beyond that date. These benefits are given by law on the basis of the service
actually rendered by the employee, and in the particular case of the service incentive leave, is granted
as a motivation for the employee to stay longer with the employer. There is no cause for granting said
incentive to one who has already terminated his relationship with the employer.

The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of
the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is
but recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to
be denied to none).43
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted.
Petitioner is ordered to pay private respondents their 13th month pay commencing from the date of
employment up to 15 August 1996, as well as service incentive leave pay from the second year of
employment up to 15 August 1996. No pronouncement as to costs. SO ORDERED.

G.R. No. 154410

HEAVYLIFT MANILA, INC. and/or JOSEPHINE EVANGELIO, Administrative & Finance


Manager, AND CAPT. ROLANDO* TOLENTINO Petitioners, vs. CA,

MA. DOTTIE GALAY and the NATIONAL LABOR RELATIONS COMMISSION, Respondents.

Before us is a petition for certiorari assailing the Resolution[1] dated December 18, 2001 of the Court
of Appeals in CA-G.R. SP No. 68072 denying the petition for failure to comply with procedural rules,
as well as the Decision[2] dated August 30, 2001 and the Resolution[3] dated September 28, 2001 of the
National Labor Relations Commission (NLRC) which affirmed the Labor Arbiters decision finding
petitioners guilty of illegal dismissal.

The factual antecedents of the case are as follows:

On February 23, 1999, petitioner Heavylift, a maritime agency, thru a letter signed by petitioner
Josephine Evangelio, Administrative and Finance Manager of Heavylift, informed respondent Ma.
Dottie Galay, Heavylift Insurance and Provisions Assistant, of her low performance rating and the
negative feedback from her team members regarding her work attitude. The letter also notified her that
she was being relieved of her other functions except the development of the new Access program.

Subsequently, on August 16, 1999, Galay was terminated for alleged loss of confidence. Thereafter,
she filed with the Labor Arbiter a complaint for illegal dismissal and nonpayment of service incentive
leave and 13th month pay against petitioners.

Before the labor arbiter, petitioners alleged that Galay had an attitude problem and did not get along
with her co-employees for which she was constantly warned to improve. Petitioners aver that Galays
attitude resulted to the decline in the companys efficiency and productivity. Petitioners presented a
letter[4] dated February 23, 1999 and a notice of termination[5] dated August 16, 1999.

The Labor Arbiter found that Galay was illegally terminated for petitioners failure to prove that she
violated any company regulation, and for failure to give the proper notice as required by law.[6]

Petitioner appealed to the NLRC. The latter, however, denied the appeal for lack of merit and affirmed
the decision of the Labor Arbiter.[7] A motion for reconsideration was subsequently filed but which was
likewise denied.[8]
Petitioner elevated the case by certiorari to the Court of Appeals. But, petitioners failed to: state the
full names and actual addresses of all the petitioners; attach the copies of all pleadings and supporting
documents; properly verify the petition; and certify against forum-shopping. For these procedural
lapses, the petition was dismissed.[9] Petitioners moved for reconsideration and attached a board
resolution authorizing petitioner Tolentino to legally represent the company. Nonetheless, the Court of
Appeals denied the motion for lack of justifying circumstances, and because the attached board
resolution was issued after the petition was filed.[10]

Hence, the instant petition for certiorari alleging that

I. The Honorable Court of Appeals grossly erred in relying too much on form rather than on the merits
of the petition thereby denying petitioners of right to due process.

II. The NLRC acted in a whimsical, arbitrary and despotic manner with grave abuse of discretion when
it ruled that:

a. Petitioners failed to submit substantial evidence that will prove petitioners had withdrawn their trust
and confidence upon the respondent notwithstanding the admitted strained and irreconcilable
relationship between respondent Galay and petitioners.

b. The cause for terminating the employment of respondent by the petitioner appears foreign to the
causes of terminating an employment either under loss of trust and confidence or under analogous
causes.

c. The NLRC acted in a despotic manner when it ruled that complainant is entitled to service incentive
pay and 13th month pay in the absence of any claim, prayer or evidence.

III. It is a grave abuse of discretion on the part of the NLRC when it made it to appear that the right of
worker for security of tenure is absolute.[11]

Simply, the issues are (1) Were the petitioners denied due process with the Court of Appeals dismissal
of the petition on technical grounds? (2) Is attitude problem a valid ground for the termination of an
employee? (3) If in the affirmative, was this sufficiently proved? (4) Were the procedural requirements
for an effectual dismissal present? and (5) Were the awards of service incentive pay and 13th month pay
proper?

