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Laboratories Chapter) and THE COURT OF INDUSTRIAL

LABOR STANDARDS – FINAL EXAM RELATIONS, respondents. .................................................. 60


National Sugar Refineries v NLRC ..................................... 62
Witholding of Bonus ................................................................. 66
Table of Contents STATES MARINE CORPORATION and ROYAL LINE,
WAGES ............................................................................................. 2 INC., petitioners, vs. CEBU SEAMEN'S ASSOCIATION,
INC., respondent. .................................................................. 66
Definition ...................................................................................... 2
GLOBE MACKAY CABLE AND RADIO CORPORATION,
JOSE SONGCO, ROMEO CIPRES, and AMANCIO
FREDERICK WHITE and JESUS
MANUEL, petitioners, vs NATIONAL LABOR
SANTIAGO, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (FIRST DIVISION), LABOR
RELATIONS COMMISSION, FFW-GLOBE MACKAY
ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M),
EMPLOYEES UNION and EDA
INC., respondents. ................................................................... 2
CONCEPCION, respondents. .............................................. 69
Cebu v NLRC ........................................................................... 6
ATOK-BIG WEDGE MINING CO., INC., petitioner, vs.
PLASTIC TOWN CENTER ATOK-BIG WEDGE MUTUAL BENEFIT
CORPORATION, petitioner, vs. NATIONAL LABOR ASSOCIATION, respondent. ............................................... 71
RELATIONS COMMISSION AND NAGKAKAISANG
MANILA ELECTRIC COMPANY, petitioner, vs. Hon.
LAKAS NG MANGGAGAWA (NLM)-
SECRETARY OF LABOR LEONARDO QUISUMBING and
KATIPUNAN, respondents.................................................. 27
MERALCO EMPLOYEES and WORKERS ASSOCIATION
SOCIAL SECURITY SYSTEM, petitioner, vs. SSS (MEWA), respondent. ........................................................... 72
SUPERVISORS' UNION-CUGCO and COURT OF
TRADERS ROYAL BANK, petitioner, vs. NATIONAL
INDUSTRIAL RELATIONS, respondents. ......................... 30
LABOR RELATIONS COMMISSION & TRADERS ROYAL
Benjamin C. Pineda for respondent Union. ........................ 30 BANK EMPLOYEES UNION, respondents. ...................... 75
DURABUILT RECAPPING PLANT & COMPANY and Manilabank v NLRC ............................................................. 77
EDUARDO LAO, GENERAL MANAGER, petitioners, vs.
LOURDES G. MARCOS, ALEJANDRO T. ANDRADA,
NATIONAL LABOR RELATIONS COMMISSION, HON.
BALTAZARA J. LOPEZ AND VILMA L.
COMM. RICARDO C. CASTRO, HON. ARBITER AMELIA
CRUZ, petitioners, vs. NATIONAL LABOR RELATIONS
M. GULOY, KAPISANAN NG MGA MANGGAGAWA SA
COMMISSION and INSULAR LIFE ASSURANCE CO.,
DURABUILT and REYNALDO BODEGAS, respondents.
LTD., respondents ................................................................. 83
.................................................................................................. 32
Payment by Result..................................................................... 87
ANTONIO W. IRAN (doing business under the name and
style of Tones Iran Enterprises), petitioner, vs. NATIONAL LCP v NLRC........................................................................... 87
LABOR RELATIONS COMMISSION (Fourth Division),
Forms of Payment ..................................................................... 96
GODOFREDO O. PETRALBA, MORENO CADALSO,
PEPITO TECSON, APOLINARIO GOTHONG GEMINA, BERNARDO JIMENEZ and JOSE JIMENEZ, as Operators
JESUS BANDILAO, EDWIN MARTIN, CELSO LABIAGA, of JJ's TRUCKING, petitioners, vs. NATIONAL LABOR
DIOSDADO GONZALGO, FERNANDO M. RELATIONS COMMISSION, PEDRO JUANATAS and
COLINA, respondents. ......................................................... 34 FREDELITO JUANATAS, respondents. ............................. 96
Millares v NLRC .................................................................... 37 Time of Payment........................................................................ 99
Coverage ..................................................................................... 44 Place of Payment ....................................................................... 99
Prohibition against diminution/elimination ......................... 44 Exceptions to Direct Payment .................................................. 99
Davao v Abarquez ................................................................. 44
NESTLÉ PHILIPPINES, INC., petitioner, vs. THE
NATIONAL LABOR RELATIONS COMMISSION and
UNION OF FILIPRO EMPLOYEES, respondents. ............ 48
STATES MARINE CORPORATION and ROYAL LINE,
INC., petitioners, vs. CEBU SEAMEN'S ASSOCIATION,
INC., respondent. ................................................................... 50
Tiangco v Leogardo ............................................................... 53
MAMERTO B. ASIS, petitioner, vs. MINISTER OF LABOR
AND EMPLOYMENT, CENTRAL AZUCARERA DE
PILAR, and EMMANUEL JAVELLANA, respondents. ... 58
LEXAL LABORATORIES and/or JOSE ANGELES,
Manager, petitioners, vs. NATIONAL CHEMICAL
INDUSTRIES WORKERS UNION-PAFLU (Lexal
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |1
separation pay due to petitioners. Petitioners, who were in the
sales force of Zuellig received monthly salaries of at least
WAGES P40,000. In addition, they received commissions for every sale
they made.
Definition
The collective Bargaining Agreement entered into between
Art. 97. Definitions. As used in this Title: Zuellig and F.E. Zuellig Employees Association, of which
(f) “Wage” paid to any employee shall mean the remuneration petitioners are members, contains the following provision (p.
or earnings, however designated, capable of being expressed in 71, Rollo):
terms of money, whether fixed or ascertained on a time, task, ARTICLE XIV — Retirement Gratuity
piece, or commission basis, or other method of calculating the
Section l(a)-Any employee, who is separated
same, which is payable by an employer to an employee under a
from employment due to old age, sickness,
written or unwritten contract of employment for work done or
death or permanent lay-off not due to the
to be done, or for services rendered or to be rendered and
fault of said employee shall receive from the
includes the fair and reasonable value, as determined by the
company a retirement gratuity in an amount
Secretary of Labor and Employment, of board, lodging, or other
equivalent to one (1) month's salary per year
facilities customarily furnished by the employer to the
of service. One month of salary as used in this
employee. “Fair and reasonable value” shall not include any
paragraph shall be deemed equivalent to
profit to the employer, or to any person affiliated with the
the salary at date of retirement; years of
employer.
service shall be deemed equivalent to total
service credits, a fraction of at least six
G.R. No. L-50999 March 23, 1990 months being considered one year, including
probationary employment. (Emphasis
JOSE SONGCO, ROMEO CIPRES, and supplied)
AMANCIO MANUEL, petitioners, On the other hand, Article 284 of the Labor Code then prevailing
vs provides:
NATIONAL LABOR RELATIONS COMMISSION
Art. 284. Reduction of personnel. — The
(FIRST DIVISION), LABOR ARBITER FLAVIO termination of employment of any employee
AGUAS, and F.E. ZUELLIG (M), INC., respondents. due to the installation of labor saving-devices,
Raul E. Espinosa for petitioners. redundancy, retrenchment to prevent losses,
and other similar causes, shall entitle the
Lucas Emmanuel B. Canilao for petitioner A. Manuel. employee affected thereby to separation pay.
Atienza, Tabora, Del Rosario & Castillo for private respondent. In case of termination due to the installation
of labor-saving devices or redundancy, the
separation pay shall be equivalent to one (1)
MEDIALDEA, J.: month pay or to at least one (1) month pay for
every year of service, whichever is higher. In
This is a petition for certiorari seeking to modify the decision of
case of retrenchment to prevent losses and
the National Labor Relations Commission in NLRC Case No.
other similar causes, the separation pay shall
RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
be equivalent to one (1) month pay or at least
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-
one-half (1/2) month pay for every year of
Appellee" and NLRC Case No. RN- IV-20855-78-T
service, whichever is higher. A fraction of at
entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig
least six (6) months shall be considered one
(M), Inc., Respondent-Appellee," which dismissed the appeal of
(1) whole year. (Emphasis supplied)
petitioners herein and in effect affirmed the decision of the
Labor Arbiter ordering private respondent to pay petitioners In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules
separation pay equivalent to their one month salary (exclusive Implementing the Labor Code provide:
of commissions, allowances, etc.) for every year of service. xxx
The antecedent facts are as follows: Sec. 9(b). Where the termination of
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to employment is due to retrechment initiated
as Zuellig) filed with the Department of Labor (Regional Office by the employer to prevent losses or other
No. 4) an application seeking clearance to terminate the services similar causes, or where the employee suffers
of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel from a disease and his continued
(hereinafter referred to as petitioners) allegedly on the ground employment is prohibited by law or is
of retrenchment due to financial losses. This application was prejudicial to his health or to the health of his
seasonably opposed by petitioners alleging that the company is co-employees, the employee shall be entitled
not suffering from any losses. They alleged further that they are to termination pay equivalent at least to his
being dismissed because of their membership in the union. At one month salary, or to one-half
the last hearing of the case, however, petitioners manifested that month pay for every year of service,
they are no longer contesting their dismissal. The parties then whichever is higher, a fraction of at least six
agreed that the sole issue to be resolved is the basis of the

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |2


(6) months being considered as one whole Zuellig argues that if it were really the intention of the Labor
year. Code as well as its implementing rules to include commission
in the computation of separation pay, it could have explicitly
xxx
said so in clear and unequivocal terms. Furthermore, in the
Sec. 10. Basis of termination pay. — The definition of the term "wage", "commission" is used only as one
computation of the termination pay of an of the features or designations attached to the word
employee as provided herein shall be based remuneration or earnings.
on his latest salary rate, unless the same was
Insofar as the issue of whether or not allowances should be
reduced by the employer to defeat the
included in the monthly salary of petitioners for the purpose of
intention of the Code, in which case the basis
computation of their separation pay is concerned, this has been
of computation shall be the rate before its
settled in the case of Santos v. NLRC, et al., G.R. No. 76721,
deduction. (Emphasis supplied)
September 21, 1987, 154 SCRA 166, where We ruled that "in the
On June 26,1978, the Labor Arbiter rendered a decision, the computation of backwages and separation pay, account must be
dispositive portion of which reads (p. 78, Rollo): taken not only of the basic salary of petitioner but also of her
RESPONSIVE TO THE FOREGOING, transportation and emergency living allowances." This ruling
respondent should be as it is hereby, ordered was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October
to pay the complainants separation pay 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v.
equivalent to their one month salary NLRC, et al., G.R. No. 78524, January 20, 1989.
(exclusive of commissions, allowances, etc.) We shall concern ourselves now with the issue of whether or not
for every year of service that they have earned sales commission should be included in the monthly
worked with the company. salary of petitioner for the purpose of computation of their
SO ORDERED. separation pay.

The appeal by petitioners to the National Labor Relations Article 97(f) by itself is explicit that commission is included in
Commission was dismissed for lack of merit. the definition of the term "wage". It has been repeatedly
declared by the courts that where the law speaks in clear and
Hence, the present petition. categorical language, there is no room for interpretation or
On June 2, 1980, the Court, acting on the verified "Notice of construction; there is only room for application (Cebu Portland
Voluntary Abandonment and Withdrawal of Petition dated Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17,
April 7, 1980 filed by petitioner Romeo Cipres, based on the August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
ground that he wants "to abide by the decision appealed from" G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and
since he had "received, to his full and complete satisfaction, his unambiguous statute speaks for itself, and any attempt to make
separation pay," resolved to dismiss the petition as to him. it clearer is vain labor and tends only to obscurity. How ever, it
may be argued that if We correlate Article 97(f) with Article XIV
The issue is whether or not earned sales commissions and
of the Collective Bargaining Agreement, Article 284 of the Labor
allowances should be included in the monthly salary of
Code and Sections 9(b) and 10 of the Implementing Rules, there
petitioners for the purpose of computation of their separation
appears to be an ambiguity. In this regard, the Labor Arbiter
pay.
rationalized his decision in this manner (pp. 74-76, Rollo):
The petition is impressed with merit.
The definition of 'wage' provided in Article 96
Petitioners' position was that in arriving at the correct and legal (sic) of the Code can be correctly be (sic)
amount of separation pay due them, whether under the Labor stated as a general definition. It is 'wage ' in
Code or the CBA, their basic salary, earned sales commissions its generic sense. A careful perusal of the
and allowances should be added together. They cited Article same does not show any indication that
97(f) of the Labor Code which includes commission as part on commission is part of salary. We can say that
one's salary, to wit; commission by itself may be considered a
wage. This is not something novel for it
(f) 'Wage' paid to any employee shall mean
cannot be gainsaid that certain types of
the remuneration or earnings, however
employees like agents, field personnel and
designated, capable of being expressed in
salesmen do not earn any regular daily,
terms of money, whether fixed or ascertained
weekly or monthly salaries, but rely mainly
on a time, task, piece, or commission basis, or
on commission earned.
other method of calculating the same, which
is payable by an employer to an employee Upon the other hand, the provisions of
under a written or unwritten contract of Section 10, Rule 1, Book VI of the
employment for work done or to be done, or implementing rules in conjunction with
for services rendered or to be rendered, and Articles 273 and 274 (sic) of the Code
includes the fair and reasonable value, as specifically states that the basis of the
determined by the Secretary of Labor, of termination pay due to one who is sought to
board, lodging, or other facilities customarily be legally separated from the service is 'his
furnished by the employer to the employee. latest salary rates.
'Fair reasonable value' shall not include any
x x x.
profit to the employer or to any person
affiliated with the employer.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |3
Even Articles 273 and 274 (sic) invariably use meaning, that is, a reward or recompense for services
'monthly pay or monthly salary'. performed. Likewise, "pay" is the synonym of "wages" and
"salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the
The above terms found in those Articles and
words "wages", "pay" and "salary" have the same meaning, and
the particular Rules were intentionally used
commission is included in the definition of "wage", the logical
to express the intent of the framers of the law
conclusion, therefore, is, in the computation of the separation
that for purposes of separation pay they mean
pay of petitioners, their salary base should include also their
to be specifically referring to salary only.
earned sales commissions.
.... Each particular benefit provided in the
The aforequoted provisions are not the only consideration for
Code and other Decrees on Labor has its own
deciding the petition in favor of the petitioners.
pecularities and nuances and should be
interpreted in that light. Thus, for a specific We agree with the Solicitor General that granting, in gratia
provision, a specific meaning is attached to argumenti, that the commissions were in the form of incentives
simplify matters that may arise there from. or encouragement, so that the petitioners would be inspired to
The general guidelines in (sic) the formation put a little more industry on the jobs particularly assigned to
of specific rules for particular purpose. Thus, them, still these commissions are direct remuneration services
that what should be controlling in matters rendered which contributed to the increase of income of Zuellig
concerning termination pay should be the . Commission is the recompense, compensation or reward of an
specific provisions of both Book VI of the agent, salesman, executor, trustees, receiver, factor, broker or
Code and the Rules. At any rate, settled is the bailee, when the same is calculated as a percentage on the
rule that in matters of conflict between the amount of his transactions or on the profit to the principal
general provision of law and that of a (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217
particular- or specific provision, the latter Md. 123, 141 A.2d 749, 750). The nature of the work of a
should prevail. salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commission are part
On its part, the NLRC ruled (p. 110, Rollo):
of petitioners' wage or salary. We take judicial notice of the fact
From the aforequoted provisions of the law that some salesmen do not receive any basic salary but depend
and the implementing rules, it could be on commissions and allowances or commissions alone, are part
deduced that wage is used in its generic sense of petitioners' wage or salary. We take judicial notice of the fact
and obviously refers to the basic wage rate to that some salesman do not received any basic salary but depend
be ascertained on a time, task, piece or on commissions and allowances or commissions alone,
commission basis or other method of although an employer-employee relationship exists. Bearing in
calculating the same. It does not, however, mind the preceeding dicussions, if we adopt the opposite view
mean that commission, allowances or that commissions, do not form part of wage or salary, then, in
analogous income necessarily forms part of effect, We will be saying that this kind of salesmen do not
the employee's salary because to do so would receive any salary and therefore, not entitled to separation pay
lead to anomalies (sic), if not absurd, in the event of discharge from employment. Will this not be
construction of the word "salary." For what absurd? This narrow interpretation is not in accord with the
will prevent the employee from insisting that liberal spirit of our labor laws and considering the purpose of
emergency living allowance, 13th month pay, separation pay which is, to alleviate the difficulties which
overtime, and premium pay, and other fringe confront a dismissed employee thrown the the streets to face the
benefits should be added to the computation harsh necessities of life.
of their separation pay. This situation, to our
Additionally, in Soriano v. NLRC, et al., supra, in resolving the
mind, is not the real intent of the Code and its
issue of the salary base that should be used in computing the
rules.
separation pay, We held that:
We rule otherwise. The ambiguity between Article 97(f), which
The commissions also claimed by petitioner
defines the term 'wage' and Article XIV of the Collective
('override commission' plus 'net deposit
Bargaining Agreement, Article 284 of the Labor Code and
incentive') are not properly includible in such
Sections 9(b) and 10 of the Implementing Rules, which mention
base figure since such commissions must be
the terms "pay" and "salary", is more apparent than real.
earned by actual market transactions
Broadly, the word "salary" means a recompense or
attributable to petitioner.
consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium," Applying this by analogy, since the commissions in the present
or more fancifully from "sal," the pay of the Roman soldier, it case were earned by actual market transactions attributable to
carries with it the fundamental idea of compensation for petitioners, these should be included in their separation pay. In
services rendered. Indeed, there is eminent authority for the computation thereof, what should be taken into account is
holding that the words "wages" and "salary" are in essence the average commissions earned during their last year of
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. employment.
44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div.
The final consideration is, in carrying out and interpreting the
481; 38 Am. Jur. 496). "Salary," the etymology of which is the
Labor Code's provisions and its implementing regulations, the
Latin word "salarium," is often used interchangeably with
workingman's welfare should be the primordial and paramount
"wage", the etymology of which is the Middle English word
consideration. This kind of interpretation gives meaning and
"wagen". Both words generally refer to one and the same
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |4
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.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |5