Anent the first issue, petitioners posit that instead of denying outright their petition on technicalities,
the Court of Appeals should have given it due course. Petitioners explain that only the name and
address of petitioner Heavylift were stated in the petition because it was the real party in interest, while
the rest were mere nominal parties. They also reasoned that it was not necessary to attach the pleadings
submitted to the Labor Arbiter as the arguments asserted therein were sufficiently tackled and
reiterated in the petition. Lastly, petitioners submit that petitioner Tolentino was authorized by the
Board of Directors as the legal representative of the agency and its officers.

Respondent counters that strict adherence to the rules of procedure is required to promote efficiency
and orderliness. It adds that petitioners did not present any persuasive reason for a liberal application of
the Rules.

The Rules of Court require that the petition for certiorari shall be verified,[12] contain the full names
and actual addresses of all the petitioners and respondents, accompanied by a certified true copy of the
subject decision, order or resolution and other documents relevant or pertinent thereto, and be
submitted with the certification of non-forum shopping signed by the principal.[13]

We likewise have enunciated that the Rules of Court are designed for the proper and prompt
disposition of cases. In not a few instances, we relaxed the rigid application of the rules to afford the
parties opportunity to fully ventilate their cases on the merits. In that way, the ends of justice would be
better served.[14]

Additionally, verification of a pleading is a formal, not a jurisdictional requisite. It is intended to secure


an assurance that what are alleged in the pleading are true and correct and not the product of the
imagination or a matter of speculation, and that the pleading is filed in good faith.[15]

The rule on certification against forum-shopping requires strict compliance. The requirement
underscores its mandatory nature such that it cannot be altogether dispensed with. However, under
justifiable circumstances, the Court does allow substantial compliance.[16]

Further, we accept petitioners inadvertence to state the names and addresses of the other petitioners as a
minor defect. We also accept their explanation on their failure to incorporate the Labor Arbiters
decision.

Thus, mindful that the greater interest of justice would be served if the petition is adjudicated on its
merits,[17] we will proceed with the remaining issues, and discuss them jointly.

Was there just cause in the termination of Galay?

Petitioners assert that it terminated Galay because she had an attitude problem. This situation,
according to petitioners, is analogous to loss of trust and confidence. They aver that respondent did not
deny the strained and irreconcilable relationship between them, in effect, admitting the same. Further,
petitioners aver that having lost their trust and confidence on Galay, they could no longer make her in-
charge of the confidential Crew Information System which accounts for the personnel, management
and professional records of all the employees of and seamen connected with the company. Lastly,
petitioners maintain that because of Galays attitude, the companys work atmosphere had become very
strained and had gravely affected the workers and their outputs. Galays dismissal, according to
petitioners, was merely an act of self-preservation.

Petitioners explained that they sent Galay a letter of notice dated February 23, 1999, apprising her of
her low performance and her attitude problem, before the letter of her termination dated August 16,
1999. Petitioners claim that the company waited for six months, to give Galay a chance to undergo
counseling before dismissing her from the service.
Galay counters that petitioners failed to show a just and valid cause for her termination, and that letters
of notice and termination did not comply with the twin requirem

ent of notice and hearing. Galay argues that the letter dated February 23, 1999 neither informed her of
her infraction of any company rule that warrants disciplinary action; nor required her to submit an
explanation.

An employee who cannot get along with his co-employees is detrimental to the company for he can
upset and strain the working environment. Without the necessary teamwork and synergy, the
organization cannot function well. Thus, management has the prerogative to take the necessary action
to correct the situation and protect its organization. When personal differences between employees and
management affect the work environment, the peace of the company is affected. Thus, an employees
attitude problem is a valid ground for his termination.[18] It is a situation analogous to loss of trust and
confidence that must be duly proved by the employer. Similarly, compliance with the twin requirement
of notice and hearing must also be proven by the employer.