G.R. No. L-58870 December 18, 1987 VITALIANA VENERACION, LEONCIA ABELLAR,
REYNITA VILLACARLOS. respondents.
Cebu v NLRC
No. L-68345 December 18, 1987
CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner,
vs. DIVINE WORD COLLEGE OF LEGAZPI, petitioner,
HON. BLAS OPLE, in his capacity as Minister, Ministry of vs.
Labor and Employment, JULIUS ABELLA, ARSENIO The Honorable Deputy Minister of Labor and Employment,
ABELLANA, RODRIGO ALIWALAS, ZOSIMO VICENTE LEOGARDO, JR., the HONORABLE REGIONAL
ALMOCERA, GERONIDES ANCOG, GREGORIO ASIA, DIRECTOR (Regional Office No. 5) of the Ministry of Labor
ROGER BAJARIAS, BERNARDO BALATAYO, JR., & Employment GERARDO S. CASTILLO, CECILIA
BASILIO CABALLES, DEMOCRITO TEVES, VOLTAIRE MANUEL and other alleged complainants, respondents.
DELA CERNA, ROBERTO COBARRUBIAS, VILMA Nos. L-69224-5 December 18, 1987
GOMEZ CHUA, RUBEN GALLITO, EDGARDO
CONCEPCION, VICTOR COQUILLA, JOSE DAKOYKOY, FAR EASTERN UNIVERSITY EMPLOYEES LABOR
PATERNO WONG, EVELYN LACAYA, RODRIGO UNION, petitioner,
GONZALES, JEOGINA GOZO, MIGUEL CABALLES, vs.
CONSUELO JAVELOSA, QUILIANO LASCO, FRANKLIN FAR EASTERN UNIVERSITY and the NATIONAL LABOR
LAUTA, JUSTINIANA LARGO, RONALD LICUPA, ALAN RELATIONS COMMISSION, respondents.
MILANO, MARIA MONSANTO, REYNALDO NOYNAY, No. 70832 December 18, 1987
RAMON PARADELA, NATALIO PLAZA, LUZPURA
QUIROGA, NOE RODIS, COSMENIA SAAVEDRA, GREGORIO T. FABROS, ROGELIO B. DE GUZMAN,
LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO CRESENCIANO ESPINO, JOSE RAMOS SUNGA, BAYLON
TABANAG, LUCINO TAMAOSO, DANILO TERANTE, BANEZ FERNANDO ELESTERIO, ISMAEL TABO,
HELEN CALVO TORRES, ERNESTO VILLANUEVA, AMABLE TUIBEO CELSO TUBAY, RAFAEL HERNANDEZ,
DOLORES VILLONDO, EDWARD YAP, ROWENA GERONIMO JASARENO, MEL BALTAZAR, MA.
VIVARES, DOLORES SANANAM, RODRIGO BACALSO, LOURDES PASCUAL, T. DEL ROSARIO ACADEMY
YOLANDA TABLANTE, ROMERO BALATUCAN, TEACHERS and EMPLOYEES ASSOCIATION, DENNIS
CARMELITA LADOT, PANFILO CANETE, EMMANUEL MONTE, BECKY TORRES, LOIDA VELASCO, ROMLY
CHAVEZ, JR., SERGIO GALIDO, ANGEL COLLERA, NERY, DAISY N. AMPIG, PATRICIO DOLORES,
ZOSIMO CUNANAN, RENE BURT LLANTO, GIL ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners,
BATAYOLA, VICENTE DELANTE, CANDELARIO DE vs.
DIOS, JOSE MA. ESTELLA, NECITA TRINIDAD, The HON. JAIME C. LAYA, in his capacity as Minister of
ROTELLO ILUMBA, TEODORICO JAYME, RAYMUNDO Education, Culture and Sports, respondents.
ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA No. L-76524 December 18, 1987
BLANCO, FE DELMUNDO, ELNORA MONTERA,
MORRISON MONTESCLAROS, ELEAZAR JASMIN BISCOCHO, ROWENA MARIANO, AGNES
PANIAMOGAN, BERNARDO PILAPIL, RODOLFO POL, GALLEGO, MA. ANA ORDENES, ISABEL DE LEON,
DEMOSTHENES REDOBLE, PACHECO ROMERO, DELLO LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA
SABANAL, SARAH SALINAS, RENATO SOLATORIO, ORTIZ, ANGELINA ROXAS, BITUIN DE PANO,
EDUARDO TABLANTE, EMMANUEL TAN, FELICISIMO ELIZABETH ORDEN, APOLLO ORDEN, GUILLERMA
TESALUNA, JOSE VERALLO, JR., MAGDALENO CERCANO, IMELDA CARINGAL, EFREN BATIFORA,
VERGARA, ESMERALDA ABARQUEZ, MAC ARTHUR ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ,
DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE OSCAR RODRIGUEZ, JOVITA CEREZO, JOSEFINA
ELIZORDO ALCANTARA, REOSEBELLA AMPER, BONDOC, BELEN POSADAS, DOLORES PALMA,
ZENAIDA BACALSO, ELIZA BADANA, GEORGIA BAS, ANTONINA CRUS, CONRADO BANAYAT, TERESITA
ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON LORBES, and CORAZON MIRANDA, petitioners,
CASENAS, REGINO CASTANEDA, GEORGE CATADA, vs.
CARMENCITA G. CHAVEZ, LORETIA CUNANAN, THE HONORABLE AUGUSTO SANCHEZ, in his capacity
FLORES DELFIN, TERESITA ESPINO, ELVIE GALANZA, as Minister of Labor and Employment, ESPIRITU SANTO
AMADEA GALELA, TERESITA. JUNTILLA, LEONARDA PAROCHIAL SCHOOL AND ESPIRITU SANTO
KAPUNGAN, ADORACION LANAWAN, LINDA LAYAO, PAROCHIAL SCHOOL FACULTY
GERARDO LAYSON, VIRGILIO LIBETARIO, RAYMOND ASSOCIATION, respondents.
PAUL LOGARTA, NORMA LUCERO, ANATOLIA No. 76596 December 18, 1987
MENDEZ, ELIODORO MENDEZ, JUDALINE MONTE,
ELMA OCAMPO, ESTEFA OLIVARES, GEORGE ORAIS, RICARDO C. VALMONTE and CORAZON
CRISPINA PALANG, GRETA PEGARIDO, MELBA BADIOLA, petitioners,
QUIACHON, REMEDIOS QUIROS, VIRGINIA RANCES, vs.
EDNA DELOS REYES, VICENTE TAN, EMERGENCIA THE HONORABLE AUGUSTO SANCHEZ, in his capacity
ROSELL, JULIETA TATING, MERCIA TECARRO, FELISA as Minister of Labor and Employment, ESPIRITU SANTO
VERGARA, WEMINA VILLACIN, MACRINA PAROCHIAL SCHOOL FACULTY ASSOCIATION, and
YBARSABAL, MILAGROS CATALAN, JULIETA ESPIRITU SANTO PAROCHIAL SCHOOL, respondents.
AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO,
ASUNCION ABAYAN, ESTHER CARREON, ECHEVARRE,
BUENAFE SAMSON, CONCEPCION GONZALES, CORTES, J.:

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |6


Six cases involving various private schools, their teachers and employees. After these sub-issues have been resolved, the Court
non-teaching school personnel, and even parents with children will tackle the other incidents attending the individual
studying in said schools, as well as the then Minister of Labor cases, seriatim.
and Employment, his Deputy, the National Labor Relations
The factual antecedents that brought these cases before this
Commission, and the then Minister of Education, Culture and
Tribunal are as follows:
Sports, have been consolidated in this single Decision in order to
dispose of uniformly the common legal issue raised therein, I.. FACTUAL BACKGROUND OF EACH CASE
namely, the allocation of the incremental proceeds of authorized A.
tuition fee increases of private schools provided for in section 3 (a) of
Presidential Decree No. 451, and thereafter, under the Education Act CEBU INSTITUTE OF TECHNOLOGY CASE
of 1982 (Batas Pambansa Blg. 232). This case originated from a Complaint filed with the Regional
Specifically, the common problem presented by these cases Office No. VII of the Ministry of Labor on February 11, 1981
requires an interpretation of section 3(a) of Pres. Decree No. against petitioner Cebu Institute of Technology (CIT) by private
451 which states: respondents, Panfilo Canete, et al., teachers of CIT, for non-
payment of: a) cost of living allowances (COLA) under Pres.
SEC. 3. Limitations. — The increase in tuition Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th)
or other school fees or other charges as well month pay differentials and c) service incentive leave. By virtue
as the new fees or charges authorized under of an Order issued by the then Deputy Minister of Labor
the next preceding section shall be subject to Carmelo C. Noriel, a labor-management committee composed
the following conditions; of one representative each from the Ministry of Labor and
(a) That no increase in tuition or other school Employment (MOLE), the Minister of Education, Culture and
fees or charges shall be approved unless sixty Sports (MECS), and two representatives each from CIT and
(60%) per centum of the proceeds is allocated from the teachers was created. Said committee was to ascertain
for increase in salaries or wages of the compliance with the legal requirements for the payment of
members of the faculty and all other COLA, thirteenth (13th) month pay and service incentive leave
employees of the school concerned, and the [Rollo, p. 84].
balance for institutional development, The position taken by CIT during the conference held by the
student assistance and extension services, labor management committee was that it had paid the
and return to investments: Provided That in allowances mandated by various decrees but the same had been
no case shall the return to investments exceed integrated in the teacher's hourly rate. It alleged that the
twelve (12%) per centum of the incremental payment of COLA by way of salary increases is in line with Pres.
proceeds; Dec. No. 451. It also claimed in its position paper that it had paid
xxx xxx xxx thirteenth month pay to its employees and that it was exempt
from the payment of service incentive leave to its teachers who
In addition, there is also a need for a pronouncement on the
were employed on contract basis [Rollo, pp. 85-86].
effect of the subsequent enactment of B.P. Blg. 232 which
provides for the allocation of tuition fee increases in section 42 After the report and recommendation of the committee, herein
thereof. public respondent, then Minister of Labor and Employment
issued the assailed Order dated September 29, 1981 and held
In a nutshell, the present controversy was precipitated by the
that the basic hourly rate designated in the Teachers' Program is
claims of some school personnel for allowances and other
regarded as the basic hourly rate of teachers exclusive of the
benefits and the refusal of the private schools concerned to pay
COLA, and that COLA should not be taken from the 60%
said allowances and benefits on the ground that said items
incremental proceeds of the approved increase in tuition fee.
should be deemed included in the salary increases they had paid
The dispositive portion of the Order reads:
out of the 60% portion of the proceeds from tuition fee increases
provided for in section 3 (a) of Pres. Decree No. 451. The PREMISES CONSIDERED, CIT is hereby
interpretation and construction of laws being a matter of judicial ordered to pay its teaching staff the following:
power and duty [Marbury v. Madison, 1 Cranch 137 (1803); 1) COLA under P.D.'s 525 and 1123 from
Endencia v. David, 93 Phil. 696 (1953)], this Court has been February 1978 up to 1981;
called upon to resolve the controversy.
2) COLA under P.D.'s l6l4,1634,1678 and
In the process of reading and at times, having to decipher, the l7l3;and
numerous pleadings filed in the six cases, the Court found that
the main issue has been approached by the parties from almost 3) Service incentive leave from l978 upto l981.
diametrical points, thereby bringing into focus three sub- CIT is further directed to integrate into the
issues: first, whether or not allowances and other fringe benefits basic salaries of its teachers and (sic) COLA
of faculty members and other school employees may be charged under P.D.'s 525 and 1123 starting on January
against the 60% portion of the tuition fee increases provided for 1981, pursuant to P.D. 1751. For purposes of
in section 3(a) of Pres. Dec. No. 451: second, whether or not the integration, the hourly rate shown in its
same items may be charged against said portion under the Teachers' Program for school year 198182
provisions of B.P. Blg. 232: and, third, whether or not schools shall be considered as the basic hourly rate.
and their employees may enter into a collective bargaining
agreement allocating more than 60% of said incremental SO ORDERED.
proceeds for salary increases and other benefits of said
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |7
Petitioner assails the aforesaid Order in this Special Civil Action WHEREFORE, for the reasons abovestated,
of certiorari with Preliminary Injunction and/or Restraining the Order appealed from is hereby
Order. The Court issued a Temporary Restraining Order on AFFIRMED, and the appeal DISMISSED, for
December 7, 1981 against the enforcement of the questioned lack of merit.
Order of the Minister of Labor and Employment.
SO ORDERED.
B.
(Annex "K " to Petition; Rollo, p. 108, 110).
DIVINE WORD COLLEGE OF LEGAZPI CASE
This special civil action of certiorari and Prohibition with
Upon a complaint filed by ten faculty members for alleged non- Preliminary Injunction questions the interpretation of, and
compliance by herein petitioner Divine Word College of application by the respondent Deputy Minister, of the
Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances provisions of Pres. Dec. No. 45 1, as set forth in the assailed
were charged to the 60% incremental proceeds of tuition fee Order.
increase, the Labor Regulation Section of Regional Office No. V
On March 25, 1985, after considering the allegations, issues and
(Legazpi City) of the Ministry of Labor and Employment
arguments adduced in the Petition as well as the Comment
conducted an inspection of the employment records of said
thereon of the public respondent and dispensing with the
school. On the basis of the report on the special inspection that
private respondents' Comment, the Court resolved to dismiss
the school did not comply with Pres. Dec. No. 451, herein
the Petition for lack of merit (Rollo, p. 198). On April 26, 1985,
respondent Regional Director issued an Order dated May 30,
petitioner filed a Motion for Reconsideration with Motion to
1983, requiring compliance by the Divine Word College. The
Consider the Case En Banc. On June 26, 1985 the First Division
latter filed a Memorandum of Appeal from said Order which
of the Court referred the case to the Court En Banc for
the Regional Director treated as a Motion for Reconsideration. consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et al
Upon failure of the school to comply with the aforesaid Order, vs. Hon. Jaime C. Laya, etc. " since it involves the same issue on
another Order (August 2, 1983) was issued by herein the application of 60% incremental proceeds of authorized
respondent Regional Director requiring herein petitioner to pay
tuition fee increases [Rollo, p. 235]. The Court EN BANC
the faculty members- complainants (herein private resolved to accept the case. (Resolution of July 16, 1985). These
respondents) the amounts indicated therein or the total sum of cases were further consolidated with other cases involving the
Six Hundred Seventeen Thousand Nine Hundred Sixty Seven same issues.
Pesos and Seventy Seven Centavos (P 617,967.77). Petitioner's
Motion for Reconsideration of the Order was denied. C.

On appeal, the respondent Deputy Minister of Labor and FAR EASTERN UNIVERSITY CASE
Employment affirmed the Order of the Regional Director, viz: On December 17, 1978, petitioner Union filed with the Ministry
xxx xxx xxx of Labor and Employment a complaint against respondent
University for non-payment of legal holiday pay and under-
Coming now to the substantial merit of the payment of the thirteenth (13th) month pay. On July 7, 1979,
case, we share the view that the emergency
while the case was pending, the Union President, in his personal
allowances due the complainants under the capacity, filed another complaint for violation of Pres. Dec. No.
several presidential decrees (PD's 525, 1123, 451 against the same respondent.
etc.) cannot be charged by the respondent
against the 60% of the incremental proceeds The two cases were forthwith consolidated and jointly heard
from increase in tuition fees authorized under and tried. On March 10, 1980, Labor Arbiter Ruben A. Aquino
PD 451, not only because as per decision of promulgated a decision the dispositive portion of which is
the Supreme Court (UE vs. UE Faculty quoted hereunder:
Association, et. al., G.R. No. 57387, September RESPONSIVE TO THE FOREGOING,
30, 1982) said allowances whether mandated respondent is hereby directed, within ten (10)
by law or secured by collective bargaining days from receipt hereof, to:
should be taken only from the return to
investment referred to in the decree if the 1. To (sic) pay the paid legal holidays that it
school has no other resources to grant the withdrew since January 14, 1976 up to the
allowances but not from the 60% incremental present; and
proceeds, but also because to hold otherwise 2. Pay the 13th month pay differential of
would, to our mind, inevitably result in the complainant's for the covered period
loss of one benefit due the complainants-that December 16, 1975 to December 17, 1978, date
is the salary or wage increase granted them of filing of complaint for non-payment of
by PD 451. legal holiday pay and under payment of the
In other words, we believe that by paying the 13th month pay, and thereafter. Barred
complainants' allowances out of the 60% forever are money claims beyond three (3)
incremental proceeds intended for their years from the time the course (sic) of action
salary increase they are practically being occurred. Respondent's formula on
deprived of one benefit-their share in the 60% transportation allowance which was
incremental proceeds in terms of salary or deducted from the 13th month pay is thus
wage increase. subject to this prescriptive period, for

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |8


purposes of computation of differentials for for School Year 1985-1986. The relevant portions of said Order are
the 13th month pay. quoted hereunder:
The claim under PD 451 is hereby dismissed 7. Application or Use of Tuition and
for lack of merit.
Other School Fees or Charges.
SO ORDERED.
7.1. The proceeds from tuition fees and other
(Annex " E " to Petition; Rollo, p. 55, 65-66). school charges as well as other income of each
school shall be treated as an institutional fund
Both parties appealed the decision of the Labor Arbiter. On
which shall be administered and managed for
September 18, 1984, the respondent Commission disposed of the
the support of school purposes
appeal in the following manner:
strictly: Provided, That for the purpose of
RESPONSIVE TO THE FOREGOING, the generating additional financial resources or
Decision of Labor Arbiter Ruben A. Aquino income for the operational support and
in the instant case dated March 10, 1980 is maintenance of each school two or more
hereby Modified in the sense that schools may pool their institutional funds, in
complainant's claims for legal holiday pay whole or in part, subject to the prior approval
and 13th month pay are likewise dismissed of their respective governing boards.
for lack of merit and the dismissal of the claim
7.2. Tuition fees shag be used to cover the
under P.D. 451 is hereby
general expenses of operating the school in
Affirmed en (sic) toto.
order to allow it to meet the minimum
(Annex "A" to Petition: Rollo, p. 24, 35). standards required by the Ministry or any
Petitioner's Motion for Reconsideration dated September 29, other higher standard, to which the school
1984 was denied for lack of merit on November 8, 1984. Before aspires. They may be used to meet the costs of
this Court is the petition on certiorari filed by the Union operation for maintaining or improving the
assailing the abovementioned decision of the Commissioner. quality of instruction/training/research
through improved facilities and through the
D. payment of adequate and competitive
FABROS CASE compensation for its faculty and support
personnel, including compliance with
This petition is in the nature of a class suit brought by petitioners
mandated increases in personnel
in behalf of the faculty members and other employees of more
compensation and/or allowance.
than 4000 private schools nationwide. Petitioners seek to enjoin
the implementation of paragraphs 7 to 7.5 of MECS Order No. 7.3. Tuition fees shag be used to cover minimum
5, series of 1985 on the ground that the said order is null and and necessary costs including the following: (a)
void for being contrary to Pres. Dec. No. 451 and the rulings of compensation of school personnel such as teaching
the Supreme Court in the cases of University of the East v. UE or academic staff, school administrators, academic
Faculty Association [G.R. No. L-57387, September 20, 1982, 117 non-teaching personnel, and non-academic
SCRA 5541, University of Pangasinan Faculty Union v. University personnel, (b) maintenance and operating
of Pangasinan and NLRC [G.R. No. 63122, February 20, 1984, 127 expenses, including power and utilities, rentals,
SCRA 691 ], St. Louis University Faculty Club v. NLRC and St. depreciation, office supplies; and (c) interest
Louis University [G.R. No. 65585, September 28, 1984, 132 SCRA expenses and installment payments on school
debts.
380].
7.4. Not less than sixty (60) percent of the
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act
incremental tuition proceeds shall be used for
of 1982) was signed into law. On the matter of tuition and other
salaries or wages, allowances and fringe
school fees of private schools, section 42 of said law provides as
benefits of faculty and support staff,
follows:
including cost of living allowance, imputed
Sec. 42. Tuition and other School Fees. — Each costs of contributed services, thirteenth (13th)
private School shall determine its rate of month pay, retirement fund contributions,
tuition and other school fees or charges. The social security, medicare, unpaid school
rates and charges adopted by schools personnel claims and payments as may be
pursuant to this provision shall be collectible, prescribed by mandated wage orders.
and their application or use authorized collective bargaining agreements and
subject to rules and regulations promulgated voluntary employer practices, Provided That
by the Ministry of Education, Culture and increases in fees specifically authorized for
Sports. (Emphasis supplied). the purposes listed in paragraph 4.3.3 hereof
Invoking section 42 of B.P. Blg. 232, among others, as its legal shall be used entirely for those purposes.
basis, the then Minister of Education Jaime C. Laya (Italics supplied).
promulgated on April 1, 1985 the disputed MECS Order No. 25, 7.5. Other student fees and charges as may be
s. 1985 entitled Rules and Regulations To Implement the Provisions approved, including registration, library,
of B.P. Blg. 232. The Education Act of 1982, Relative to Student Fees laboratory, athletic, application, testing fees
and charges shall be used exclusively for the