However, we are not convinced that in the present case, petitioners have shown sufficiently clear and
convincing evidence to justify Galays termination. Though they are correct in saying that in this case,
proof beyond reasonable doubt is not required, still there must be substantial evidence to support the
termination on the ground of attitude.[19] The mere mention of negative feedback from her team
members, and the letter dated February 23, 1999, are not proof of her attitude problem. Likewise, her
failure to refute petitioners allegations of her negative attitude does not amount to admission. Technical
rules of procedure are not binding in labor cases.[20] Besides, the burden of proof is not on the employee
but on the employer who must affirmatively show adequate evidence that the dismissal was for
justifiable cause.[21]

In our view, neither does the February 23, 1999 letter constitute the required notice. The letter did not
inform her of the specific acts complained of and their corresponding penalty. The law requires the
employer to give the worker to be dismissed two written notices before terminating his employment,
namely, (1) a notice which apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the subsequent notice which informs the employee of the employers
decision to dismiss him.[22] Additionally, the letter never gave respondent Galay an opportunity to
explain herself, hence denying her due process.

In sum, we find that Galay was illegally dismissed, because petitioners failed to show adequately that a
valid cause for terminating respondent exists, and because petitioners failed to comply with the twin
requirement of notice and hearing.

Apropos the award of service incentive pay and 13th month pay, we find that they were properly prayed
for by Galay. These were subsumed in the complaint and under the position papers general prayer of
such other relief as are just and equitable under the law. Petitioners failed to present evidence that these
benefits were already paid. Moreover, this issue involves a question of fact which is not proper in a
petition for certiorari and the determinations of the Labor Arbiter and the NLRC are afforded great
weight and respect by the courts on these matters, when these findings are supported by substantial
evidence, and devoid of any unfairness or arbitrariness. [23] Hence, their findings must be sustained.

WHEREFORE, the Decision dated September 16, 2000 of the Labor Arbiter in NLRC NCR Case No.
00-08-08461-99 as well as Decision dated August 30, 2001 and the Resolution dated September 28,
2001 of the National Labor Relations Commission in NLRC NCR CA No. 026466-2000 are hereby
AFFIRMED. Costs against petitioners. SO ORDERED.

G.R. No. 96169 September 24, 1991

EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner, vs.

NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE


WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION CONGRESS OF THE
PHILIPPINES, respondents.

The petition is given due course and the various pleadings submitted being sufficient to aid the Court in
the proper resolution of the basic issues raised in this case, we decide it without further ado.

The Employers Confederation of the Philippines (ECOP) is questioning the validity of Wage Order No.
NCR-01-A dated October 23, 1990 of the Regional Tripartite Wages and Productivity Board, National
Capital Region, promulgated pursuant to the authority of Republic Act No. 6727, "AN ACT TO
RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE MECHANISM
AND PROPER STANDARDS THEREFORE, AMENDING FOR THE PURPOSE ARTICLE 99 OF,
AND INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126, AND 127 INTO,
PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE KNOWN AS THE LABOR
CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE INCENTIVES
FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES," was
approved by the President on June 9, 1989. Aside from providing new wage rates,1 the "Wage
Rationalization Act" also provides, among other things, for various Regional Tripartite Wages and
Productivity Boards in charge of prescribing minimum wage rates for all workers in the various
regions2 and for a National Wages and Productivity Commission to review, among other functions,
wage levels determined by the boards.3

On October 15, 1990, the Regional Board of the National Capital Region issued Wage Order No. NCR-
01, increasing the minimum wage by P17.00 daily in the National Capital Region.4 The Trade Union
Congress of the Philippines (TUCP) moved for reconsideration; so did the Personnel Management
Association of the Philippines (PMAP).5 ECOP opposed.

On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending Wage Order No. NCR-
01, as follows:

Section 1. Upon the effectivity of this Wage Order, all workers and employees in the private sector in
the National Capital Region already receiving wages above the statutory minimum wage rates up to
one hundred and twenty-five pesos (P125.00) per day shall also receive an increase of seventeen pesos
(P17.00) per day.

ECOP appealed to the National Wages and Productivity Commission. On November 6, 1990, the
Commission promulgated an Order, dismissing the appeal for lack of merit. On November 14, 1990,
the Commission denied reconsideration.

The Orders of the Commission (as well as Wage Order No. NCR-01-A) are the subject of this petition,
in which. ECOP assails the board's grant of an "across-the-board" wage increase to workers already
being paid more than existing minimum wage rates (up to P125. 00 a day) as an alleged excess of
authority, and alleges that under the Republic Act No. 6727, the boards may only prescribe "minimum
wages," not determine "salary ceilings." ECOP likewise claims that Republic Act No. 6727 is meant to
promote collective bargaining as the primary mode of settling wages, and in its opinion, the boards can
not preempt collective bargaining agreements by establishing ceilings. ECOP prays for the nullification
of Wage Order No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.