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL |9


indicated purposes, including (a) the In the case of St. Louis University, its Faculty Club,
acquisition and maintenance of equipment, Administrative Personnel Association and the University itself
furniture and fixtures, and buildings, (b) the joined in a petition seeking for leave that 49% of the increase in
payment of debt amortization and interest tuition and other fees for school year 1985-1986 be released.
charges on debt incurred for school Petitioners manifested that the remaining balance shall continue
laboratory, athletic, or other purposes, and (c) to be held in escrow by the University.
personal services and maintenance and
In a resolution dated January 28, 1986, the Court resolved as
operating expenses incurred to operate the
follows:
facilities or services for which fees and
charges are collected. Accordingly, the Temporary Restraining
Order issued by this Court on May 28, 1985 is
The Petition prayed for the issuance of a temporary restraining
hereby ordered LIFTED with respect to Saint
order which was granted by this Court after hearing. The
Louis University of Baguio City in order that
dispositive portion of the resolution dated May 28, 1985 reads
it may proceed immediately with the
as follows:
implementation of salary increases for its
After due consideration of the allegations of employees.
the petition dated May 22, 1985 and the
D.
arguments of the parties, the Court Resolved
to ISSUE, effective immediately and BISCOCHO CASE
continuing until further orders from this The Espiritu Santo Parochial School and the Espiritu Santo
Court, a TEMPORARY RESTRAINING Parochial School Faculty Association were parties to a labor
ORDER enjoining the respondent from dispute which arose from a deadlock in collective bargaining.
enforcing or implementing paragraphs 7.4 to The parties entered into conciliation proceedings. The union
7.5 of MECS Order No. 25, s. 1985, which went on strike after efforts at the conciliation failed.
provide for the use and application of sixty Subsequently, a return to work agreement was forged between
per centum (60%) of the increases in tuition the parties and both agreed to submit their labor dispute to the
and other school fees or charges authorized jurisdiction of the Minister of Labor.
by public respondent for the school year 1985-
1986 in a manner inconsistent with section In the exercise of his power to assume jurisdiction, the Ministry
3(a), P.D. No. 451, (which allocates such 60% of Labor and Employment issued an Order dated April 14, 1986
of the increases exclusively "for increases in which provides for the following:
salaries or wages of the members of the IN CONSIDERATION OF ALL THE
faculty and other employees of the school FOREGOING, the Ministry hereby declares
concerned.") and directing accordingly that the strike staged by the Union to be legal and
such 60% of the authorized increases shall be orders the following:
held in escrow by the respective colleges and
a) the School to submit the pertinent record of
universities, i.e., shall be kept intact and not
employment of Romualdo Noriego to the
disbursed for any purpose pending the
Research and Information Division of the
Court's resolution of the issue of the validity
NLRC for computation of his underpayment
of the aforementioned MECS Order in
of wages and for the parties to abide by the
question.
said computation;
(Rollo, p. 21).
b) the School to submit all pertinent record of
In the same resolution, the Philippine Association of Colleges collections of tuition fee increases for school
and Universities (PACU) was impleaded as respondent. year (sic) 1982-1983, 1983-1984 and 1984-1985
Subsequent to the issuance of this resolution, four (4) schools, to the Research and Information Division of
represented in this petition, moved for the lifting of the the NLRC for proper computation and for
temporary restraining order as to them. In separate resolutions, equal distribution of the amount to all
this Court granted their prayers. employees and teachers during the
abovementioned school year (sic) as their
Ateneo de Manila University, De La Sale University (Taft salary adjustment under P.D. 461;
Avenue) and De La Salle University-South, through their
respective counsels, manifested that for the school year 1985- c) the parties to wait for the final resolution of
1986, tuition fee increase was approved by the MECS and that the illegal dismissal (case) docketed as NLRC
on the basis of Pres. Dec. No. 451, 60% of the tuition fee increases NCR Case No. 5-1450-85 and to abide by the
shall answer for salary increase. However, a budgeted salary said resolution;
increase, exclusive of living allowances and other benefits, was d) to furnish the MECS a copy of this order
approved for the same school year which when computed for them to issue the guidelines in the
amounts to more than the 60%. implementation of PRODED Program;
This Court granted the motions in separate resolutions lifting e) the parties to execute a collective bargaining
the temporary restraining order with respect to these schools in agreement with an economic package equivalent to
order that they may proceed with the implementation of the 90% of the proceeds from tuition fee increases for
general salary increase for their employees. school year 1985-1986 and another 90% for school
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 10
year 1986-1987 and 85% for school year 1987- to the 60% incremental proceeds under Pres. Dec. No. 451 which
1988. The amount aforementioned shall be divided provide for the exclusive application of the 60% incremental
equally to all members of the bargaining unit as proceeds to basic salary.
their respective salary adjustments. Such other
Acting on the petitioners' prayer, this Court immediately issued
benefits being enjoyed by the members of the
bargaining unit prior to the negotiation of the a temporary restraining order on November 25, 1986 ". . .
CBA shall remain the same and shall not be enjoining the respondents from enforcing, implementing and
reduced. proceeding with the questioned order of April 14, 1986 and
collective bargaining agreement executed between respondents
f) the School to deduct the amount equivalent to Union and the School Administration in pursuance thereof."
ten (10%) per cent of the backwages payable to all [Rollo, p. 20].
members of the bargaining unit as negotiation fee
and to deliver the same to the Union Treasurer for F.
proper disposition (Emphasis supplied). VALMONTE CASE
SO ORDERED. This Petition was filed by parents with children studying at
(Rollo, pp. 16-17) respondent school, Espiritu Santo Parochial School to nullify the
Order dated April 14, 1986 issued by public respondent, then
Pursuant to the said order, private respondent Union agreed to Minister of Labor and Employment, specifically paragraphs (e)
incorporate in their proposed collective bargaining agreement and (f) thereof, quoted in the Biscocho case.
(CBA) with the School the following:
The award contained in the said Order is the result of the
2) The Union and School Administration will assumption of jurisdiction by the public respondent over a labor
incorporate the following in their CBA - dispute involving the private respondents school and faculty
1) The computation of the association. The latter had earlier filed a notice of strike because
tuition fee increase shall be of a bargaining deadlock on the demands of its members for
gross to gross from which additional economic benefits. After numerous conciliation
the corresponding conferences held while the union was on strike, the parties
percentage of 90% will be voluntarily agreed that the public respondent shall assume
taken. The resulting jurisdiction over all the disputes between them. As to the subject
amount will be divided matter of the instant case, the public respondent found that the
among 141.5 employees for latest proposals of the respondent school was to give 85% of the
1985-86 and 132.5 proceeds from tuition fee increases for the school years to be
employees for 1986-87. divided among the teachers and employees as salary
adjustments. What the respondent faculty association offered to
1/2 of the resulting
accept was a package of 95% for school year 1985-1986, 90% for
increase will be added to
school year 1986- 1987. The respondent school offered to strike
basic and divided by 13.3
the middle of the two positions, hence the Order complained of
to arrive at monthly
by the petitioners [See Annex "A", Petition; Rollo, pp. 9, 14-15;
increase in basic. The other
Comment of the Respondent Faculty Association: Rollo, p. 26].
1/2 will be divided by 12.3
to arrive at monthly II. RESOLUTION OF THE COMMON LEGAL ISSUE
increase in living This long-drawn controversy has sadly placed on the balance
allowance. diverse interests, opposed yet intertwined, and all deserving,
xxx xxx xxx and demanding, the protection of the State. On one arm of the
balance hang the economic survival of private schools and the
4) xxx
private school system, undeniably performing a
Upon request/demand of the Union, School complementary role in the State's efforts to maintain an
win deduct from backwages of managerial adequate educational system in the country. Perched
employees and others outside the bargaining precariously on the other arm of the same balance is the much-
unit what Union win charge its own members needed financial uplift of schoolteachers, extolled for all times
in the form of attorney's fees, special as the molders of the minds of youth, hence of every nation's
assessment and union dues/agency fee. future. Ranged with them with needs and claims as insistent are
5) The signing of the CBA and payment of other school personnel. And then, anxiously waiting at the
backwages and others shall be on November sidelines, is the interest of the public at large, and of the State, in
26, 1986 at the Espiritu Santo Parochial School the continued availability to all who desire it, high-standard
Library. education consistent with national goals, at a reasonable and
affordable price.
(Rollo, pp. 3-4).
Amidst these opposing forces the task at hand becomes saddled
The herein petitioners, Jasmin Biscocho and 26 others, all with the resultant implications that the interpretation of the law
employees and faculty members of the respondent School, filed would bear upon such varied interests. But this Court can not
the present petition for prohibition to restrain the go beyond what the legislature has laid down. Its duty is to say
implementation of the April 14, 1986 Order of respondent Labor what the law is as enacted by the lawmaking body. That is not
Minister as well as the agreements arrived at pursuant thereto. the same as saying what the law should be or what is the correct
They contend that said Order and agreements affect their rights
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 11
rule in a given set of circumstances. It is not the province of the Intervenor PACU alleges that the aforecited U.E. decision does
judiciary to look into the wisdom of the law nor to question the not categorically rule that COLA and other fringe benefits
policies adopted by the legislative branch. Nor is it the business should not be charged against the 60% incremental proceeds of
of this Tribunal to remedy every unjust situation that may arise the authorized tuition fee increase.
from the application of a particular law. It is for the legislature
The Solicitor General, on the other hand, argues in support of
to enact remedial legislation if that be necessary in the premises.
the Order of the public respondent that Pres. Dec. No. 451
But as always, with apt judicial caution and cold neutrality, the
allocates the 60% proceeds of tuition fee increases exclusively
Court must carry out the delicate function of interpreting the
for salary increases of teachers and non- teaching supportive
law, guided by the Constitution and existing legislation and
personnel of the school concerned, and that the Decree does not
mindful of settled jurisprudence. The Court's function is
provide that said salary increases would take the place of the
therefore limited, and accordingly, must confine itself to the
COLA [Rollo, p. 244-245]. He cites as authority for this stance,
judicial task of saying what the law is, as enacted by the
two (2) memoranda of the then President dated June 6, 1978 and
lawmaking body.
March 30, 1979 both of which provide that the 60% incremental
FIRST SUB-ISSUE proceeds of tuition fee increases "shall be allocated for the
increase in the salaries of teachers and supportive personnel. "
A. Whether or not allowances and other
Anent the U.E. case, the Solicitor General states that the
fringe benefits of employees may be charged
Supreme Court in deciding said case took note of the stand of
against the 60% portion of the incremental
the Office of the President that the 60% incremental proceeds
proceeds provided for in sec. 3(a) of Pres. Dec.
shall be solely applied to salaries of faculty members and
No. 451.
employees.
1. Arguments raised in the Cebu Institute of Technology case
On August 7, 1986, considering the supervening events,
In maintaining its position that the salary increases it had paid including the change of administration, that have transpired
to its employees should be considered to have included the during the pendency of these cases, the Court required the
COLA, Cebu Institute of Technology (CIT) makes reference to Solicitor General to state whether or not he maintains the action
Pres. Dec. No. 451 and its Implementing Rules. The line of and position taken by his predecessor-in-office. In his
reasoning of the petitioner appears to be based on the major Compliance with said Resolution, the Solicitor General
premise that under said decree and rules, 60% of the Manifested the position that:
incremental proceeds from tuition fee increases may be applied
a. If the tuition fee increase was collected
to salaries, allowances and other benefits of teachers and other
during the effectivity oil Presidential Decree
school personnel. In support of this major premise, petitioner
No. 451, 60% thereof shall answer exclusively
cites various implementing rules and regulations of the then
for salary increase of school personnel. Other
Minister of Education, Culture and Sports, to the effect that 60%
employment benefits shall be covered by the
of the incremental proceeds may be applied to salaries,
12% allocated for return of investment, this is
allowances and other benefits for members of the faculty and
in accordance with the ruling of this
other school personnel [Petition citing Implementing Rules and
Honorable Court in University of the East vs.
Regulations of Pres. Dec. No. 451 of various dates; Rollo, pp.
U.E. Faculty Association, et. al (117 SCRA 554),
318-320]. Petitioner concludes that the salary increases it had
... and reiterated in University of Pangasinan
granted the CIT teachers out of the 60% portion of the
Faculty Union v. University of Pangasinan, et.
incremental proceeds of its tuition fee increases from 1974-1980
al. (127 SCRA 691) and St. Louis Faculty Club
pursuant to Pres. Dec. No. 451 and the MECS implementing
u. NLRC (132 SCRA 380).
rules and regulations must be deemed to have included the
COLA payable to said employees for those years [Rollo, pp. b. If the salary increase was collected during
911]. the effectivity of Batas Pambansa Blg. (sic)
232, 60% thereof shall answer not only for
With leave of Court, the Philippine Association of Colleges and
salary increase of school personnel but also
Universities, filed its Memorandum as Intervenor in support of
for other employment benefits.
the proposition that schools may pay the COLA to faculty
members and other employees out of the 60% of the increase in (Rollo, at pp. 513-514)
tuition fees. In addition to the arguments already set forth in the 2. Arguments raised in the Divine Word College Case
memorandum of the petitioner CIT, intervenor PACU attacks
the Decision of this Court in University of the East v. University of Petitioner Divine Word College of Legazpi (DWC) advances the
the East Faculty Association et. all G.R. No. 57387 as "not doctrinal" theory that the COLA, 13th month pay and other personnel
and inapplicable to the CIT case. The Court held in the UE case, benefits decreed by law, must be deemed chargeable against the
which was promulgated on September 30, 1982, during the 60% portion allocated for increase of salaries or wages of faculty
pendency of these cases, that: and all other school employees. In support of this stance,
petitioner points out that said personnel benefits are not
... allowances and benefits should be included in the enumeration of the items for which the balance
chargeable to the return to investment (less 60%) or 40% portion of the incremental proceeds may be
referred to in Sec. 3(a), if the schools should alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30.
happen to have no other resources than Petitioner likewise cites the interpretation of the respondent
incremental proceeds of authorized tuition
Minister of Education, Culture and Sports embodied in the
fee increases ... (See Dispositive Portion of the Implementing Rules and Regulations of P.D. 451, DEC Issuance,
Decision) May 13, 1987; Rollo, p. 30], that the 60% incremental proceeds of
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 12
authorized tuition fee increases may be applied to increases in As mentioned in the Cebu Institute of Technology case, the
emoluments and/or benefits for members of faculty, including Solicitor General filed its Compliance with this Court's
staff and administrative employees of the school as the valid resolution dated August 7, 1986 requiring him to manifest
interpretation of the law, as against that made by the respondent whether public respondents maintain the position they have
Deputy Minister of Labor in the assailed Order. If the latter taken in these consolidated cases. The resolution of September
interpretation is upheld, petitioner would go as far as 25, 1986 required petitioners to Comment on said Compliance.
questioning the constitutionality of Pres. Dec. No. 451 upon the
The Comment dated December 6, 1986 was received by this
ground that the same discriminates against the petitioner and
Court after petitioner Union was required to show cause why
other private schools as a class of employers. According to the
no disciplinary action should be taken against them for failure
petitioner, the discrimination takes the form of requiring said
to comply earlier. The Union agreed with the position taken by
class of employers to give 60% of their profits to their employees
the Solicitor General that under Pres. Dec. No. 451, 60% of the
in addition to the COLA mandated by law, while other
tuition fee increases, shall answer exclusively for salary increase.
employers have to contend only with salary increases and
However, it expressed disagreement with the opinion that
COLA [Petition; Rollo, p. 46].
during the effectivity of B.P. Blg. 232, the 60% ncremental
With regard to the Decision of this Court in the U.E. case, proceeds shall answer not only for salary increases but also for
petitioner claims exemption therefrom upon the ground that the other employment benefits. The Union argues that
Court's interpretation of a law cannot be applied retroactively whereas "Pres. Dec. No. 451 is a law on a particular subject, viz.,
to parties who have relied upon the previous administrative increase of tuition fee by educational institutions and how such
interpretation which has not been declared invalid or increase shall be allocated B.P. Blg. 232 is not a law on a particular
unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further subject of increase of tuition fee . . . ; at most it is a general legislation
argues on this point that if the court had intended to invalidate on tuition fee as it touches on such subject in general, " [Comment on
the MECS interpretation of the Decree, it should have positively Compliance; Rollo, p. 376], Suppletory to its argument that B.P.
stated so in the Decision [Petition; Rollo, p. 50]. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the Union
also invokes the principle that a special or particular law cannot
The Comment of the public respondents cite as settled
be repealed by a general law.
jurisprudence applicable to the case at bar, the ruling of this
Court in the U.E. case, supra, which was reiterated in the RESOLUTION OF THE FIRST SUB-ISSUE
subsequent cases of University of Pangasinan Faculty Union v. This Court has consistently held, beginning with the University
University of Pangasinan et all and St. Louis Faculty Club v. NLRC, of the East case, that if the schools have no resources other than
et al. those derived from tuition fee increases, allowances and
Public respondents Deputy Minister of Labor and Employment benefits should be charged against the proceeds of tuition fee
and Regional Director of the MOLE (Region V) likewise attack increases which the law allows for return on investments under
the validity of the Revised Implementing Rules and Regulations section 3(a) of Pres. Dec. No. 451, therefore, not against the 60%
of Pres. Dec. No. 451 cited by the petitioner insofar as said rules portion allocated for increases in salaries and wages (See 117
direct the allotment of the 60% of incremental proceeds from SCRA at 571). This ruling was reiterated in the University of
tuition fee hikes for retirement plan, faculty development and Pangasinan case and in the Saint Louis University case.
allowances. They argue that said rules and regulations were There is no cogent reason to reverse the Court's ruling in the
invalid for having been promulgated in excess of the rule- aforecited cases. Section 3(a) of Pres. Dec. No. 451 imposes
making authority of the then Minister of Education under Pres. among the conditions for the approval of tuition fee
Dec. No. 451 which mandates that the 60% of incremental increases, the allocation of 60% per cent of the incremental proceeds
proceeds from tuition fee hikes should be allotted solely for thereof for increases in salaries or wages of school personnel and not
salary increases [Comment; Rollo, pp. 184-185]. Finally, with for any other item such as allowances or other fringe benefits. As aptly
respect to the issue on the allege unconstitutionality of Pres. put by the Court in University of Pangasinan Faculty Union v.
Dec. No. 451, the public respondents posit that a legislation University of Pangasinan, supra:
(such as Pres. Dec. No. 451) which affects a particular class does
not infringe the constitutional guarantee of equal protection of ... The sixty (60%) percent incremental
the law as long as it applies uniformly and without proceeds from the tuition increase are to be
discrimination to everyone of that class [Comment; Rollo, p. 14]. devoted entirely to wage or salary increases which
means increases in basic salary. The law cannot
3. Arguments raised in the Far Eastern University case be construed to include allowances which are
It is the petitioner's contention that in respect of Pres. Dec. No. benefits over and above the basic salaries of
451, the decision of the NLRC is a defiance of the rulings of this the employees. To charge such benefits to the
Court in the cases of University of the East v. U.E. Faculty, 60% incremental proceeds would be to reduce
Association et al. and of University of Pangasinan Faculty Union the increase in basic salary provided by law,
v. University of Pangasinan and NLRC (supra). The Union an increase intended also to help the teachers
submits that monetary benefits, other than increases in basic and other workers tide themselves and their
salary, are not chargeable to the 60% incremental proceeds. families over these difficult economic times.
[Italics supplied] (127 SCRA 691, 702).
The respondent University in its Comment dated June 13, 1982
refers to Article 97(f) of the Labor Code which provides a This interpretation of the law is consistent with the legislative
definition of the term "wages" to support its position that intent expressed in the Decree itself, i.e., to alleviate the sad
"salaries or wages" as used in Pres. Dec. No. 451 should be plight of private schools and that of their personnel wrought by
interpreted to include other benefits in terms of money. slump in enrollment and increasing operational costs on the