The Court directed the Solicitor General to comment on behalf of the Government, and in the Solicitor
General's opinion, the Board, in prescribing an across-the-board hike did not, in reality, "grant
additional or other benefits to workers and employees, such as the extension of wage increases to
employees and workers already receiving more than minimum wages ..."6 but rather, fixed minimum
wages according to the "salary-ceiling method."

ECOP insists, in its reply, that wage is a legislative function, and Republic Act No. 6727 delegated to
the regional boards no more "than the power to grant minimum wage adjustments"7 and "in the absence
of clear statutory authority,"8 the boards may no more than adjust "floor wages."9

The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended to correct "wage
distortions" and the salary-ceiling method (of determining wages) is meant, precisely, to rectify wage
distortions.10

The Court is inclined to agree with the Government. In the National Wages and Productivity
Commission's Order of November 6, 1990, the Commission noted that the determination of wages has
generally involved two methods, the "floor-wage" method and the "salary-ceiling" method. We quote:

Historically, legislation involving the adjustment of the minimum wage made use of two methods. The
first method involves the fixing of determinate amount that would be added to the prevailing statutory
minimum wage. The other involves "the salary-ceiling method" whereby the wage adjustment is
applied to employees receiving a certain denominated salary ceiling. The first method was adopted in
the earlier wage orders, while the latter method was used in R.A. Nos. 6640 and 6727. Prior to this, the
salary-ceiling method was also used in no less than eleven issuances mandating the grant of cost-of-
living allowances (P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5 and 6).
The shift from the first method to the second method was brought about by labor disputes arising from
wage distortions, a consequence of the implementation of the said wage orders. Apparently, the wage
order provisions that wage distortions shall be resolved through the grievance procedure was perceived
by legislators as ineffective in checking industrial unrest resulting from wage order implementations.
With the establishment of the second method as a practice in minimum wage fixing, wage distortion
disputes were minimized.11

As the Commission noted, the increasing trend is toward the second mode, the salary-cap method,
which has reduced disputes arising from wage distortions (brought about, apparently, by the floor-wage
method). Of course, disputes are appropriate subjects of collective bargaining and grievance
procedures, but as the Commission observed and as we are ourselves agreed, bargaining has helped
very little in correcting wage distortions. Precisely, Republic Act No. 6727 was intended to rationalize
wages, first, by providing for full-time boards to police wages round-the-clock, and second, by giving
the boards enough powers to achieve this objective. The Court is of the opinion that Congress meant
the boards to be creative in resolving the annual question of wages without labor and management
knocking on the legislature's door at every turn. The Court's opinion is that if Republic No. 6727
intended the boards alone to set floor wages, the Act would have no need for a board but an accountant
to keep track of the latest consumer price index, or better, would have Congress done it as the need
arises, as the legislature, prior to the Act, has done so for years. The fact of the matter is that the Act
sought a "thinking" group of men and women bound by statutory standards. We quote:

ART. 124. Standards / Criteria for Minimum Wage Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain
the minimum standards of living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social development program. In the
determination of such regional minimum wages, the Regional Board shall, among other relevant
factors, consider the following:

(a) The demand for living wages;


(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of emphasis employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic and social
development.12
The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an
across-the-board hike, performed an unlawful act of legislation. It is true that wage-fixing, like rate
constitutes an act Congress;13 it is also true, however, that Congress may delegate the power to fix
rates14 provided that, as in all delegations cases, Congress leaves sufficient standards. As this Court has
indicated, it is impressed that the above-quoted standards are sufficient, and in the light of the floor-
wage method's failure, the Court believes that the Commission correctly upheld the Regional Board of
the National Capital Region.
Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get the
Government out of the industry" and leave labor and management alone in deciding wages. The Court
does not think that the law intended to deregulate the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their
welfare;15 (2) the Constitution also makes it a duty of the State "to intervene when the common goal so
demands" in regulating property and property relations;16 (3) the Charter urges Congress to give
priority to the enactment of measures, among other things, to diffuse the wealth of the nation and to
regulate the use of property;17 (4) the Charter recognizes the "just share of labor in the fruits of
production;"18 (5) under the Labor Code, the State shall regulate the relations between labor and
management;19 (6) under Republic Act No. 6727 itself, the State is interested in seeing that workers
receive fair and equitable wages;20 and (7) the Constitution is primarily a document of social justice,
and although it has recognized the importance of the private sector,21 it has not embraced fully the
concept of laissez faire22 or otherwise, relied on pure market forces to govern the economy; We can not
give to the Act a meaning or intent that will conflict with these basic principles.