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 13


part of the schools, and the increasing costs of living on the part B. Whether or not allowances and other fringe benefits may be
of the personnel (Preamble, Pres. Dec. No. 451). While coming charged against the 60% portion of the incremental proceeds of
to the aid of the private school system by simplifying the tuition fee increases upon the effectivity of the Education Act of
procedure for increasing tuition fees, the Decree imposes as a 1982 (B.P. Blg. 232).
condition for the approval of any such increase in fees, the
1. Arguments raised in the Fabros case
allocation of 60% of the incremental proceeds thereof, to
increases in salaries or wages of school personnel. This In assailing MECS Order No. 25, s. 1985, petitioners argue that
condition makes for a quid pro quo of the approval of any tuition the matter of allocating the proceeds from tuition fee increases
fee hike by a school, thereby assuring the school personnel is still governed by Pres. Dec. No. 451. It is their opinion that
concerned, of a share in its proceeds. The condition having been section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for
imposed to attain one of the main objectives of the Decree, the following reasons: first, there is no conflict between section
which is to help the school personnel cope with the increasing 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or any
costs of living, the same cannot be interpreted in a sense that semblance of inconsistency to deduce a case of a repeal by
would diminish the benefit granted said personnel. implication: second, Pres. Dec. No. 451 is a specific law upon a
particular subject-the purposes and distribution of the
In the light of existing laws which exclude allowances from the
incremental proceeds of tuition fee increases, while B.P. Blg. 232
basic salary or wage in the computation of the amount of
is a general law on the educational system; as such, a specific
retirement and other benefits payable to an employee, this
law is not repealed by a subsequent general law in the absence
Court will not adopt a different meaning of the terms "salaries
of a clear intention; and third, Pres. Dec. No. 451 is still the only
or wages" to mean the opposite, i.e. to include allowances in the
law on the subject of tuition fee increases there being no
concept of salaries or wages.
prescription or provision in section 42 of B.P. Blg. 232 or
As to the alleged implementing rules and regulations elsewhere in the law. They furthermore aver that the disputed
promulgated by the then MECS to the effect that allowances and MECS Order which imposed additional burdens against the
other benefits may be charged against the 60% portion of the 60% incremental proceeds of tuition fee increases are not
proceeds of tuition fee increases provided for in Section 3(a) of provided in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical
Pres. Dec. No. 45 1, suffice it to say that these were issued ultra result as intimated by petitioners is that the inclusion of
vires, and therefore not binding upon this Court. paragraph 7.4 and related paragraphs 7 to 7.3 and 7.5 in the
questioned MECS order contravenes the statutory authority
The rule-making authority granted by Pres. Dec. No. 451 is
granted to the public respondent, and the same are therefore,
confined to the implementation of the Decree and to the
void.
imposition of limitations upon the approval of tuition fee
increases, to wit: Respondent PACU takes the contrary view contending that
MECS Order No. 25, s. 1985, complies with the mandate of
SEC. 4. Rules and Regulations. — The Secretary
section 42 of B.P. Blg. 232 which law had already repealed Pres.
of Education and Culture is hereby
Dec. No. 451. PACU notes that the University of the East case
authorized, empowered and directed to issue
invoked by petitioners is not applicable because the issue in that
the requisite rules and regulations for the
case does not involve the effect of B.P. Blg. 232 on Pres. Dec. No.
effective implementation of this Decree. He
451.
may, in addition to the requirements and
limitations provided for under Sections 2 and The Solicitor General, representing the public respondent, after
3 hereof, impose other requirements and giving a summary of the matters raised by petitioner and
limitations as he may deem proper and respondent PACU, points out that the decisive issue in this case
reasonable. is whether B.P. Big. 232 has repealed Pres. Dec. No. 451 because
on the answer to this question depends the validity of MECS
The power does not allow the inclusion of other items in
Order No. 25, s. 1985. Public respondent holds the view
addition to those for which 60% of the proceeds of tuition fee
consistent with that of PACU on the matter of B.P. Blg. 232
increases are allocated under Section 3(a) of the Decree.
having repealed Pres. Dec. No. 451. To support this contention,
Rules and regulations promulgated in accordance with the the Solicitor General compared the respective provisions of the
power conferred by law would have the force and effect of law two laws to show the inconsistency and incompatibility which
[Victorias Milling Company, Inc. v. Social Security Commission, would result in a repeal by implication.
114 Phil. 555 (1962)] if the same are germane to the subjects of
RESOLUTION OF THE SECOND SUB-ISSUE
the legislation and if they conform with the standards
prescribed by the same law [People v. Maceren, G.R. No. L- On the matter of tuition fee increases section 42 of B.P. Blg. 232
32166, October 18, 1977, 79 SCRA 450]. Since the implementing provides:
rules and regulations cited by the private schools adds allowances
SEC. 42. Tuition and Other School Fees. — Each
and other benefits to the items included in the allocation of 60% of the
private school shall determine its rate of tuition
proceeds of tuition fee increases expressly provided for by law, the and other school fees or charges. The rates and
same were issued in excess of the rule-making authority of said charges adopted by schools pursuant to this
agency, and therefore without binding effect upon the courts. provision shall be collectible and their application
At best the same may be treated as administrative or use authorized, subject to rules and regulations
interpretations of the law and as such, they may be set aside by promulgated by the Ministry of Education,
this Court in the final determination of what the law means. Culture and Sports. (Emphasis supplied).
SECOND SUB-ISSUE The enactment of B.P. Blg. 232 and the subsequent issuance of
MECS Order No. 25, s. 1985 revived the old controversy on the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 14
application and use of the incremental proceeds from tuition fee return on investment, whereas B.P. Blg. 232 gives the MECS
increases. As can be gleaned from the pleadings and arguments discretion to determine the application or use of the
of the parties in these cases, one side, composed of the teachers increments. Third, the extent of the application or use of the
and other employees of the private schools, insist on the increment under Pres. Dec. No. 451 is fixed at the pre-
applicability of section 3(a) of Pres. Dec. No. 451 as interpreted determined percentage allocations; 60% for wage and salary
arid applied in the University of the East, University of Pangasinan increases, 12% for return in investment and the balance of 28%
and St Louis University cases, while the private schools uphold to institutional development, student assistance and extension
the view that the matter of allocating the incremental proceeds services, while under B.P. Blg. 232, the extent of the allocation
from tuition fee increases is governed by section 42 of B.P. Blg. or use of the increment is likewise left to the discretion of the
232 as implemented by the MECS Rules and Regulations. As MECS.
stated, the latter's argument is premised on the allegation that
The legislative intent to depart from the statutory limitations
B.P. Blg. 232 impliedly repealed Pres. Dec. No. 451.
under Pres. Dec. No. 451 is apparent in the second sentence of
On the second sub-issue, therefore, this Court upholds the view section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of
taken by the Solicitor General in the Fabros case, that the B.P. Blg. 232 which cover the same subject matter, are so clearly
decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. inconsistent and incompatible with each other that there is no
No. 451. other conclusion but that the latter repeals the former in
accordance with section 72 of B.P. Blg. 232 to wit:
In recognition of the vital role of private schools in the country's
educational system, the government has provided measures to Sec. 72. Repealing clause. — All laws or parts
regulate their activities. As early as March 10, 1917, the power thereof inconsistent with any provision of this
to inspect private schools, to regulate their activities, to give Act shall be deemed repealed or modified, as
them official permits to operate under certain conditions and to the case may be.
revoke such permits for cause was granted to the then Secretary
Opinion No. 16 of the Ministry of Justice dated January 29, 1985,
of Public Instruction by Act No. 2706 as amended by Act No.
quoted below, supports the above conclusion:
3075 and Commonwealth Act No. 180. Republic Act No. 6139,
enacted on August 31, 1970, provided for the regulation of Both P.D. No. 451 and B.P. Blg. 232 deal with
tuition and other fees charged by private schools in order to the imposition of tuition and other school fees
discourage the collection of exorbitant and unreasonable fees. In or charges and their use and application,
an effort to simplify the "cumbersome and time consuming" although the latter is broader in scope as it
procedure prescribed under Rep. Act No. 6139 and "to alleviate covers other aspects of the education system.
the sad plight of private schools," Pres. Dec. No. 451 was enacted We note substantial differences or
on May 11, 1974. While this later statute was being inconsistencies between the provisions of the
implemented, the legislative body envisioned a comprehensive two laws. P.D. No. 451 prescribes certain
legislation which would introduce changes and chart directions limitations in the increase of tuition and other
in the educational system, hence, the enactment of B.P. Blg. 232. school fees and their application, whereas the
What then was the effect of B.P. Blg. 232 on Pres. Dec. No. 451? latter law, B.P. Blg. 232 s silent on the matter.
Under P.D. 451, rates of tuition/school fees
The Court after comparing section 42 of B.P. Blg. 232 and Pres.
need prior approval of the Secretary of
Dec. No. 451, particularly section 3(a) thereof, finds evident
Education, Culture (now Minister of
irreconcilable differences.
Education, Culture and Sports), who also
Under Pres. Dec. No. 451, the authority to regulate the determines the reasonable rates for new
imposition of tuition and other school fees or charges by private school fees, whereas under B.P. Blg. 232, each
schools is lodged with the Secretary of Education and Culture private school determines its rate of tuition
(Sec. 1), where section 42 of B.P. Blg. 232 liberalized the and other school fees or charges. P.D. No. 451
procedure by empowering each private school to determine its authorizes the Secretary of Education and
rate of tuition and other school fees or charges. Culture to issue requisite rules and
regulations to implement the said Decree and
Pres. Dec. No. 451 provides that 60% of the incremental
for that purpose, he is empowered to impose
proceeds of tuition fee increases shall be applied or used to
other requirements and limitations as he may
augment the salaries and wages of members of the faculty and
deem proper and reasonable in addition to
other employees of the school, while B.P. Blg. 232 provides that
the limitations prescribed by the Decree for
the increment shall be applied or used in accordance with the
increases in tuition fees and school charges,
regulations promulgated by the MECS.
particularly, the limitations imposed in the
A closer look at these differences leads the Court to resolve the allocation of increases in fees and charges,
question in favor of repeal. As pointed out by the Solicitor whereas under B.P. Blg. 232, the collection
General, three aspects of the disputed provisions of law support and application or use of rates and charges
the above conclusion. First, the legislative authority under Pres. adopted by the school are subject to rules and
Dec. No. 451 retained the power to apportion the incremental regulations promulgated by the Ministry of
proceeds of the tuition fee increases; such power is delegated to Education, Culture and Sports without any
the Ministry of Education and Culture under B.P. Blg. mention of the statutory limitations on the
232. Second, Pres. Dec. No. 451 limits the application or use of application or use of the fees or charges. The
the increment to salary or wage increase, institutional authority granted to private schools to
development, student assistance and extension services and determine its rates of tuition and

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 15


unconditional authority vested in the tuition fees constitute both as [sic] an excess of statutory
Ministry of Education, Culture and Sports to authority and as (sic) a substantial impairment of the accrued,
determine by rules and regulations the existing and protected rights and benefits of the members of
collection and application or use of tuition or faculty and non-academic personnel of private schools."
fees rates and charges under B.P. Big. 232 Memorandum for Petitioners, Rollo, p. 1911. Petitioners alleged
constitute substantial and irreconcilable that these additional burdens under the MECS Order are not
incompatibility with the provisions of P.D. provided in the law itself, either in section 42 of B.P. Blg. 232 or
No. 451, which should be for that reason section 3(a) of Pres. Dec. No. 451, except increases in salaries in
deemed to have been abrogated by the the latter provision.
subsequent legislation.
Section 42 of B.P. Blg. 232 grants to the Minister of Education
Moreover, B.P. Blg. 232 is a comprehensive (now Secretary of Education) rule-making authority to fill in the
legislation dealing with the establishment details on the application or use of tuition fees and other school
and maintenance of an integrated system of charges. In the same vein is section 70 of the same law which
education and as such, covers the entire states:
subject matter of the earlier law, P.D. No. 451.
SEC. 70. Rule-making Authority. — The
The omission of the limitations or conditions
Minister of Education, Culture and Sports
imposed in P.D. No. 451 for increases in
charged with the administration and
tuition fees and school charges is an
enforcement of this Act, shall promulgate the
indication of a legislative intent to do away
necessary implementing rules and
with the said limitations or conditions.
regulations.
(Crawford, supra, p. 674). It has also been said
that — Contrary to the petitioners' insistence that the questioned rules
and regulations contravene the statutory authority granted to
an act which purports to
the Minister of Education, this Court finds that there was a valid
set out in full all that it
exercise of rule-making authority.
intends to contain,
operates as a repeal of The statutory grant of rule-making power to administrative
anything omitted which agencies like the Secretary of Education is a valid exception to
was contained in the old the rule on non-delegation of legislative power provided two
act and not included in the conditions concur, namely: 1) the statute is complete in itself,
amendatory act." (People setting forth the policy to be executed by the agency, and 2) said
vs. Almuete 69 SCRA 410; statute fixes a standard to which the latter must conform [Vigan
People vs. Adillo 68 SCRA Electric Light Co., Inc. v. Public Service Commission, G.R. No.
90) (Ministry of Justice, Op. L-19850, January 30, 1964, and Pelaez v. Auditor General, G. R.
No. 16, s. 1985). No. L-23825, December 24, 1965].
Having concluded that under B.P. Big. 232 the collection and The Education Act of 1982 is "an act providing for the establishment
application or use of tuition and other school fees are subject and maintenance of an integrated system for education " with the
only to the limitations under the rules and regulations issued by following basic policy:
the Ministry, the crucial point now shifts to the said It is the policy of the State to establish and
implementing rules. maintain a complete, adequate and integrated
The guidelines and regulations on tuition and other school fees system of education relevant to the goals of
issued after the enactment of B.P. Blg. 232 consistently permit national development. Toward this end, the
the charging of allowances and other benefits against the 60% government shall ensure, within the context
incremental proceeds. Such was the tenor in the MECS Order of a free and democratic system, maximum
No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS Order No. contribution of the educational system to the
25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. attainment of the following national
37, s. 1987. The pertinent portion of the latest order reads thus: development goals:
In any case of increase at least sixty percent 1. To achieve and maintain an accelerating
(60%) of the incremental proceeds should be rate of economic development and social
allocated for increases in or provisions for progress;
salaries or wages, allowances and fringe 2. To assure the maximum participation of all
benefits of faculty and other staff, including the people in the attainment and enjoyment
accruals to cost of living allowance, 13th of the benefits of such growth; and
month pay, social security, medicare and
retirement contribution and increases as may 3. To achieve and strengthen national unity
be provided in mandated wage orders, and consciousness and preserve, develop and
collective bargaining agreements or promote desirable cultural, moral and
voluntary employer practices. spiritual values in a changing world.

The validity of these orders, particularly MECS Order No. 25, s. The State shall promote the right of every
1985, is attacked on the ground that the additional burdens individual to relevant quality education,
charged against ". . . the 60% of the proceeds of the increases in regardless of sex, age, creed, socioeconomic
status, physical and mental conditions, racial
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 16
or ethnic origin, political or other affiliation. society, in the realization that only in such an
The State shall therefore promote and atmosphere can the true goals and objectives
maintain equality of access to education as of education be fulfilled.
well as the enjoyment of the benefits of
Moreover, the State shall:
education by all its citizens.
1. Aid and support the natural right and duty
The State shall promote the right of the
of parents in the rearing of the youth through
nation's cultural communities in the exercise
the educational system.
of their right to develop themselves within
the context of their cultures, customs, 2. Promote and safeguard the welfare and
traditions, interests and belief, and recognizes interests of the students by defining their
education as an instrument for their rights and obligations, according them
maximum participation in national privileges, and encouraging the
development and in ensuring their establishment of sound relationships between
involvement in achieving national unity. them and the other members of the school
(Section 3, Declaration of Basic Policy). community.
With the foregoing basic policy as well as, specific policies 3. Promote the social and economic status of
clearly set forth in its various provisions, the Act is complete in an school personnel, uphold their rights,
itself and does not leave any part of the policy-making, a strictly define their obligations, and improve their
legislative function, to any administrative agency. living and working conditions and career
prospects.
Coming now to the presence or absence of standards to guide
the Minister of Education in the exercise of rule-making power, 4. Extend support to promote the viability of
the pronouncement in Edu v. Ericta [G.R. No. L-32096, October those institutions through which parents,
24, 1970, 35 SCRA 481, 497] is relevant: students and school personnel seek to attain
their educational goals.
The standard may be either expressed or
implied. If the former, the non-delegation On the other hand, the policy on the funding of schools in
objection is easily met. The standard though general, are laid down in section 33:
does not have to be spelled out specifically. It SEC. 33. Declaration of Policy. — It is hereby
could be implied from the policy and purpose declared to be a policy of the State that the
of the act considered as a whole. In the national government shall contribute to the
Reflector Law, clearly the legislative objective financial support of educational programs
is public safety. What is sought to be attained pursuant to the goals of education as declared
as in Calalang v. Williams is "safe transit in the Constitution. Towards this end, the
upon the roads." (Italics supplied). government shall:
Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. 1. Adopt measures to broaden access to
(G.R. No. 78164, July 31, 1987], the Court held that the necessary education through financial assistance and
standards are set forth in Section 1 of the 1959 Medical Act, i.e., other forms of incentives to schools, teachers,
"the standardization and regulation of medical education" as pupils and students; and
well as in other provisions of the Act. Similarly, the standards
to be complied with by Minister of Education in this case may 2. Encourage and stimulate private support to
be found in the various policies set forth in the Education Act of education through, inter alia, fiscal and other
1982. assistance measures.