It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to
rationalize wages, that is, by having permanent boards to decide wages rather than leaving wage
determination to Congress year after year and law after law. The Court is not of course saying that the
Act is an effort of Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar problems, the national legislature has found it more
necessary to entrust to administrative agencies the power of subordinate legislation' as it is caned."23

The Labor Code defines "wage" as follows:

"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done, or for services rendered or
to be rendered and includes the fair and reasonably value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee. "Fair and
reasonable value" shall not include any profit to the employer or to any person affiliated with the
employer.24

The concept of "minimum wage" is, however, a different thing, and certainly, it means more than
setting a floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies
the effort of the State, as Republic Act No. 6727 expresses it, "to promote productivity-improvement
and gain-sharing measures to ensure a decent standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of production; to enhance employment
generation in the countryside through industry dispersal; and to allow business and industry reasonable
returns on investment, expansion and growth,"25 and as the Constitution expresses it, to affirm "labor as
a primary social economic force."26 As the Court indicated, the statute would have no need for a board
if the question were simply "how much". The State is concerned, in addition, that wages are not
distributed unevenly, and more important, that social justice is subserved.

It is another question, to be sure, had Congress created "roving" boards, and were that the case, a
problem of undue delegation would have ensued; but as we said, we do not see a Board (National
Capital Region) "running riot" here, and Wage Order No. NCR-01-A as an excess of authority.

It is also another question whether the salary-cap method utilized by the Board may serve the purposes
of Republic Act No. 6727 in future cases and whether that method is after all, a lasting policy of the
Board; however, it is a question on which we may only speculate at the moment. At the moment, we
find it to be reasonable policy (apparently, it has since been Government policy); and if in the future it
would be perceptibly unfair to management, we will take it up then.

WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.

IT IS SO ORDERED.
G.R. No. 140689. February 17, 2004

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs.


NLRC and BANKARD, INC., respondents.

CARPIO MORALES, J.:

The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of
whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring
rates of new employees without increasing the salary rates of old employees resulted in wage distortion
within the contemplation of Article 124 of the Labor Code.

Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV,
and Level V. On May 28, 1993, its Board of Directors approved a New Salary Scale, made retroactive
to April 1, 1993, for the purpose of making its hiring rate competitive in the industrys labor market.
The New Salary Scale increased the hiring rates of new employees, to wit: Levels I and V by one
thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly,
the salaries of employees who fell below the new minimum rates were also adjusted to reach such rates
under their levels.

Bankards move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the
salary of its old, regular employees.

Bankard took the position, however, that there was no obligation on the part of the management to
grant to all its employees the same increase in an across-the-board manner.

As the continued request of petitioner for increase in the wages and salaries of Bankards regular
employees remained unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of
discrimination and other acts of Unfair Labor Practice (ULP).

A director of the National Conciliation and Mediation Board treated the Notice of Strike as a
Preventive Mediation Case based on a finding that the issues therein were not strikeable.

Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain,
discrimination, and other acts of ULP - union busting. The strike was averted, however, when the
dispute was certified by the Secretary of Labor and Employment for compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed
the case for lack of merit.

Petitioners motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995,
denied.

Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In
accordance with its ruling in St. Martin Funeral Homes v. NLRC, the petition was referred to the Court
of Appeals which, by October 28, 1999, denied the same for lack of merit.

Hence, the present petition which faults the appellate court as follows:

(1) It misapprehended the basic issues when it concluded that under Bankards new wage structure, the
old salary gaps between the different classification or level of employees were still reflected by the
adjusted salary rates and

(2) It erred in concluding that wage distortion does not appear to exist, which conclusion is manifestly
contrary to law and jurisprudence.

Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others,
Article 124 of the Labor Code) on June 9, 1989, the term wage distortion was explicitly defined as:

a situation where an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation.

Prubankers Association v. Prudential Bank and Trust Company laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates; (2) A
significant change in the salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one; (3) The elimination of the distinction between the two levels; and (4) The
existence of the distortion in the same region of the country.

Normally, a company has a wage structure or method of determining the wages of its employees. In a
problem dealing with wage distortion, the basic assumption is that there exists a grouping or
classification of employees that establishes distinctions among them on some relevant or legitimate
bases.

Involved in the classification of employees are various factors such as the degrees of responsibility, the
skills and knowledge required, the complexity of the job, or other logical basis of differentiation. The
differing wage rate for each of the existing classes of employees reflects this classification.