MECS Order No. 25, s. 1985 touches upon the economic Given the abovementioned policies and objectives, there are
relationship between some members and elements of the sufficient standards to guide the Minister of Education in
educational community, i.e., the private schools and their promulgating rules and regulations to implement the
faculty and support staff. In prescribing the minimum provisions of the Education Act of 1982, As in
percentage of tuition fee increments to be applied to the salaries, the Ericta and Tablarin cases, there is sufficient compliance with
allowances and fringe benefits of the faculty and support staff, the requirements of the non-delegation principle.
the Act affects the economic status and the living and working THIRD SUB-ISSUE
conditions of school personnel, as well as the funding of the
C. Whether or not schools and their
private schools.
employees may enter into a collective
The policies and objectives on the welfare and interests of the bargaining agreement allocating more than
various members of the educational community are found in 60% of said incremental proceeds for salary
section 5 of B.P. Blg. 232. which states: increases and other benefits of said
SEC. 5. Declaration of Policy and Objectives. — employees.
It is likewise declared government policy to 1. Arguments raised in the Biscocho and Valmonte cases
foster, at all times, a spirit of shared purposes
Assailed by the petitioners in the Biscocho and
and cooperation among the members and
the Valmonte cases is the Order of the respondent Minister of
elements of the educational community, and
Labor directing the execution of a CBA between the school and
between the community and other sectors of
the respondent Espiritu Santo Parochial School Faculty
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 17
Association which provides for an economic package equivalent representative of the parents' association in the School or in
to 90% of the proceeds of tuition fee increases for school year behalf of other parents similarly situated.
1985-1986, another 90% for school year 1986-1987 and 85% for
If indeed, petitioners Valmonte and Badiola are aggrieved by
school year 1987-1988. Pursuant to said Order, petitioners in
the said Order, they should have intervened and moved for a
the Biscocho case alleged that the parties had agreed to
reconsideration of respondent Minister's Order before filing the
incorporate in their CBA a provision which allocates one-half
instant petition. Petitioners failed to show that the case falls
(1/2) of the 90% portion of the proceeds or 45% to increases in
under any one of the recognized exceptions to the rule that a
the monthly basic salaries and the other one-half (1/2) or 45% to
motion for reconsideration should first be availed of before
increases in monthly living allowance.
filing a petition for certiorari and prohibition.
The petitioners in the two cases seek the nullification of the
In view of the foregoing, the resolution of the third sub-issue
MOLE Order for exactly opposite reasons. In the Biscocho case,
will be based mainly on the arguments raised in
the controversy springs from what petitioners perceive to be a
the Biscocho case.
diminution of the benefits to be received by the school
employees insofar as the CBA allocates only 45% for salary RESOLUTION OF THE THIRD SUB-ISSUE
increases instead of 60%, which petitioners claim to be the The Biscocho case involves the issue on the allocation of the
portion set aside by Pres. Dec. No. 451 for that purpose. incremental proceeds of the tuition fee increases applied for by
Parenthetically, the case questions the allocation of the the respondent Espiritu Santo Parochial School for school years
remaining 45% of the 90% economic package under the CBA, to 1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres.
allowances. Stripped down to its essentials, the question is Dec. No. 451 by B.P. Blg. 232, the allocation of the proceeds of
whether or not the 90% portion of the proceeds of tuition fee any authorized tuition fee increase must be governed by specific
increases alloted for the economic package may be allocated for rules and regulations issued by the Minister (now Secretary) of
both salary increases and allowances. Education pursuant to his broadened rule making authority
On the other hand, petitioners in the Valmonte case believe that under section 42 of the new law. Thus, insofar as the proceeds
the MOLE cannot order the execution of a CBA which would of the authorized tuition fee increases for school year 1985-1986
allocate more than 60% of the proceeds of tuition fee increases are concerned, the allocation must conform with the pertinent
for salary increases of school employees. Furthermore, section of MECS Order No. 25, s. 1985, to wit:
petitioners question the authority of the then Minister of Labor 7. Application or Use of Tuition and Other School
and Employment to issue the aforequoted Order insofar as this Fees or Charges.
allocates the tuition fee increases of the respondent private
school. According to them, only the Minister of Education, xxx xxx xxx
Culture and Sports has the authority to promulgate rules and 7.4. Not less than sixty (60) percent of the
regulations on the use of tuition fees and increases thereto, incremental tuition proceeds shall be used for
pursuant to the provisions of B.P. Blg. 232. They further argue salaries or wages, allowances and fringe
that the assailed Order collides with the provisions of Pres. Dec. benefits of faculty and support staff,
No. 451 insofar as it allocates 90% of the tuition fee increases for including cost of living allowance, imputed
salary adjustments of the members of the bargaining unit which costs of contributed services, thirteenth (13th)
exceeds the 60% of the said increases allocated by the Decree for month pay, retirement fund contributions,
the same purpose. social security, medicare, unpaid school
Before delving further into the questions raised, this Court notes personnel claims, and payments as may be
that in the Valmonte case, respondent Minister and respondent prescribed by mandated wage orders,
Faculty Association raise a procedural objection to the filing of collective bargaining agreements and
the Petition: the standing of the petitioners to bring this suit. voluntary employer practices: Provided, That
Both respondents decry the petitioners' lack of the interest increases in fees specifically authorized for
required in Rule 65 of the Rules of Court for the filing of the the purposes fisted in paragraph 4.3.3 hereof
Petition for certiorari and Prohibition, since the latter do not shall be used entirely for those purposes.
appear to be in any way aggrieved by the enforcement of the xxx xxx xxx
Order. Petitioners-parents did not even participate in the
With regard to the proceeds of the tuition fee increases for
proceedings below which led to the issuance of the assailed
school year 1986-1987, the applicable rules are those embodied
Order.
in MECS Order No. 22, s. 1986 which made reference to MECS
This Court finds merit in the respondents' objection. Under Rule Order No. 25, s. 1985, the pertinent portion of which is quoted
65 of the Rules of Court (Secs. 1 and 2), only a person aggrieved above.
by the act or proceeding in question may file a petition for
Finally, as to the proceeds of the tuition fee increases for school
certiorari and/or prohibition. The Valmonte petition fails to
year 1987- 1988, DECS Order No. 37, s. 1987 must apply:
indicate how the petitioners would be aggrieved by the assailed
Order. It appears that the petitioners are not parties and never c. Allocation of lncremental Proceeds
at any time intervened in the conciliation conferences and
(1) In any case of increase at least sixty percent
arbitration proceedings before the respondent Minister. The
(60%) of the incremental proceeds should be
parties therein, who stand to be directly affected by the Order of
allocated for increases in or provisions for
the respondent Minister, do not contest the validity of said salaries or wages, allowances and fringe
Order. The petition does not even state that petitioners act as benefits of faculty and other staff, including
accruals to cost of living allowance, 13th
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 18
month pay, social security, medicare and 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee, petitioner
retirement contributions and increases as was represented by its counsel, registrar and assistant
may be provided in mandated wage orders, accountant and in the conferences that were held, the
collective bargaining agreements or representatives of the petitioner were present. Furthermore, the
voluntary employer practices. petitioner's position paper submitted to the committee reflects
that in all the deliberations, it was never denied the right to
(2) Provided, that in all cases of increase the
present evidence and be heard on all the issues raised,
allocation of the incremental proceeds shall
particularly to demonstrate that it had complied with the
be without prejudice to the Supreme Court
various COLA, 13th month pay and service incentive leave
cases on the interpretation and applicability
decrees. The evidence presented during the conferences and the
of existing legislations on tuition and other
position paper of the parties were made the basis of the
fees especially on the allocation and use of
committee's report and recommendation which in turn became
any incremental proceeds of tuition and other
the basis of the order of the Minister of Labor directing the
fees increases. (Emphasis supplied).
petitioner to pay the complainants their COLA and service
xxx xxx xxx incentive leave benefits.
Based on the aforequoted MECS and DECS rules and It could not therefore be contended that the petitioner was
regulations which implement BP Blg. 232, the 60% portion of the deprived of his right to be heard when it appears on the record
proceeds of tuition fee increases may now be allotted for both that it was permitted to ventilate its side of the issues. There was
salaries and allowances and other benefits. The 60% figure is, sufficient compliance with the requirements of due process. In
however, a minimum which means that schools and their the face of the well- settled principle that administrative
employees may agree on a larger portion, or in this case, as agencies are not strictly bound by the technical rules of
much as 90% for salaries and allowances and other benefits. This is procedure, this Court dismisses the petitioner's claim that
not in anyway to allow diminution or loss of the portion allotted formal investigative and arbitration proceedings should be
for institutional development of the school concerned. Thus, conducted. "While a day in court is a matter of right in judicial
paragraph 7.5 of MECS Order No. 25, series of 1985 specifically proceedings, in administrative proceedings it is otherwise since
provides that other student fees and charges like registration, they rest upon different principles." [Cornejo v. Gabriel and
library, laboratory or athletic fees shall be used exclusively for Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v.
the purposes indicated. Lamaroza, G.R. Nos. L-48907 and L-49035, December 19,1981,
III RESOLUTION OF THE SPECIFIC ISSUES 110 SCRA 438].

CEBU INSTITUTE OF TECHNOLOGY CASE 2. Going now to the matter of service incentive leave benefits,
petitioner claims that private respondents are engaged by the
Petitioner assigns three other errors in the petition for certiorari: school on a contract basis as shown by the individual teachers
1 contract which defines the nature, scope and period of their
employment; hence, they are not entitled to the said benefit
RESPONDENT MINISTER OF THE MINISTRY OF LABOR
according to Rule V of the Implementing Rules and Regulations
AND EMPLOYMENT COMMITTED GRAVE ABUSE OF
of the Labor Code to wit:
DISCRETION AMOUNTING TO A DENIAL OF DUE
PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER Sec. 1. Coverage. — This rule [on Service
DATED SEPTEMBER 29,1981 WITHOUT CONDUCTING A Incentive Leave] shall apply to all employees,
FORMAL INVESTIGATION AND ARBITRATION except:
PROCEEDINGS. xxx xxx xxx
2 (d) Field personnel and other employees
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT whose performance is unsupervised by the
PETITIONER IS EXEMPTED AND/OR NOT OBLIGED TO employer including those who are engaged
PAY SERVICE INCENTIVE LEAVE. on task or contract basis, purely commission
basis, or those who are paid in a fixed amount
3
for performing work irrespective of the time
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT consumed in the performance thereof;
PRIVATE RESPONDENTS' CLAIMS FOR COLA AND (MOLE Rules and Regulations, Rule V, Book
SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY III)
LACHES AND/OR EXTINGUISHED BY PRESCRIPTION.
The phrase "those who are engaged on task or contract basis" should
1. Petitioner assails the Order of the Minister of Labor on the however, be related with "field personnel " applying the rule
ground that the same was issued without the benefit of a on ejusdem generis that general and unlimited terms are
hearing and was merely based on the report of the labor restrained and limited by the particular terms that they follow,
management committee which is allegedly without power to [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA 379].
pass upon the issues raised. On this premise, petitioner claims Clearly, petitioner's teaching personnel cannot be deemed field
that it was denied its right to due process. personnel which refers "to non-agricultural employees who
regularly perform their duties away from the principal place of
Petitioner's contention is without merit. The Labor Management
business or branch office of the employer and whose actual
Committee was empowered to investigate the complaint
hours of work in the field cannot be determined with reasonable
against the petitioner for non-payment of the cost of living
certainty. [Par. 3, Article 82, Labor Code of the Philippines].
allowance, 13th month pay and service incentive leave from
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 19
Petitioner's claim that private respondents are not entitled to the DIVINE WORD COLLEGE CASE
service incentive leave benefit cannot therefore be sustained.
In assailing the disputed Order, petitioner contends that the
3. As a last ditch effort to bar private respondents'claims, public respondents acted with grave and patent abuse of
petitioner asserts that the same are barred by laches and/or discretion amounting to lack of jurisdiction in that:
extinguished by prescription according to Article 291 of the
1. The Regional Director has no jurisdiction
Labor Code which provides:
over money claims arising from employer-
Art. 291. Money claims. — All money claims employee relationship; and
arising from employer-employee , relations
2. The Regional Director and Deputy Minister
accruing during the effectivity of this Code
of Labor adopted the report of the Labor
shall be filed within three (3) years from the
Standards Division without affording the
time the cause of action accrued; otherwise,
petitioner the opportunity to be heard.
they shall be forever barred.
1. Petitioner school claims that the case at bar is a money claim
All money claims accruing prior to the
and should therefore be within the original and exclusive
effectivity of this Code shall be filed with the
jurisdiction of the Labor Arbiter pursuant to article 217 of the
appropriate entities established under this
Labor Code, as amended.
Code within one (1) year from the date of
effectivity, and shall be processed or It appears from the record, however, that the original complaint
determined in accordance with implementing filed by ten (10) faculty members of the Divine Word College
rules and regulations of the Code; otherwise, was for non-compliance with Pres. Dec. No. 451 and with Labor
they shall be forever barred. Code provisions on service incentive leave, holiday and rest day
pay and which complaint specifically prayed that an inspection
xxx xxx xxx
of the College be conducted.
Considering that the complaint alleging non-payment of
Contrary to the petitioner's protestation of lack of jurisdiction,
benefits was filed only on February 11, 1981, petitioner argues
the Secretary of Labor or his duly authorized representatives
that prescription has already set in.
(which includes Regional Directors) are accorded the power to
From the aforequoted provision, it is not fully accurate to investigate complaints for non- compliance with labor laws,
conclude that the entire claims for COLA and service incentive particularly those which deal with labor standards such as
leave are no longer recoverable. This Court finds no reason to payment of wages and other forms of compensation, working
disturb the following pronouncement of the Minister of Labor: hours, industrial safety, etc. This is provided for in article 128 of
the Labor Code, as amended:
xxx xxx xxx
Art. 128. Visitorial and enforcement power.
Simply stated, claims for COLA under P.D.

525, which took effect on August 1, 1974, for
the months of August, September and (a) The Secretary of Labor or his duly
October 1974 must be filed within one (1) year authorized representatives including labor
from November 1, 1974, otherwise they shall regulation officers, shall have access to
be considered prescribed; claims under the employers' records and premises at any time
same decree that accrued on or after of the day or night, whenever work is being
November 1, 1974 should be initiated within undertaken therein, and the right to copy
three (3) years from the date of accrual therefrom, to question any employee and
thereof, otherwise the same shall be deemed investigate any fact, condition or matter
extinguished. Although this particular claim which may be necessary to determine violations
was filed on February 11, 1981, petitioners or which may aid in the enforcement of this Code
herein are entitled to COLA under P.D. 525 and of any labor law, wage order or rules and
from February 1978 up to the present since regulations issued pursuant thereto.
the COLA that accrued in February 1978 has (b) The Secretary of Labor or his duly
not yet prescribed at the time that the claim authorized representatives shall have the
was filed in February 1981. In the same vein, power to order and administer, after due
petitioners herein should be granted COLA notice and hearing, compliance with the labor
under P.D. 1123 from February 1978 up to standards provisions of this Code based on the
1981 inasmuch as said decree became findings of labor regulation officers or industrial
effective only on May 11, 1977. Further, safety engineers made in the course of
petitioners are entitled to the full amount of inspection, and to issue writs of execution to
COLA provided under P.D.'s 1614, 1634, 1678 the appropriate authority for the enforcement
and 1713. It must be pointed out that the of their order, except in cases where the
earliest of the just cited four (4) decrees, i.e., employer contests the findings of the labor
P.D. 1614, just took effect on April 1, 1979. regulations officer and raises issues which
Thus, the prescriptive period under Art. 292 cannot be resolved without considering
of the Labor Code, as amended, does not as evidentiary matters that are not verifiable in
yet apply to money claims under the just the normal course of inspection. (Emphasis
mentioned decrees. supplied).

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 20


Furthermore, Policy Instruction No. 6 which deals with the basic salary of not more than Pl,000 a month, regardless of the
distribution of jurisdiction over labor cases restates inter alia nature of the employment, a 13th- month pay" (Sec. 1).
that "(L)abor standards cases arising from violation of labor However, "employer[s] already paying their employees a 13th-
standards laws discovered in the course of inspection or month pay or its equivalent are not covered" (Sec. 2). (Emphasis
complaints where employer-employee relations still exist" are supplied)
under the exclusive original jurisdiction of the Regional
The Rules and Regulations Implementing Pres. Dec. No. 851
Director.
provide the following:
Even assuming that respondent Regional Director was without
SEC. 3. Employees. — The Decree shall apply
jurisdiction to entertain the case at bar, petitioner is now barred
to all employers except to: ...
at this stage to claim lack of jurisdiction having actively
participated in the proceedings below. Petitioner never c) Employers already paying their employees
questioned the jurisdiction of the respondent Regional Director. 13th-month or more in a calendar year or its
equivalent at the time of this issuance; ...
2. The petitioner claims that it was never afforded the
opportunity to be heard and was therefore denied due process. xxx xxx xxx
There is no dispute that an inspection of the College was The term "its equivalent" as used in
conducted after a complaint by some faculty members was filed paragraph (c) hereof shall include Christmas
with the Regional Office of the Ministry of Labor and bonus, mid-year bonus, profit-sharing
Employment. A report was submitted on the basis of the payments and other cash bonuses amounting
findings contained therein. Petitioner was furnished a copy of to not less than 1/12th of the basic salary but
said report to which it filed a comment. Finding this to be shall not include cash and stock dividends,
without merit, the Regional Director issued an order giving cost of living allowances and all other
petitioner ten (10) days to manifest its compliance with the allowances regularly enjoyed by the
findings, otherwise, another would be issued to enforce employer, as well as non-monetary benefits.
payment. Petitioner appealed but instead of resolving the Where an employer pays less than 1/1 2th of
memorandum of appeal, which the Regional Director treated as the employees basic salary, the employer
a motion for reconsideration, said Director issued another Order shall pay the difference.
dated August 2, 1983 directing the payment of the employees' In the case at bar, the 13th month pay is paid in the following
share in the sixty (60%) percent incremental proceeds. Petitioner manner:
moved for a reconsideration of the latest order which the
Regional Director, however, denied, thereby elevating the case FOR REGULAR EMPLOYEES:
to the Office of the Minister of Labor and Employment. Transportation Allowance (TA)
The foregoing facts demonstrate that petitioner had the 50% of basic for the first year of service plus
opportunity to refute the report on the inspection conducted. It additional 5% every year thereafter but not to
submitted a comment thereto, which was in effect its position exceed 100% of basic salary
paper. The arguments therein and evidence attached thereto
Christmas Bonus (CB)
were considered by respondent Regional Director in the order
issued subsequently. They, therefore, had ample opportunity to 50% of basic salary for the first year of service
present their side of the controversy. plus additional 5% every year thereafter but
not to exceed 100% of basic salary.
What due process contemplates is not merely the existence of an
actual hearing. The "right to be heard" focuses more on the For employees who have served the
substance rather than the form. In the case at bar, petitioner was University for more than 10 years, the
actually heard through the pleadings that it filed with the University pays them emoluments equivalent
Regional Office V. As it itself admitted in its petition that it was to the 14 months salaries.
afforded the right to be heard on appeal [See Rollo, p. 581,
13th Month Pay Formula:
petitioner cannot therefore insist that it was denied due process.
Monthly Rate x No. of
FAR EASTERN UNIVERSITY CASE
months served for the year
Two other issues are raised in this petition, to wit:
Less TA/CB = 13th Mo. pay
1
12 months
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE'
SHOULD BE CONSIDERED AS 'EQUIVALENT TO 13TH- FOR CASUAL EMPLOYEES:
MONTH PAY UNDER PRES. DEC. NO. 851. 13th Month Pay Formula:
2 Add salaries from 16 December of previous year to 15th
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT December of present year [and] divide by 12 months = 13th Mo.
COULD BE VALIDLY WITHDRAWN AFTER BEING Pay (Rollo, pp. 60, 72).
PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS. The University's answer to the Union's claim of underpayment
1. The issue on the thirteenth (13th) month pay involves an of the 13th month pay is that the "transportation allowance"
interpretation of the provisions of Pres. Dec. No. 851 which paid to its employees partakes the nature of a mid-year bonus
requires all employers "to pay all their employees receiving a which under section 2 of Pres. Dec. No. 851 and section 3(c) of
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 21
the Implementing Rules and Regulations is equivalent to the every March of each year as distinguished
13th month pay, from other allowances that are being paid on
a monthly basis or on a bimonthly basis; that
The Labor Arbiter ordered FEU to pay the 13th month pay
the amount of transportation allowance to be
differentials of the complainants reasoning that:
paid is dependent on the length of service of
CLEARLY, transportation allowance cannot the employee concerned (i.e. 50% basic in the
be considered as equivalent" of 13th month first year and additional 5% for each
pay as it is neither a Christmas bonus, mid- succeeding years, etc.); that the said method
year bonus, profit sharing payment, or other of computing the amount of the
cash bonuses, pursuant to paragraphs (c) and transportation allowance to be paid the
(e), Section 3 of PD 851. The regularity of its complainants is Identical to that used in
payment further cements this proposition. determining Christmas bonus (respondent's
PERFORCE, complainants are underpaid of exhibit 8) that the reason behind said
their 13th month pay in an amount equivalent transportation allowance is to financially
to 50% of their basic salary for the lst year of assist employees in meeting their tax
service, plus additional 5% every year obligations as the same become due on or
thereafter but not to exceed 100% of their about the month of March of each year.
basic salary which, per respondent's formula, xxx xxx xxx
corresponds to their transportation
We are inclined to believe and so hold that by
allowance. (Rollo, p. 61).
the manner by which said transportation
On appeal, the Third Division of the National Labor Relations allowance is being paid (only once a year) as
Commission reversed the Labor Arbiter's ruling by dismissing well as the method in determining the
the complainant's claim for underpayment of the 13th month amount to be paid (similar to Christmas
pay for lack of merit. The NLRC ruled that: bonus) and considering further the reason
From the above findings and conclusion, it is behind said payment (easing the burden of
clear that insofar as employees with ten (10) taxpayer-employee), the said transportation
years of service or more are concerned, they allowance given out by respondent while
receive the equivalent of one (1) month pay designating as such, partakes the nature of a
for Christmas bonus and another one (1) mid-year bonus. It bears to note in passing
month pay as transportation allowance or a that in providing for transportation
total of fourteen (14) months salary in a year. allowance, respondent was not compelled by
Obviously, this group of employees are fully law nor by the CBA (Annex "A" of
paid of their 13th month pay and are not respondent's Appeal) as nowhere in the CBA
therefore subject to the instant claim. As it is nor in the Labor Code can be found any
only those with less than ten (10) years of provision on transportation allowance. It was
service are included or encompassed by the therefore a benefit that stemmed out purely
Labor Arbiter's resolution on this particular from the voluntary act and generosity of the
issue. With this clarification, we shall now respondent FEU. Moreover, said
proceed to discuss the crux of the transportation allowance is only being paid
controversy, that is, the determination of once a year. On the other hand, regular
whether or not the so designated allowances not considered as 13th month pay
"transportation allowance" being paid to the equivalent under P.D. 851, to our mind, refer
employees should be considered among to those paid on regular intervals and
those deemed equivalent to 13th month pay. catering for specific employees' needs and
As adverted earlier, the Labor Arbiter opined requirements that recur on a regular basis.
that it cannot be so considered as the Verily, if the intendment behind the disputed
equivalent of 13th month pay. transportation allowance is to answer for the
daily recurring transportation expenses of the
xxx xxx xxx employees, the same should have been paid
In passing upon the issue, we deemed it best to employees on regular periodic intervals.
to delve deeper into the nature and All indications, as we see it, point out to
intendment of the transportation allowances conclusion that the disputed transportation
as designated by both the complainants and allowance, while dominated as such
the respondent. Complainants claim that the apparently for lack of better term, is in fact a
transportation allowance they enjoy has form of bonus doled out by the respondent
always been called and termed allowance and during the month of March every year.
never as bonus since the time the same was Hence, we hold that it is one of those that can
given to them. They assert that it simply was very well be considered as equivalent to the
intended as an allowance and not a bonus. It 13th month pay (Rollo, pp. 73, 74, 75, 76).
would appear however that complainants do
not dispute respondent's stand that This Court sustains the aforequoted view of public respondent.
transportation allowance is being paid only The benefit herein designated as "transportation allowance" is a

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 22


form of bonus equivalent to the 13th month pay. Nevertheless, purpose, never intended to bring about such oppressive
where this does not amount to 1/12 of the employees basic situation. (p. 944)
salary, the employer shall pay the difference.
2. Presidential Decree No. 570-A was issued on November 1,
The evident intention of the law was to grant an additional 1974 amending certain articles of Presidential Decree No. 442
income in the form of a 13th month pay to employees not (Labor Code of the Philippines promulgated on May 1, 1974
already receiving the same. This Court ruled in National which took effect six months thereafter). Section 28 thereof
Federation of Sugar Workers (NFSW) v. Ovejera [G.R. No. 59743, provides that:
May 31, 1982, 114 SCRA 354].
Section 28. A new provision is hereby
Otherwise put, the intention was to grant substituted in lieu of the original provision of
some relief — not to all workers — but only Article 258 of the same Code to read as
to the unfortunate ones not actually paid a follows:
13th month salary or what amounts to it, by
Art. 258. Right to holiday pay-
whatever name called: but it was not
envisioned that a double burden would be (a) Every worker shall be paid his regular
imposed on the employer already paying his holidays, except in retail and service
employees a 13th month pay or its equivalent establishments regularly employing less than
— whether out of pure generosity or on the ten (10) workers;
basis of a binding agreement and, in the latter (b) The term "holiday" as used in this Chapter,
case, regardless of the conditional character of shall include: New Year's day, Maundy
the grant (such as making the payment Thursday, Good Friday, the ninth of April,
dependent on profit), so long as there is actual the first of May, the twelfth of June, the fourth
payment. Otherwise, what was conceived to of July, the thirtieth of November, the twenty
be a 13th month salary would in effect fifth and thirtieth of December and the day
become a 14th or possibly 15th month pay. designated by law for holding a general
xxx xxx xxx election.
Pragmatic considerations also weigh heavily (c) When employer may require work on holidays.
in favor of crediting both voluntary and The employer may require an employee to
contractual bonuses for the purpose of work on any holiday but such employee shall
determining liability for the 13th month pay. be paid a compensation equivalent twice his
To require employers (already giving their regular rate.
employees a 13th month salary or its Presidential Decree No. 850 issued on December 16, 1975 also
equivalent) to give a second 13th month pay amending certain articles of Pres. Dec. No. 442 adopted the
would be unfair and productive of aforequoted provision. Two months later, on February 16, 1976,
undesirable results. To the employer who had the Rules and Regulations Implementing the Labor Code, as
acceded and is already bound to give bonuses amended, was released the pertinent portion of which states
to his employees, the additional burden of a that:
13th month pay would amount to a penalty
for his munificence or liberality. The probable Section 2. Status of employees paid by the month.
reaction of one so circumstanced would be to — Employees who are uniformly paid by the
withdraw the bonuses or resist further month, irrespective of the number of working
voluntary grants for fear that if and when a days therein, with a salary of not less than the
law is passed giving the same benefits, his statutory or established minimum wage shall
prior concessions might not be given due be presumed to be paid for all days in the
credit; and this negative attitude would have month whether worked or not.
an adverse impact on the employees For this purpose, the monthly minimum
(pp.369,370). wage shall not be less than the statutory
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, minimum wage multiplied by 365 days
October 23, 1982, 117 SCRA 938 (1982)], citing the ruling in the divided by twelve.
above case also pointed out that: (e) Section 3. Holiday Pay. — Every employer
To hold otherwise would be to impose an unreasonable and shall pay his employees their regular daily
undue burden upon those employers who had demonstrated wage for any unworked regular holiday.
their sensitivity and concern for the welfare of their employees. As used in the Rule, the term 'holiday' shall
A contrary stance would indeed create an absurd situation exclusively refer to: New Year's Day, Maundy
whereby an employer who started giving his employees the Thursday, Good Friday, the ninth of April,
13th month pay only because of the unmistakable force of the the first of May, the twelfth of June, the fourth
law would be in a far better position than another who, by his of July, the thirtieth of November, the twenty-
own magnanimity or by mutual agreement, had long been fifth and thirtieth of December and the day
extending his employees the benefits contemplated under PD designated by law for a general election or
No. 851, by whatever nomenclature these benefits have come to national referendum or plebiscite (MOLE
be known. Indeed, PD No. 851, a legislation benevolent in its Rules and Reg. Book III, Rule IV, sec. 2 (1976).

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 23


After one week, on February 23, 1976, the Minister of Labor the University to withdraw such benefits from its faculty and
issued Policy Instruction No. 9, to clarify further the right to employees because said implementing rule was issued only on
holiday pay, thus: April 23, 1976 or four months later.
The Rules Implementing PD 850 have The Labor Arbiter ruled in favor of the complainant Union for
clarified the policy in the implementation of the reason that ". . . the payment of the 10-paid legal holiday
the ten (10) paid legal holidays. Before PD benefits from June 8, 1975 up to January 14, 1976 is considered
850. the number of working days a year in a an employer practice that can no longer be withdrawn."
firm was considered important in [Decision; Rollo, p. 59].
determining entitlement to the benefit. Thus,
As in the case of the 13th month pay, the NLRC reversed the
where an employee was working for at least
Labor Arbiter's ruling. The NLRC held that:
313 days, he was definitely already paid. If he
was working for less than 313, there was no Apparently, Arbiter Ruben Aquino
certainty whether the ten (10) paid legal concluded that payment by the respondent of
holidays were already paid to him or not. the legal holiday pay preceded the effectivity
of the Rules and Regulations Implementing
The ten (10) paid legal holidays law, to start
P.D. 850 and which rules took effect on
with, is intended to benefit principally daily
February 16, 1976. Hence, his conclusion that
employees. In the case of monthly, only those
the payment of the legal holiday pay
whose monthly salary did not yet include
stemmed out from company practice and not
payment for the ten (10) paid legal holidays
from law. Tracing back, however, the
are entitled to the benefit.
payments made by respondent of said
Under the rules implementing PD 850, this holiday pay will show that, if ever, the same
policy has been fully clarified to eliminate was made pursuant to P.D. 570-A which took
controversies on the entitlement of monthly effect on November 1, 1974. Noteworthy is
paid employees. The new determining rule is the undisputed fact that respondent first paid
this: If the monthly paid employee is its employees legal holiday pay in June 1975
receiving not less than P 240, the maximum corresponding to nine (9) legal holidays. It
monthly minimum wage, and his monthly bears to note that from the time of the
pay is uniform from January to December, he effectivity of P.D. 570-A which was in
is presumed to be already paid the ten (10) November of 1974 up to June of 1975, the time
paid legal holidays. However, if deductions respondent first paid legal holiday pay for
are made from his monthly salary on account nine (9) legal holidays, there, were indeed
of holidays in months where they occur, then more or less nine legal holidays that
he is entitled to the ten (10) legal holidays. transpired to wit: November 30, 1974,
December 25, 1974, December 30, 1974,
These new interpretations must be uniformly
January 1, 1975, February 27, 1975
and consistently upheld.
(Referendum Day), Maundy Thursday of
This issuance shall take effect immediately. 1975, Good Friday of 1975, April 9, 1975 and
In the meantime, respondent University paid its employees finally, May 1st of 1975. We are therefore
holiday pay for the following days: inclined to lend credence to respondent's
claim that the payment of legal holiday pay
DATE HOLIDAYS PAID was in fact made pursuant to law, P.D. 570-A
June 9, 1975 for the previous nine legal in particular, it is not one that arose out of
holidays company practice or policy.
August, 1975 for the previous June 12 and Finding that said payment was made based
July 4 on an honest although erroneous
interpretation of law, which interpretation
Jan. 14, 1976 or the previous Nov. 30, Dec. 25
was later on corrected by the issuance (sic) of
and 30 Policy Instruction No. 9 and which issuance
and Jan. prompted respondent to withdraw the
1 holiday pay benefits extended to the
employees who were paid on a regular
After January 14, 1976, however, the University ceased paying
monthly basis, and finding further that under
the holiday pay allegedly by reason of Policy Instruction No. 9.
Policy Instructions No. 9, said subject
Specifically, the University claimed that the monthly salary of
employees are deemed paid their holiday pay
its employees was, as of 1976, more than P 240.00 without
as they were paid on a monthly basis at a
deductions from their monthly salary on account of holidays in
wage rate presumably above the statutory
months where they occurred and that therefore, by virtue of
minimum, we believe and so hold that the
Policy Instruction No. 9, they were no longer entitled to the ten
withdrawal of said holiday pay benefit was
paid legal holidays.
valid and justifiable under the circumstances
Petitioners, upon the other hand, contend that Policy Instruction (Rollo, pp. 33-4).
No. 9 could not have possibly been the reason that prompted

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 24


This Court cannot sustain the foregoing decision of public private respondents to execute a CBA covering only members
respondent. Said decision relied on Section 2, Rule IV, Book Ill of the bargaining unit.
of the implementing rules and on Policy Instruction No. 9 which
Being outside the coverage of respondent Minister's order, and
were declared by this Court to be null and void in Insular Bank
thus, not entitled to the economic package involved therein,
of Asia and America Employee's Union (IBAAEU) v. Inciong (G.R.
employees who are non- members of the bargaining unit should
No. 52415, October 23, 1984, 132 SCRA 6631. In disposing of the
not be assessed negotiation fees, attorney's fees, agency fees and
issue at hand, this Court reiterates the ruling in that case, to wit:
the like, for the simple reason that the resulting collective
WE agree with the petitioner's contention that bargaining agreement does not apply to them. It should be clear,
Section 2, Rule IV, Book Ill of the however, that while non-members of the bargaining unit are not
implementing rules and Policy Instruction entitled to the economic package provided by said order, they
No. 9 issued by the then Secretary of Labor are, in lieu thereof, still entitled to their share in the 60%
are nun and void since in the guise of incremental proceeds of increases in tuition or other school fees
clarifying the Labor Code's provision on or charges.
holiday pay, they in fact amended them by
As far as assessment of fees against employees of the collective
enlarging the scope of their exclusion.
bargaining unit who are not members of the collective
xxx xxx xxx bargaining agent is concerned, Article 249 of the Labor Code, as
amended by B.P. Blg. 70, provides the rule:
It is elementary in the rules of statutory
construction that when the language of the Art. 249. Unfair labor practices of employers.-
law is clear and unequivocal the law must be
xxx xxx xxx
taken to mean exactly what it says. In the case
at bar, the provisions of the Labor Code on the (e) ... Employees of an appropriate collective
entitlement to the benefits of holiday pay are bargaining unit who are not members of the
clear and explicit — it provides for both the recognized collective bargaining agent may
coverage of and exclusion from the benefits. be assessed a reasonable fee equivalent to the
In Policy Instruction No. 9, the then Secretary dues and other fees paid by members of the
of Labor went as far as to categorically state recognized collective bargaining agent, if
that the benefit is principally intended for such non- union members accept the benefits
daily paid employees, when the law clearly under the collective agreement . . .
states that every worker shall be paid their Employees of the collective bargaining unit who are not
regular holiday pay. This is a flagrant members of the collective bargaining agent have to pay the
violation of the mandatory directive of Article foregoing fees if they accept the benefits under the collective
4 of the Labor Code, which states that "All bargaining agreement and if such fees are not unreasonable.
doubts in the implementation and Petitioners who are members of the bargaining unit failed to
interpretation of the provisions of this show that the equivalent of ten (10%) percent of their backwages
Code, including its implementing rules and sought to be deducted is unreasonable.
regulations, shall be resolved in favor of labor.
" Moreover, it shall always be presumed that WHEREFORE, the Court rules:
the legislature intended to enact a valid and CEBU INSTITUTE OF TECHNOLOGY CASE
permanent statute which would have the
In G.R. No. 58870, the Order of respondent Minister of Labor
most beneficial effect that its language
and Employment dated September 29, 1981 is SUSTAINED
permits (Orlosky vs. Haskell, 155 A. 112). (pp.
insofar as it ordered petitioner Cebu Institute of Technology to
673-4).
pay its teaching staff the following:
BISCOCHO CASE
(1) Cost of living allowance under Pres.
At issue also in this petition is whether the 60% incremental Dec.Nos.525 and 1123 from February 1978 up
proceeds may be subjected to attorney's fees, negotiation fees, to 1981;
agency fees and the like.
(2) Cost of living allowance under Pres. Dec.
The Court notes the fact that there are two classes of employees Nos. 1614, 1634, 1678 and 1713; and
among the petitioners: (1) those who are members of the
(3) Service incentive leave due them from
bargaining unit and (2) those who are not members of the
1978.
bargaining unit. The first class may be further subdivided into
two: those who are members of the collective bargaining agent The Temporary Restraining Order issued by this Court on
and those who are not. December 7, 1981 is hereby LIFTED and SET ASIDE. No costs.
It is clear that the questioned Order of the respondent DIVINE WORD COLLEGE CASE
Minister applies only to members of the bargaining unit. The CBA
The petition in G.R. No. 68345 is DENIED for lack of merit. The
prepared pursuant to said Order, however, covered employees
questioned Orders of respondent Deputy Minister of Labor and
who are not members of the bargaining unit, although said CBA
Employment, dated December 19, 1983 and July 4, 1984
had not yet been signed at the time this petition was filed on
are SUSTAINED insofar as said Orders denied the payment of
November 24, 1986. Assuming it was signed thereafter, the
the emergency cost of living allowances of private respondents
inclusion of employees outside the bargaining unit should be
faculty teachers of the Divine Word College of Legazpi out of
nullified as this does not conform to said order which directed
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 25
the sixty (60%) incremental proceeds of tuition and other school
fee increases collected during the effectivity of Pres. Dec. No.
451. The Rules and Regulations implementing Pres. Dec. No.
451 are hereby declared invalid for being ultra vires No costs.
FAR EASTERN UNIVERSITY CASE
The Decision of public respondent National Labor Relations
Commission dated September 18, 1984 is REVERSEDinsofar as
it affirmed in toto the dismissal of petitioner Far Eastern
University Employee Labor Union's claim under Pres. Dec. No.
451 and its claim for payment of holiday pay. Private
respondent Far Eastern University is therefore ordered to pay
its employees the following:
(1) Their sixty (60) percent share in the
increases in tuition and other school fees or
charges which shall be allocated exclusively
for increase in salaries or wages if the tuition
or other school fee increase was collected
during the effectivity of Pres. Dec. No. 451;
(2) Their claim for holiday pay which was
withdrawn since January 14, 1976 up to the
present.
The Decision of respondent National Labor Relations
Commission, however, is SUSTAINED insofar as it denied
petitioner's claim for thirteenth (1 3th month pay. No costs.
FABROS CASE
In G.R. No. 70832, the Petition for certiorari and Prohibition is
DISMISSED. MECS Order No. 25. s. 1985, particularly
paragraphs 7.0 to 7.5 thereof, which provide for the use and
application of sixty (60%) percent of the increases in tuition and
other school fees or charges, having been issued pursuant to B.P.
Blg. 232 which repealed Pres. Dec. No. 451, is hereby
declared VALID. The Temporary Restraining Order issued by
this Court dated May 29, 1985 is LIFTED and SET ASIDE. No
costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and
Employment dated April 14, 1986 are AFFIRMED. The
collective bargaining agreement prepared pursuant thereto
should, however, be MODIFIED to cover only members of the
bargaining unit. Only petitioners who are members of the
collective bargaining unit, if they accept the benefits under the
resulting collective bargaining agreement, shall be charged ten
(10%) percent of the payable backwages as negotiation fees. The
Temporary Restraining Order dated November 25, 1986
is LIFTED and SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the
proceeds from increases in tuition fees and other schools fees or
charges shall be governed by section 42 of B.P. Blg. 232 as
implemented by the Rules and Regulations issued by the then
Ministry, now Department of Education, Culture and Sports. SO
ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras,
Feliciano, Gancayco, Bidin and Sarmiento, JJ., concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 26


G.R. No. 81176 April 19, 1989 equivalent of 26 days service. To award the
daily wage earner pay for more than 26 days
PLASTIC TOWN CENTER is pay for days he does not work. But as
CORPORATION, petitioner, regards the monthly- paid workers he expects
vs. his monthly salary to be fixed which is a
NATIONAL LABOR RELATIONS COMMISSION month salary. Hence, a distinction separates
AND NAGKAKAISANG LAKAS NG him with the daily wages.
MANGGAGAWA (NLM)- IN VIEW OF THE FOREGOING, the unfair
KATIPUNAN, respondents. labor practice charge should be, as it is hereby
dismissed for lack of legal and factual basis.
Generosa R. Jacinto for petitioner. (pp- 56-57, Rollo)
The Solicitor General for public respondent. On August 30, 1987, the respondent labor union appealed to the
National Labor Relations Commission.
GUTIERREZ, JR., J.: On June 30, 1987, the NLRC rendered the questioned decision
with the following dispositive portion:
An issue in this petition is the interpretation of certain
provisions of the Collective Bargaining Agreement (CBA) WHEREFORE, the appealed decision is
between Plastic Town Center Corporation and the respondent hereby reversed and the respondent is
union. ordered to grant Pl.00 increase for July 1, 1984
and the equivalent of thirty days salary in
On September 7,1984, the respondent Nagkakaisang Lakas ng
gratuity pay, as required by its CBA with the
Manggagawa (NLM)-Katipunan filed a complaint dated
complainants. (p. 39, Rollo)
August 30, 1984 charging the petitioner with:
The motion for reconsideration of said decision was denied on
a. Violation of Wage Order No. 5, by crediting the Pl.00 per day
December 7, 1987. Hence, this petition.
increase in the CBA as part of the compliance with said Wage
Order No. 5, and y instead of thirty (30) days equivalent to one The applicable provisions of the CBA read as follows:
(1) month as gratuity pay to resigning employees. (p. 3, Rollo) Section 1 -The company agrees to grant
b. Unfair labor practice thru violation of the CBA by giving only permanent regular rank and file workers
twenty-six (26) days pay instead of thirty (30) days equivalent covered by this Agreement who have
to one (1) month as gratuity pay to resigning employees. (p. 3, rendered at least one year of continuous
Rollo) service, across-the-board wage increases as
follows:
On July 25,1985, Labor Arbiter Ruben Alberto ruled in favor of
Plastic Town Center Corporation. The pertinent portions of the a. Effective 1 July, 1983-Pl.00 per worked day;
decision read as follows: b Effective 1 July, 1984-Pl.00 per worked day;
... In this particular case, the P1.00 increase c. Effective 1 July, 1985-Pl.00 per worked day;
was ahead of the implementation of the CBA
provision or could be said was advantageous Section 3- It is agreed and understood by the
to complainant members, chronologically parties herein that the aforementioned
stated. For the above cogent reason we can increase in pay shall be credited against
not fault respondent for its refusal to grant a future allowances or wage orders hereinafter
second Pl.00 increase on July 1, 1984. implemented or enforced by virtue of Letters
of Instructions, Decrees and other labor
xxx xxx xxx legislation. (pp. 36-37, Rollo)
Complainant sustains the view that a month Wage Order No. 4 provided for the integration of the
salary pertains to salary for 30 days, citing the mandatory emergency cost of living allowances (ECOLA) under
provision of the Civil Code on the matter. Presidential Decrees 1614,1634,1678 and 1713 into the basic pay
Upon the other hand, respondents of all covered workers effective May 1, 1984. It further provided
understanding of the controverted provision that after the integration, the applicable statutory minimum
is pragmatic or practical. Since the workers daily wage rate must be complied with, which in this case is
are paid on daily basis, it computed the salary P32.00.
received by the worker in a month as a month The petitioner incurred a deficiency of P1.00 in the wage rate
salary. In this case the salary of 26 days is a after integrating the ECOLA with basic pay. So the petitioner
month salary. advanced to May 1, 1984 or two months earlier the
We agree with the respondent's implementation of the one-peso wage increase provided for in
interpretation. As daily wage earner, there the CBA starting July 1, 1984 for the benefit of the workers.
would be no instance that the worker would The petitioner argues that it did not credit the Pl.00 per day
work for 30 days a month since work does not across the board increase under the CBA as compliance with
include Sunday or rest days. In the mind of Wage Order No. 5 implemented on June 16,1984 since it gave an
the daily worker in a month he could not additional P3.00 per day to the basic salary pursuant to said
expect a month salary exceeding the order. It, however, credited the Pl.00 a day increase to the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 27
requirement under Wage Order No. 4 to which the private In this case, between July 1, 1983 and July 1,
respondents allegedly did not object. 1984, there were actually two increases
mandated by Wage Order No. 4 on May 1,
The other controverted provision of the CBA reads:
1984 and by Wage Order No. 5 on June
Section 2. It is the intention of both the 16,1984. The fact that the respondent had
COMPANY and the UNION, that the grant of complied with Wage Order No. 4 and Wage
gratuity pay by the COMPANY herein set Order No. 5 does not relieve it of its obligation
forth is to reward employees and laborers, to grant the P1.00 increase under the CBA.
who have rendered satisfactory and efficient (pp. 37-38, Rollo)
service with the COMPANY. THUS, in case of
With regards to the second issue, the petitioner maintains that
voluntary resignation, which is not covered
under the principle of "fair day's wage for fair day's labor",
by Section 1 above, the COMPANY
gratuity pay should be computed on the basis of 26 days for one
nevertheless agrees to grant a gratuity pay to
month salary considering that the employees are daily paid.
the resigning employee or laborer as follows:
We find no abuse of discretion on the part of the NLRC in
1. Two to Five years of service : 1 month
granting gratuity pay equivalent to one month or 30 days salary
salary
.
2. Six (6) to Ten (10) yrs. of : Two and One-half
We quote with favor the NLRC decision which states:
(21/2)service months salary
xxx xxx xxx
3 Eleven (ll) to Fifteen yrs. of service : 4
months salary ... To say that awarding the daily wage earner
salary for more than 26 days is paying him for
4 Sixteen (16) to twenty yrs. of : 5 months
days he does not work misses the point
5 Twenty one yrs. of service and above : entirely. The issue here is not payment for
Twelve (12) months salary. days worked but payment of gratuity pay
(p. 38, Rollo) equivalent to one month or 30 days salary. (p.
29, Rollo)
The petitioner alleges that one month salary for daily paid
workers should be computed on the basis of twenty-six (26) Looking into the definition of gratuity, we find the following in
days and not thirty (30) days since daily wage workers do not Moreno's Philippine Law Dictionary, to wit:
work every day of the month including Sundays and holidays. Something given freely, or without
The petition is devoid of merit. recompense; a gift; something voluntarily
given in return for a favor or services; a
The subject for interpretation in this petition for review is not bounty; a tip. -Pirovano v. De la Rama
the Labor Code or its implementing rules and regulations but Steamship Co., 96 Phil. 357.
the provisions of the collective bargaining agreement entered
into by management and the labor union. As a contract, it That paid to the beneficiary for past services
constitutes the law between the parties (Fegurin v. National rendered purely out of the generosity of the
Labor Relations Commission, 120 SCRA 910 [1983]) and in giver or grantor.-Peralta v. Auditor General,
interpreting contracts, the rules on contract must govern. 100 Phil. 1054.