Petitioner maintains that for purposes of wage distortion, the classification is not one based on levels or
ranks but on two groups of employees, the newly hired and the old, in each and every level, and not
between and among the different levels or ranks in the salary structure.
Public respondent National Labor Relations Commission (NLRC) refutes petitioners position,
however. It, through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as
follows:

To determine the existence of wage distortion, the historical classification of the employees prior to the
wage increase must be established. Likewise, it must be shown that as between the different
classification of employees, there exists a historical gap or difference.

The classification preferred by petitioner is belied by the wage structure of private respondent as shown
in the new salary scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:

Hiring Minimum Maximum


Level From To From To From To
I 3,100 4,100 3,200 4,200 7,200 9,250
II 3,200 4,100 3,300 4,200 7,500 9,500
III 3,300 4,200 3,400 4,300 8,000 10,000
IV 3,500 4,400 3,600 4,500 8,500 10,500
V 3,700 4,700 3,800 4,800 9,000 11,000
Thus the employees of private respondent have been historically classified into levels, i.e. I to V, and
not on the basis of their length of service. Put differently, the entry of new employees to the company
ipso facto place[s] them under any of the levels mentioned in the new salary scale which private
respondent adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of
private respondents employees without encroaching upon recognized management prerogative of
formulating a wage structure, in this case, one based on level

The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of
quasi-judicial tribunals and it being a basic rule that findings of facts of quasi-judicial agencies, like the
NLRC, are generally accorded not only respect but at times even finality if they are supported by
substantial evidence, as are the findings in the case at bar, they must be respected. For these agencies
have acquired expertise, their jurisdiction being confined to specific matters.

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion provided in Prubankers is wanting.

While seniority may be a factor in determining the wages of employees, it cannot be made the sole
basis in cases where the nature of their work differs.

Moreover, for purposes of determining the existence of wage distortion, employees cannot create their
own independent classification and use it as a basis to demand an across-the-board increase in salary.

As National Federation of Labor v. NLRC, et al. teaches, the formulation of a wage structure through
the classification of employees is a matter of management judgment and discretion.

[W]hether or not a new additional scheme of classification of employees for compensation purposes
should be established by the Company (and the legitimacy or viability of the bases of distinction there
embodied) is properly a matter of management judgment and discretion, and ultimately, perhaps, a
subject matter for bargaining negotiations between employer and employees. It is assuredly something
that falls outside the concept of wage distortion

As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also
wanting. For, as the appellate court explained:

In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly
affected by the said increase:

Pay of Old/ Pay of Newly Difference


Regular Employees Hired Employees
A. Prior to April 1, 1993
Level I P4,518.75 P3,100 P1,418.75
(Sammy Guce)
Level II P6,242.00 P3,200 P3,042.00
(Nazario Abello)
Level III P4,850.00 P3,300 P1,550.00
(Arthur Chavez)
Level IV P5,339.00 P3,500 P1,839.00
Melissa Cordero)
Level V P7,090.69 P3,700 P3,390.69
(Ma. Lourdes Dee)
B. Effective April 1, 1993
Level I P4,518.75 P4,100 P418.75
Sammy Guce)
Level II P6,242.00 P4,100 P2,142.00
(Nazario Abello)
Level II P6,242.00 P4,100 P2,142.00
(Nazario Abello)
Level III P4,850.00 P4,200 P650.00
(Arthur Chavez)
Level IV P5,330.00 P4,400 P939.00
(Melissa Cordero)
Level V P7,090.69 P4,700 P2,390.69
(Ma. Lourdes Dee)