Contracts which are not ambiguous are to be interpreted Salary or compensation. The very term
according to their literal meaning and should not be interpreted 'gratuity' differs from the words 'salary' or
beyond their obvious intendment (Herrera v. Petrophil Corp., 'compensation' in leaving the amount thereof,
146 SCRA 385 [1986]). within the limits of reason, to the arvitrament
of the giver.-Herranz & Garriz v. Barbudo,12
In the case at bar, the petitioner alleges that on May 1, 1984, it Phil. 9.
granted a Pl.00 increase pursuant to Wage Order No. 4 which in
consonance with Section 3 of the CBA was to be credited to the From the foregoing, gratuity pay is therefore, not intended to
July 1, 1984 increase under the CBA. It was, therefore, a July pay a worker for actual services rendered. It is a money benefit
increase. Section 3 of the CBA, however, clearly states that CBA given to the workers whose purpose is "to reward employees or
granted increases shall be credited against future allowances or laborers, who have rendered satisfactory and efficient service to
wage orders. Thus, the CBA increase to be effected on July 1, the company." (Sec. 2, CBA) While it may be enforced once it
1984 can not be retroactively applied to mean compliance with forms part of a contractual undertaking, the grant of such
Wage Order No. 4 which took effect on May 1, 1984. The words benefit is not mandatory so as to be considered a part of labor
of the contract are plain and readily understandable so we find standard law unlike the salary, cost of living allowances,
no need for any further construction or interpretation petition holiday pay, leave benefits, etc., which are covered by the Labor
(Dihiansan v. Court of Appeals, 153 SCRA 712 [1987]). Code. Nowhere has it ever been stated that gratuity pay should
Furthermore, we agree with the NLRC as it held: be based on the actual number of days worked over the period
of years forming its basis. We see no point in counting the
It is our finding that the respondent is bound number of days worked over a ten-year period to determine the
by the CBA to grant an increase on July 1, meaning of "two and one- half months' gratuity." Moreover any
1984. doubts or ambiguity in the contract between management and
the union members should be resolved in the light of Article
1702 of the Civil Code that:
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 28
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.
This is also in consonance with the principle enunciated in the
Labor Code that all doubts should be resolved in favor of the
worker.
The Civil Code provides that when months are not designated
by name, a month is understood to be thirty (30) days. The
provision applies under the circumstances of this case.
In view of the foregoing, the public respondent did not act with
grave abuse of discretion when it rendered the assailed decision
which is in accordance with law and jurisprudence.
WHEREFORE, the petition is hereby DISMISSED for lack of
merit.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Cortes, JJ., concur.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 29


G.R. No. L-31832 October 23, 1982 and the impossibility of compliance. We denied the Petition on
2 December 1969 and the proceedings below were resumed.
SOCIAL SECURITY SYSTEM, petitioner,
vs. Upon a joint Motion for clarification of its Order of 24 November
1969, respondent Court, through Judge Joaquin M. Salvador,
SSS SUPERVISORS' UNION-CUGCO and
issued the Order of 3 March 1970, ordering the payment of
COURT OF INDUSTRIAL salaries of the members of respondent Union during the strike
RELATIONS, respondents. period, but not to be chargeable to accrued leave credits. The
Benjamin C. Pineda for respondent Union. reasons given were that this Court had already declared the
strike premature, and that the members of respondent Union
Filemon Q. Almazan for petitioners. had not participated in the strike and had actually manifested
their desire to work but could not cross the heavy picket lines
during the height of the strike.
MELENCIO-HERRERA, J.:
The SSS moved to reconsider the Order of 3 March 1970 arguing
This Petition seeks to review on certiorari the Orders of that since respondent Union members actually rendered no
respondent Court of Industrial Relations (CIR) on the issue of service at all during the strike, they were not entitled to the
whether or not petitioner Social Security System (SSS) may be payment of salaries. Respondent Court, en banc, denied
held liable for the payment of wages of members of respondent reconsideration on 25 March 1970 for lack of sufficient
Union who admittedly did not work during the 17-day strike justification.
declared in 1968 by the rank and file Union (the Philippine
Association of Free Labor Unions [PAFLU]). Contending that the Industrial Court had no authority to issue
the Order dated 3 March 1970 and its Resolution en banc dated
For a brief factual background, it should be stated that the 25 March 1970, petitioner asks this Tribunal to have them
instant case is an offshoot of Case No. 46-IPA (49) certified to the annulled.
CIR by the President of the Philippines for compulsory
arbitration of labor dispute between the SSS and the PAFLU We find for the petitioner based on the equitable tenet of a "fair
concerning the interpretation of certain provisions of their day's wage for a fair day's labor."
Collective Bargaining Agreement. The PAFLU had staged a The age-old rule governing the relation
strike in defiance of the CIR Order of August 29, 1968 "enjoining between labor and capital or management
the parties, for the sake of industrial peace . . . to maintain and employee is that of a 'fair day's wage for
the status quo-the Union not to declare any strike and the a fair day's labor.' If there is no work
Management not to dismiss nor suspend any of its employees performed by the employee there can be no
nor to declare any lockout." On 3 September 1968, in that same wage or pay, unless of course the laborer was
case, the SSS filed an Urgent Petition to declare the strike illegal. able, willing and ready to work but was
On 26 September 1968, respondent Union (the SSS Supervisors' illegally locked out, dismissed or suspended.
Union) filed a Motion for Intervention in the said case It is hardly fair or just for an employee or
averring, inter alia, that it had not participated in the strike: that laborer to fight or litigate against his
its members wanted to report for work but were prevented by employer on the employer's
the picketers from entering the work premises; that under the time.<äre||anº•1àw> 3
circumstances, they were entitled to their salaries In this case, the failure to work on the part of the members of
corresponding to the duration of the strike, which could be respondent Union was due to circumstances not attributable to
deducted from the accrued leave credits of their members. themselves. But neither should the burden of the economic loss
The SSS had no objection to the intervention sought but opposed suffered by them be shifted to their employer, the SSS, which
the demand for the payment of salaries pertaining to the entire was equally faultless, considering that the situation was not a
period of the strike. direct consequence of the employer's lockout or unfair labor
practice. Under the circumstances, it is but fair that each party
In its Order of 12 March 1969, intervention was allowed by must bear his own loss.
respondent Court, and pending resolution of the claim for
salaries, the SSS was directed to pay the same, chargeable in the Considering, therefore, that the parties had
meantime to the accrued leave credits of the members 1 pending no hand or participation in the situation they
the determination of the question of the illegality of the strike. were in, and that the stoppage of the work
Reconsideration of that Order sought by the SSS was denied on was not the direct consequence of the
6 November 1969. company's lockout or unfair labor practice,
'the economic loss should not be shifted to the
On 24 November 1969, respondent Court issued an employer.' Justice and equity demand that
Order 2 directing the CIR Examining Division to compute each must have to bear its own loss, thus
immediately the money equivalent of the salaries of the placing the parties in equal footing where
members of respondent Union as well as the salaries of those none should profit from the other there being
employees who were not members of the striking Union no fault of either. 4
(PAFLU) and to deposit the amount computed, for further
disposition. WHEREFORE, we hereby set aside respondent Court's Order
dated 3 March 1970 as affirmed by its Resolution en bancdated
The SSS challenged on certiorari the said Orders before this 25 March 1970, without pronouncement as to costs.
Court (G.R. No. L-31234), particularly the order to deposit,
grounded on the overlapping membership in the two Unions SO ORDERED.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 30
Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.
Teehankee (Chairman), J., is on leave.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 31


The general principle is that an employee is entitled to receive
as backwages all the amounts he may have lost starting from the
G.R. No. 76746 July 27, 1987
date of his dismissal up to the time of his reinstatement (Capital
DURABUILT RECAPPING PLANT & COMPANY Garment Corporation v. Ople, 117 SCRA 473; New Manila
and EDUARDO LAO, GENERAL Candy Workers' Union (NACONWA-PAFLU) v. CIR, supra).
MANAGER, petitioners, In a line of cases, this Court has established a policy fixing the
vs. amount of backwages to a just and reasonable level without
NATIONAL LABOR RELATIONS COMMISSION, qualification or deduction (Insular Life Assurance Co., Ltd.
Employees' Association-NATU v. Insular Life Assurance Co.,
HON. COMM. RICARDO C. CASTRO, HON.
Ltd., 76 SCRA 501; Feati University Club v. Feati University, 58
ARBITER AMELIA M. GULOY, KAPISANAN NG SCRA 395; Mercury Drug Co., Inc. v. CIR, 56 SCRA 694). The
MGA MANGGAGAWA SA DURABUILT and respondents center their attention on the above underlined
REYNALDO BODEGAS, respondents. portion of this policy. Hence, their contention that the
deductions cited by the petitioners cannot be made.
GUTIERREZ, JR., J.:
In their bid to recover a greater amount of backwages, the
This is a petition to review the May 16, 1986 resolution of
rationale of the policy has escaped the respondents'
respondent National Labor Relations Commission (NLRC)
consideration. In Insular Life Assurance Employees Association-
affirming the Labor Arbiter's order in NLRC Case No. NCR-
NATU v. Insular Life Assurance Co., Ltd. (76 SCRA 50) we held
73162083. The sole issue raised is the proper basis for the
that to fix the amount of backwages without qualification or
computation of backwages in favor of an illegally dismissed
deduction simply means that the workers are to be paid their
employee.
backwages fixed as of the time of their dismissal or strike
The facts of the case are simple and uncontroverted. without deduction for their earnings elsewhere during their
law-off and without qualification of their backwages as thus
On July 11, 1983, a complaint for illegal dismissal was filed by
fixed; i.e. unqualified by any wage increases or other benefits
respondent Reynaldo Bodegas, against petitioner Durabuilt, a
that may have been received by their co-workers who were not
tire recapping company.
dismissed or did not go on strike. The principle is justified "as a
In a decision rendered by the Labor Arbiter on February 13, realistic, reasonable and mutually beneficial solution for it
1984, the private respondent was ordered reinstated to his relieves the employees from proving their earnings during their
former position with full backwages, from the time he was law-offs and the employer from submitting counter proofs. It
terminated up to the time he is actually reinstated, without loss was meant to obviate the twin evils of Idleness on the part of the
of seniority rights and benefits accruing to him. employees and attrition and undue delay in satisfying the
The petitioners failed to file a seasonable appeal and entry of award on the part of the employer" (New Manila Candy
final judgment was made on July 8, 1985. Workers Union NACONWA-PAFLU v. CIR supra). The same
was not to establish an inflexible rule of computation of any
On August 8, 1985, the Acting Chief of Research and Backwages due an employee.
Information and the Corporation Auditing Examiner of the then
Ministry of Labor and Employment submitted a computation of The age-old rule governing the relation between labor and
backwages, ECOLA, 13th month pay, sick and vacation leave capital, or management and employee of a "fair day's wage for
benefits in favor of Reynaldo Bodegas in the total amount of a fair day's labor" remains as the basic factor in determining
P24,316.38. employees' wages, and for that matter backwages. If there is no
work performed by the employee there can be no wage or pay
The petitioner filed its opposition to the computation on the unless, of course, the laborer was able, willing and ready to
ground that it contemplated a straight computation of twenty work but was illegally locked out, or suspended (SSS v. SSS
six (26) working days in one month when the period covered by Supervisors Union-CUGCO, 117 SCRA 746).
the computation was intermittently interrupted due to frequent
brownouts and machine trouble and that respondent Bodegas The illegal dismissal of the private respondent is conceded by
had only a total of 250.75 days of attendance in 1982 due to the petitioner. It is willing to pay backwages. However, the
absences. According to the petitioner, Bodegas is entitled only petitioner argues that for days where no work was required and
to the amount of P3,834.05 broken down as follows: salaries — could be done by its employees, no wages could have been
P1,993.00; ECOLA — P1,433.50, and 13th month pay — P407.55. earned and, thereafter, lost by said employees to justify an
award of backwages. We quote with approval the Solicitor
On October 23, 1985, the Labor Arbiter denied the opposition to General's comment,* to wit:
the computation. The petitioner appealed to the NLRC which,
in an order dated May 16, 1986, affirmed the order of the Labor From the indubitable facts on record, it appears that
Arbiter and dismissed the appeal. petitioners have valid reasons to claim that certain
days should not be considered days worked for
Claiming grave abuse of discretion on the part of the public purposes of computing private respondent's
respondents, Durabuilt filed the instant petition. backwages since their business was not in actual
Backwages, in general, are granted on grounds of equity for operation due to brownouts or power interruption and
earnings which a worker or employee has lost due to his the retrenchment of workers they had during the
dismissal from work (New Manila Candy Workers Union period of private respondent's dismissal.
(NACONWA-PAFLU v. CIR, 86 SCRA 37). It cannot be denied that during the past years
particularly in 1983, there was chronic electrical power

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 32


interruption resulting to disruption of business Airways, Inc. v. CIR, 17 SCRA 813). As pointed out by the
operations. To alleviate the situation, the government Solicitor General —
thru the Ministry of Trade and Industry called on the
... to allow payment of backwages of P24,316.68 as
industrial sector to resort to the so-called Voluntary
ordered by public respondents instead of P3,834.16 as
Loan Curtailment Plan (or VLCP), whereby brownouts
petitioners claim and which appears to be just and
or electrical power interruption was scheduled by area.
reasonable under the circumstances of this case would
The program while it may have been called 1.
not only be unconscionable but would be grossly
voluntary" was not so as electrical power consumers
unfair to other employees who were not paid when
had no choice then due to the prevailing energy crisis.
petitioners' business was not in operation. (Rollo, p.
Petitioners heeding the government's call, participated 35).
in the VLCP as indicated in their statement of
Indeed, it would neither be fair nor just to allow respondent to
conformity dated November 23, 1982. Thus, beginning
recover something he has not earned and could not have earned
March 21, 1983 and every Wednesday thereafter,
and to further penalize the petitioner company over and above
petitioner's business (which indicentally is recapping
the losses it had suffered due to lack of raw materials and the
rubber tires) was not in actual operation. No less than
energy-saving programs of the government. The private
the former Minister of Trade and Industry expressed
respondent cannot be allowed to enrich himself at the expense
his gratitude to petitioners for participating in the
of the petitioner company. The computation of backwages
VLCP. Petitioners substantiated claim therefore, that
should be based on daily rather than on monthly pay schedules
the days during which they were not in operation due
where, as in the case at bar, such basis is more realistic and
to the VLCP should be excluded in the number of days
accurate. (Compania Maritima v. United Seamen's Union of the
worked for purposes of computing private
Philippines, 65 SCRA 393).
respondents backwages stands reasonable and should
have been considered by the corporation auditing In conclusion, we again quote the Solicitor General's comment:
examiner.1avvphi1 Finally, what strengthens petitioners claim for
Moreover, as early as May 1978, the Ministry of Labor mitigated liability is their evident good faith as
and Employment, thru Policy Instruction No. 36, has manifested by their reinstatement of private
said that — respondent while the case for illegal dismissal was still
pending and their willingness to pay backwages.
2. Brownouts running for more than twenty minutes
While it is true that as a general rule order of
may not be treated as hours worked provided that any
reinstatement carries with it an award of backwages
of the following conditions are present;
(Art. 280, Labor Code) this Honorable Court did not
a) The employees can leave their work place only mitigate but absolved employers from liability of
or go elsewhere whether within or without backwages where good faith is evident (Findlay Millar
the work premises; or Timber Co. v. PLASLU, 6 SCRA 26: Cromwell Com.
Employees & Laborers Union v. CIR, 13 SCRA 259,
b) The employees can use the time effectively
Norton and Harrison Labor Union v. Harrison Co. Inc.
for their own interest.
15 SCRA 310; PAL v. PALEA, 57 SCRA 489; Cruz v.
It is of record that during electrical power MOLE, 120 SCRA 15). There is no indication, to
interruptions, petitioners business was not in paraphrase this Honorable Court's ruling in Pantranco
operation. This was never disputed by private North Express Inc. v. NLRC (126 SCRA 526) that
respondent. private respondent was a "victim of arbitrary and high
Petitioners' claim that the period (December 1983) handed action. Rollo, pp. 34-35).
during which they effected retrenchment of workers WHEREFORE, in view of the foregoing, the petition is hereby
owing to economic crisis then prevailing likewise GRANTED. The order of the Labor Arbiter, Amelia M. Guloy in
appears plausible. There is substantial evidence NLRC Case No. NCR-7-3162083, dated October 23, 1985, as
consisting of reports to MOLE and Social Security affirmed by the NLRC is SET ASIDE. The petitioner is ordered
System showing that petitioners had laid off workers to pay private respondent his backwages from the time he was
due to lack of raw materials. The petitioners payrolls terminated up to the time he was actually reinstated computed
submitted to support their objection to computation on the basis of the number of days when petitioner's business
indicate that the number of working days was reduced was in actual operation. The number of days where no work was
from the normal weekly six working days to four required and could be done by petitioner's employees on
working days for a great number of petitioners' account of shutdowns due to electrical power interruptions,
workers. Obviously, private respondent could not machine repair, and lack of raw materials are not considered
have been among those laid off, as at that time he was hours worked for purposes of computing the petitioner's
already dismissed by petitioner. (Rollo, pp. 31-34). obligation to respondent employee. In no case shall the award
Thus, we have held that where the failure of workers to work exceed three year's backpay as above computed.
was not due to the employer's fault, the burden of economic loss SO ORDERED.
suffered by the employees should not be shifted to the
Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.
employer. Each party must bear his own loss (SSS v. SSS
Supervisors' Union-CUGCO, supra; Pan-American World