Even assuming that there is a decrease in the wage gap between the pay of the old employees and the
newly hired employees, to Our mind said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee group.
As already stated, the classification under the wage structure is based on the rank of an employee, not
on seniority. For this reason, ,wage distortion does not appear to exist
Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of
wage distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged wage
distortion as the increase in the wages and salaries of the newly-hired was not due to a prescribed law
or wage order.
The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of
wage adjustments, then the language of the law should have been broad, not restrictive as it is currently
phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and
the union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall
be resolved through the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration.
Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found in CHAPTER V on
WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION which principally
deals with the fixing of minimum wage. Article 124 should thus be construed and correlated in relation
to minimum wage fixing, the intention of the law being that in the event of an increase in minimum
wage, the distinctions embodied in the wage structure based on skills, length of service, or other logical
bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct wage distortion is applied to voluntary and
unilateral increases by the employer in fixing hiring rates which is inherently a business judgment
prerogative, then the hands of the employer would be completely tied even in cases where an increase
in wages of a particular group is justified due to a re-evaluation of the high productivity of a particular
group, or as in the present case, the need to increase the competitiveness of Bankards hiring rate. An
employer would be discouraged from adjusting the salary rates of a particular group of employees for
fear that it would result to a demand by all employees for a similar increase, especially if the financial
conditions of the business cannot address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC to support its claim that the obligation to
rectify wage distortion is not confined to wage distortion resulting from government decreed law or
wage order.
Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion
was not by virtue of Article 124 of the Labor Code, but on account of a then existing company practice
that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory
employees were, as a matter of practice, also paid the same amount plus an added premium. Thus this
Court held in said case:
We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the rank-
and-file employees, no CBA governing the terms and conditions of their employment, had the right to
rely on the company practice of unilaterally correcting the wage distortion effects of a salary increase
given to the rank-and-file employees, by giving the supervisory employees a corresponding salary
increase plus a premium. . . (Emphasis supplied)
Wage distortion is a factual and economic condition that may be brought about by different causes. In
Metro Transit, the reduction or elimination of the normal differential between the wage rates of rank-
and-file and those of supervisory employees was due to the granting to the former of wage increase
which was, however, denied to the latter group of employees.
The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to
rectify it, absent a law or other source of obligation which requires its rectification.
Unlike in Metro Transit then where there existed a company practice, no such management practice is
herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.
Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust
the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of
Living Allowance) of the parties Collective Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the
Company to establish such minimum salaries as it may hereafter find appropriate for specific jobs, and
to adjust the rates of the employees thereby affected to such minimum salaries thus established.
This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a
valid and legally enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates by an employer was done
arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate
purpose other than to discriminate against the regular employees, this Court will not step in to interfere
with this management prerogative. Employees are of course not precluded from negotiating with its
employer and lobby for wage increases through appropriate channels, such as through a CBA.
This Court, time and again, has shown concern and compassion to the plight of workers in adherence to
the Constitutional provisions on social justice and has always upheld the right of workers to press for
better terms and conditions of employment. It does not mean, however, that every dispute should be
decided in favor of labor, for employers correspondingly have rights under the law which need to be
respected. WHEREFORE, the present petition is hereby DENIED. SO ORDERED.
G.R. No. 127718. March 2, 2000
NATIONAL FEDERATION OF LABOR, et al, petitioners, vs. NLRC,
PATALON COCONUT ESTATE and/or CHARLIE REITH as General Manager and SUSIE GALLE
REITH, as owner, respondents.
DE LEON, JR., J.:
Before us is a special civil action for certiorari to set aside and annul two (2) resolutions of the
National Labor Relations Commission promulgated on April 24, 1996 and August 29, 1996] denying
the award of separation pay to petitioners.
The pertinent facts are as follows:
Petitioners are bona fide members of the National Federation of Labor (NFL), a legitimate labor
organization duly registered with the Department of Labor and Employment. They were employed by
private respondents Charlie Reith and Susie Galle Reith, general manager and owner, respectively, of
the 354-hectare Patalon Coconut Estate located at Patalon, Zamboanga City. Patalon Coconut Estate
was engaged in growing agricultural products and in raising livestock.
In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), which mandated the compulsory acquisition of all
covered agricultural lands for distribution to qualified farmer beneficiaries under the so-called
Comprehensive Agrarian Reform Programme (CARP).
Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to the Patalon Estate Agrarian
Reform Association (PEARA), a cooperative accredited by the Department of Agrarian Reform
(DAR), of which petitioners are members and co-owners.
As a result of this acquisition, private respondents shut down the operation of the Patalon Coconut
Estate and the employment of the petitioners was severed on July 31, 1994. Petitioners did not receive
any separation pay.
On August 1, 1994, the cooperative took over the estate. A certain Abelardo Sangadan informed
respondents of such takeover via a letter which was received by the respondents on July 26, 1994.
Being beneficiaries of the Patalon Coconut Estate pursuant to the CARP, the petitioners became part-
owners of the land
On April 25, 1995, petitioners filed individual complaints before the Regional Arbitration Branch
(RAB) of the National Labor Relations Commission (NLRC) in Zamboanga City, praying for their
reinstatement with full backwages on the ground that they were illegally dismissed. The petitioners
were represented by their labor organization, the NFL.
On December 12, 1995, the RAB rendered a decision, the dispositive portion of which provides:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing complainants
charge for illegal dismissal for lack of merit, but ordering respondents thru [sic] its owner-manager or
its duly authorized representative to pay complainants separation pay in view of the latters cessation of
operations or forced sale, and for 13th month differential pay in the amount, as follows, for:
Total Benefits P586,774.22
"FURTHER, complainants claim for Muslim Holiday, overtime pay and rest day pay should be
dismissed for lack of merit, too."
Appeal was taken by private respondents to public respondent NLRC
On April 24, 1996, the NLRC issued a resolution, the dispositive portion of which provides:
"WHEREFORE, the decision appealed from is hereby modified in favor of the following findings:
1) Respondents are not guilty of illegally dismissing complainants. Respondents cessation of operation
was not due to a unilateral action on their part resulting in the cutting off of the employment
relationship between the parties. The severance of employer-employee relationship between the parties
came about INVOLUNTARILY, as a result of an act of the State. Consequently, complainants are not
entitled to any separation pay.
2) The award of 13th month pay differential is, however, Set Aside. Any award of 13th month pay
differentials to complainants should be computed strictly based on their reduced pay, equivalent to six
(6) hours work, Monday to Friday, pursuant to what the parties agreed in the November 18, 1991
Compromise Agreement." SO ORDERED.
Petitioners filed a motion for reconsideration which was denied by the NLRC in its resolution [if ! dated
August 29, 1996.
Hence, this petition.
The issue is whether or not an employer that was compelled to cease its operation because of the
compulsory acquisition by the government of its land for purposes of agrarian reform, is liable to pay
separation pay to its affected employees.
The petition is bereft of merit.
Petitioners contend that they are entitled to separation pay citing Article 283 of the Labor Code which
reads:
"ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half () month pay for every year of service, whichever is higher. A fraction of
at least six (6) months shall be considered as one (1) whole year."
It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and reduction
of personnel. The peculiar circumstances in the case at bar, however, involves neither the closure of an
establishment nor a reduction of personnel as contemplated under the aforesaid article. When the
Patalon Coconut Estate was closed because a large portion of the estate was acquired by DAR pursuant
to CARP, the ownership of that large portion of the estate was precisely transferred to PEARA and
ultimately to the petitioners as members thereof and as agrarian lot beneficiaries. Hence, Article 283 of
the Labor Code is not applicable to the case at bench.
Even assuming, arguendo, that the situation in this case were a closure of the business establishment
called Patalon Coconut Estate of private respondents, still the petitioners/employees are not entitled to
separation pay. The closure contemplated under Article 283 of the Labor Code is a unilateral and
voluntary act on the part of the employer to close the business establishment as may be gleaned from
the wording of the said legal provision that "The employer may also terminate the employment of any
employee due to...".
The use of the word "may," in a statute, denotes that it is directory in nature and generally permissive
only
The "plain meaning rule" or verba legis in statutory construction is thus applicable in this case. Where
the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the benefit of the employees.
As earlier stated, the Patalon Coconut Estate was closed down because a large portion of the said estate
was acquired by the DAR pursuant to the CARP. Hence, the closure of the Patalon Coconut Estate was
not effected voluntarily by private respondents who even filed a petition to have said estate exempted
from the coverage of RA 6657. Unfortunately, their petition was denied by the Department of Agrarain
Reform. Since the closure was due to the act of the government to benefit the petitioners, as members
of the Patalon Estate Agrarian Reform Association, by making them agrarian lot beneficiaries of said
estate, the petitioners are not entitled to separation pay. The termination of their employment was not
caused by the private respondents. The blame, if any, for the termination of petitioners employment can
even be laid upon the petitioner-employees themselves inasmuch as they formed themselves into a
cooperative, PEARA, ultimately to take over, as agrarian lot beneficiaries, of private respondents
landed estate pursuant to RA 6657. The resulting closure of the business establishment, Patalon
Coconut Estate, when it was placed under CARP, occurred through no fault of the private respondents.
While the Constitution provides that "the State x x x shall protect the rights of workers and promote
their welfare", that constitutional policy of providing full protection to labor is not intended to oppress
or destroy capital and management. Thus, the capital and management sectors must also be protected
under a regime of justice and the rule of law.
WHEREFORE, the petition is DISMISSED. The Resolutions of the National Labor Relations
Commission dated April 24, 1996 and August 29, 1996 are hereby AFFIRMED. No costs.
SO ORDERED.