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 33


abandoned their employment. Consequently, petitioner
terminated their services. He also filed on November 7, 1991, a
G.R. No. 121927 April 22, 1998
complaint for estafa against private respondents.
ANTONIO W. IRAN (doing business under the
On the other hand, private respondents, on December 5, 1991,
name and style of Tones Iran filed complaints against petitioner for illegal dismissal, illegal
Enterprises), petitioner, deduction, underpayment of wages, premium pay for holiday
vs. and rest day, holiday pay, service incentive leave pay, 13th
NATIONAL LABOR RELATIONS COMMISSION month pay, allowances, separation pay, recovery of cash bond,
damages and attorney's fees. Said complaints were consolidated
(Fourth Division), GODOFREDO O. PETRALBA,
and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and
MORENO CADALSO, PEPITO TECSON, RAB VII-12-1826-91, and assigned to Labor Arbiter Ernesto F.
APOLINARIO GOTHONG GEMINA, JESUS Carreon.
BANDILAO, EDWIN MARTIN, CELSO LABIAGA, The labor arbiter found that petitioner had validly terminated
DIOSDADO GONZALGO, FERNANDO M. private respondents, there being just cause for the latter's
COLINA, respondents. dismissal. Nevertheless, he also ruled that petitioner had not
complied with minimum wage requirements in compensating
private respondents, and had failed to pay private respondents
their 13th month pay. The labor arbiter, thus, rendered a
ROMERO, J.: decision on February 18, 1993, the dispositive portion of which
Whether or not commissions are included in determining reads:
compliance with the minimum wage requirement is the WHEREFORE, premises considered,
principal issue presented in this petition. judgment is hereby rendered ordering the
Petitioner Antonio Iran is engaged in softdrinks merchandising respondent Antonio W. Iran to pay the
and distribution in Mandaue City, Cebu, employing truck complainants the following:
drivers who double as salesmen, truck helpers, and non-field 1. Celso Labiaga P10,033.10
personnel in pursuit thereof. Petitioner hired private 2. Godofredo Petralba 1,250.00
respondents Godofredo Petralba, Moreno Cadalso, Celso 3. Fernando Colina 11,753.10
Labiaga and Fernando Colina as drivers/salesmen while 4. Moreno Cadalso 11,753.10
private respondents Pepito Tecson, Apolinario Gimena, Jesus 5. Diosdado Gonzalgo 7,159.04
Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as 6. Apolinario Gimena 8,312.24
truck helpers. Drivers/salesmen drove petitioner's delivery 7. Jesus Bandilao 14,729.50
trucks and promoted, sold and delivered softdrinks to various 8. Pepito Tecson. 9,126.55
outlets in Mandaue City. The truck helpers assisted in the ————
delivery of softdrinks to the different outlets covered by the Attorney's Fees (10%) 74,116.63
driver/salesmen. of the gross award 7,411.66
As part of their compensation, the driver/salesmen and truck ————
helpers of petitioner received commissions per case of GRAND TOTAL AWARD P81,528.29
softdrinks sold at the following rates: ========

SALESMEN: The other claims are dismissed for lack of


merit.
Ten Centavos (P0.10) per
case of Regular softdrinks. SO ORDERED. 1
Twelve Centavos (P0.12) Both parties seasonably appealed to the NLRC, with petitioner
per case of Family Size contesting the labor arbiter's refusal to include the commissions
softdrinks. he paid to private respondents in determining compliance with
TRUCK HELPERS: the minimum wage requirement. He also presented, for the first
time on appeal, vouchers denominated as 13th month pay
Eight Centavos (P0.08) per signed by private respondents, as proof that petitioner had
case of Regular softdrinks. already paid the latter their 13th month pay. Private
Ten Centavos (P0.10) per respondents, on the other hand, contested the findings of the
case of Family Size labor arbiter holding that they had not been illegally dismissed,
softdrinks. as well as mathematical errors in computing Jesus Bandilao's
Sometime in June 1991, petitioner, while conducting an audit of wage differentials. The NLRC, in its decision of December 21,
his operations, discovered cash shortages and irregularities 1994, affirmed the validity of private respondent's dismissal, but
allegedly committed by private respondents. Pending the found that said dismissal did not comply with the procedural
investigation of irregularities and settlement of the cash requirements for dismissing employees. Furthermore, it
shortages, petitioner required private respondents to report for corrected the labor arbiter's award of wage differentials to Jesus
work everyday. They were not allowed, however, to go on their Bandilao. The dispositive portion of said decision reads:
respective routes. A few days thereafter, despite aforesaid WHEREFORE, premises considered, the
order, private respondents stopped reporting for work, decision is hereby MODIFIED in that
prompting petitioner to conclude that the former had
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 34
complainant Jesus Bandilao's computation however designated, capable of being
for wage differential is corrected from expressed in terms of money, whether fixed
P154.00 to P4,550.00. In addition to all the or ascertained on a time, task, piece,
monetary claim (sic) originally awarded by or commission basis, or other method of
the Labor Arbiter a quo, P1,000.00 is hereby calculating the same, which is payable by an
granted to each complainants (sic) as employer to an employee under a written or
indemnity fee for failure of respondents to unwritten contract of employment for work
observe procedural due process. done or to be done, or for services rendered
or to be rendered and includes the fair and
SO ORDERED.2
reasonable value, as determined by the
Petitioner's motion for reconsideration of said decision was Secretary of Labor, of board, lodging, or other
denied on July 31, 1995, prompting him to elevate this case to facilities customarily furnished by the
this Court, raising the following issues: employer to the employee.
1. THE HONORABLE COMMISSION xxx xxx xxx (Emphasis supplied)
ACTED WITH GRAVE ABUSE OF
This definition explicitly includes commissions as part of wages.
DISCRETION AND CONTRARY TO LAW
While commissions are, indeed, incentives or forms of
AND JURISPRUDENCE IN AFFIRMING
encouragement to inspire employees to put a little more
THE DECISION OF THE LABOR
industry on the jobs particularly assigned to them, still these
ARBITER A QUO EXCLUDING THE
commissions are direct remunerations for services rendered. In
COMMISSIONS RECEIVED BY THE
fact, commissions have been defined as the recompense,
PRIVATE RESPONDENTS IN COMPUTING
compensation or reward of an agent, salesman, executor,
THEIR WAGES;
trustee, receiver, factor, broker or bailee, when the same is
2. THE HONORABLE COMMISSION calculated as a percentage on the amount of his transactions or
ACTED WITH GRAVE ABUSE OF on the profit to the principal. The nature of the work of a
DISCRETION IN FINDING PETITIONER salesman and the reason for such type of remuneration for
GUILTY OF PROCEDURAL LAPSES IN services rendered demonstrate clearly that commissions are
TERMINATING PRIVATE RESPONDENTS part of a salesman's wage or salary.4
AND IN AWARDING EACH OF THE
Thus, the commissions earned by private respondents in selling
LATTER P1,000.00 AS INDEMNITY FEE;
softdrinks constitute part of the compensation or remuneration
3. THE HONORABLE COMMISSION paid to drivers/salesmen and truck helpers for serving as such,
GRAVELY ERRED IN NOT CREDITING and hence, must be considered part of the wages paid them.
THE ADVANCE AMOUNT RECEIVED BY
The NLRC asserts that the inclusion of commissions in the
THE PRIVATE RESPONDENTS AS PART
computation of wages would negate the practice of granting
OF THEIR 13TH MONTH PAY.
commissions only after an employee has earned the minimum
The petition is impressed with merit. wage or over. While such a practice does exist, the universality
The NLRC, in denying petitioner's claim that commissions be and prevalence of such a practice is questionable at best. In
included in determining compliance with the minimum wage truth, this Court has taken judicial notice of the fact that some
ratiocinated thus: salesmen do not receive any basic salary but depend entirely on
commissions and allowances or commissions alone, although
Respondent (petitioner herein) insist an employer-employee relationship exists. 5 Undoubtedly, this
assiduously that the commission should be salary structure is intended for the benefit of the corporation
included in the computation of actual wages establishing such, on the apparent assumption that thereby its
per agreement. We will not fall prey to this salesmen would be moved to greater enterprise and diligence
fallacious argument. An employee should and close more sales in the expectation of increasing their sales
receive the minimum wage as mandated by commissions. This, however, does not detract from the character
law and that the attainment of the minimum of such commissions as part of the salary or wage paid to each
wage should not be dependent on the of its salesmen for rendering services to the corporation.6
commission earned by an employee. A
commission is an incentive for an employee Likewise, there is no law mandating that commissions be paid
to work harder for a better production that only after the minimum wage has been paid to the employee.
will benefit both the employer and the Verily, the establishment of a minimum wage only sets a floor
employee. To include the commission in the below which an employee's remuneration cannot fall, not that
computation of wage in order to comply with commissions are excluded from wages in determining
labor standard laws is to negate the practice compliance with the minimum wage law. This conclusion is
that a commission is granted after an bolstered by Philippine Agricultural Commercial and Industrial
employee has already earned the minimum Workers Union vs. NLRC, 7 where this Court acknowledged that
wage or even beyond it.3 drivers and conductors who are compensated purely on a
commission basis are automatically entitled to the basic
This holding is unsupported by law and jurisprudence. Article minimum pay mandated by law should said commissions be
97(f) of the Labor Code defines wage as follows: less than their basic minimum for eight hours work. It can, thus,
Art. 97(f) — "Wage" paid to any employee be inferred that were said commissions equal to or even exceed
shall mean the remuneration or earnings, the minimum wage, the employer need not pay, in addition, the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 35
basic minimum pay prescribed by law. It follows then that This, petitioner failed to do, entitling respondents to nominal
commissions are included in determining compliance with damages in the amount of P5,000.00 each, in accordance with
minimum wage requirements. recent jurisprudence, 13 to vindicate or recognize their right to
procedural due process which was violated by petitioner.
With regard to the second issue, it is settled that in terminating
employees, the employer must furnish the worker with two Lastly, petitioner argues that the NLRC gravely erred when it
written notices before the latter can be legally terminated: (a) a disregarded the vouchers presented by the former as proof of
notice which apprises the employee of the particular acts or his payment of 13th month pay to private respondents. While
omissions for which his dismissal is sought, and (b) the subsequent admitting that said vouchers covered only a ten-day period,
notice which informs the employee of the employer's decision petitioner argues that the same should be credited as amounts
to dismiss him. 8 (Emphasis ours) Petitioner asseverates that no received by private respondents as part of their 13th month pay,
procedural lapses were committed by him in terminating Section 3(e) of the Rules and Regulations Implementing P.D.
private respondents. In his own words: No. 851 providing that the employer shall pay the difference
when he pays less than 1/12th of the employee's basic salary. 14
. . . when irregularities were discovered, that
is, when the misappropriation of several While it is true that the vouchers evidencing payments of 13th
thousands of pesos was found out, the month pay were submitted only on appeal, it would have been
petitioner instructed private respondents to more in keeping with the directive of Article 221 15 of the Labor
report back for work and settle their Code for the NLRC to have taken the same into account. 16 Time
accountabilities but the latter never reported and again, we have allowed evidence to be submitted on appeal,
for work. This instruction by the petitioner to emphasizing that, in labor cases, technical rules of evidence are
report back for work and settle their not binding. 17 Labor officials should use every and all
accountabilities served as notices to private reasonable means to ascertain the facts in each case speedily and
respondents for the latter to explain or objectively, without regard to technicalities of law or
account for the missing funds held in trust by procedure. 18
them before they disappeared. 9
It must also be borne in mind that the intent of P.D. No. 851 is
Petitioner considers this return-to-work order as equivalent to the granting of additional income in the form of 13th month pay
the first notice apprising the employee of the particular acts or to employees not as yet receiving the same and not that a double
omissions for which his dismissal is sought. But by petitioner's burden should be imposed on the employer who is already
own admission, private respondents were never told in said paying his employees a 13th month pay or its equivalent. 19 An
notice that their dismissal was being sought, only that they employer who pays less than 1/12th of the employees basic
should settle their accountabilities. In petitioner's incriminating salary as their 13th month pay is only required to pay the
words: difference. 20
It should be emphasized here that at the time The foregoing notwithstanding, the vouchers presented by
the misappropriation was discovered and petitioner covers only a particular year. It does not cover
subsequently thereafter, the petitioner's first amounts for other years claimed by private respondents. It
concern was not effecting the dismissal of cannot be presumed that the same amounts were given on said
private respondents but the recovery of the years. Hence, petitioner is entitled to credit only the amounts
misappropriated funds thus the latter were paid for the particular year covered by said vouchers.
advised to report back to work. 10
WHEREFORE, in view of the foregoing, the decision of the
As above-stated, the first notice should inform the employee NLRC dated July 31, 1995, insofar as it excludes the
that his dismissal is being sought. Its absence in the present case commissions received by private respondents in the
makes the termination of private respondents defective, for determination of petitioner's compliance with the minimum
which petitioner must be sanctioned for his non-compliance wage law, as well as its exclusion of the particular amounts
with the requirements of or for failure to observe due received by private respondents as part of their 13th month pay
process. 11 The twin requirements of notice and hearing is REVERSED and SET ASIDE. This case is REMANDED to the
constitute the essential elements of due process, and neither of Labor Arbiter for a recomputation of the alleged deficiencies.
these elements can be disregarded without running afoul of the For non-observance of procedural due process in effecting the
constitutional guarantee. Not being mere technicalities but the dismissal of private respondents, said decision is MODIFIED by
very essence of due process, to which every employee is entitled increasing the award of nominal damages to private
so as to ensure that the employer's prerogative to dismiss is not respondents from P1,000.00 to P5,000.00 each. No costs.
exercised arbitrarily, 12 these requisites must be complied with
SO ORDERED.
strictly.
Narvasa, C.J., Kapunan and Purisima, JJ., concur.
Petitioner makes much capital of private respondents' failure to
report to work, construing the same as abandonment which
thus authorized the latter's dismissal. As correctly pointed out
by the NLRC, to which the Solicitor General agreed, Section 2 of
Book V, Rule XIV of the Omnibus Rules Implementing the
Labor Code requires that in cases of abandonment of work,
notice should be sent to the worker's last known address. If
indeed private respondents had abandoned their jobs, it was
incumbent upon petitioner to comply with this requirement.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 36


BELLOSILLO, J.:
G.R. No. 122827 March 29, 1999 Petitioners numbering one hundred sixteen (116) 1 occupied the
position of Technical Staff, Unit Manager, Section Manager,
Department Manager, Division Manager and Vice President in
Millares v NLRC the mill site of respondent Paper Industries Corporation of the
Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP
suffered a major financial setback allegedly brought about by
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, the joint impact of restrictive government regulations on
SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL A. logging and the economic crisis. To avert further losses, it
DEJERO, NELSON T. GOMONIT, IMELDA IMPEYNADO undertook a retrenchment program and terminated the services
SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO of petitioners. Accordingly, petitioners received separation pay
S.GUEVARRA, FIDEL DUMANHOG, NELFA T.POLOTAN, computed at the rate of one (1) month basic pay for every year
LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO of service. Believing however that the allowances they allegedly
B. CABATUAN, EPIFANCIO E. GANANCIAL, regularly received on a monthly basis during their employment
DOMINADOR D. ATOK, CONRADO U. SERRANO,
should have been included in the computation thereof they
ISIDRO J. BARNAJA, ROMEO VIRTUDAZO, AVELINO
lodged a complaint for separation pay differentials.
NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO
LEGARAY, ROMEO R. BULA ROBERTO G.GARCIA, The allowances in question pertained to the following —
RUDOLFO SUZON, JERRY S. DANO, AUGUST G.
1. Staff/Manager's Allowance —
ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C. SISON,
NARCISO BULASA, ALBERTO CORTEZ, LILIA C. Respondent PICOP
CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, provides free housing
ISIDORO A. ALMENDAREZ, VICENTE M. PILONGO, facilities to supervisory
ROBERTO N. LUMPOT, PATRICIO BANDOLA, MANUEL and managerial employees
S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O. assigned in Bislig. The
ABRAHAM, OLEGARIO A. EPIS, NESTOR D. privilege includes free
PEREGRINO, RAMON A.USANAGA, PRESTO water and electric
BARTOLOME, BRADY EMPEYNADO, PORFERIO N. consumption. Owing
CONDADO, AQUILLO V. CORDOVA, LEONARDO however to shortage of
ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT, such facilities, it was
ANTONIO DOZA, LEONITO LABADIA, EDGARDO constrained to grant Staff
BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, allowance instead to those
MANUEL A. LERIO, JR., ROGELIO B. OCAMIA, who live in rented houses
RODOLFO A. CASTILLO, EDMUNDO L. PLAZA, outside but near the
ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR., vicinity of the mill site. But
CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO, the allowance ceases
ROGELIO M. DAVID, BENJAMIN U. ARLIGUE, whenever a vacancy occurs
APOLONIO MUNDO, JR., NENE M. ESPINOSA, NILO B. in the company's housing
BALAORO, GERONIMO S. CONVI, VICENTE R.
facilities. The former
TARAGOZA, YOLANDO A. SALAZAR, MANUEL A. NERI,
grantee is then directed to
ELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL
fill the vacancy. For Unit,
MACARIOLA, WALTERIO DAPADAP, SILVERIO
Section and Department
CUAMAG EUPARQUIO PLANOS, GILBERTO M. MIRA,
Managers, respondent
REYNALDO BACSARSA, DIOSDADO B. ABING,
ARISTARCO V. SALON, TOMAS N. CATACTE, PICOP gives an additional
RODOLFO MEMORIA, PAPENIANO CURIAS, JOSE S. amount to meet the same
CANDIA, DESIDERIO C. NAVARRO, EMMANUEL O. kind of expenses called
ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S. Manager's allowance.
SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, 2. Transportation Allowance —
ROMEO S. CABRERA, LEODEGARIO CAINTIC, NESTOR
G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, To relieve respondent
GONZALO C. PADILLO, LEONARDO CAGAKIT, PICOP's motor pool in
JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR Bislig from a barrage of
G. CAGALAWAN, GAUDENCIO C. SARMIENTO, requests for company
FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, vehicles and to stabilize
LEOPOLDO T. SUPIL, JOSE A. DOHINOG, ANIANO T. company vehicle
REYES, CARLITO G. UY, PLACIDO D. PADILLO, requirements it grants
TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and transportation allowance
AVELINO G. VENERACION, petitioners, to key officers and
vs. Managers assigned in the
NATIONAL LABOR RELATIONS COMMISSION, (FIFTH mill site who use their own
DIVISION) and PAPER INDUSTRIES CORPORATION OF vehicles in the
THE PHILIPPINES (PICOP) respondents. performance of their
duties. It is a conditional

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 37


grant such that when the Songco 12 which are all against the NLRC holding that the salary
conditions no longer base in computing separation pay includes not just the basic
obtain, the privilege is salary but also the regular allowances.
discontinued. The
There is no showing of grave abuse of discretion on the part of
recipients of this kind of
the NLRC. In case of retrenchment to prevent losses, Art. 283 of
allowance are required to
the Labor Code imposes on the employer an obligation to grant
liquidate it by submitting a
to the affected employees separation pay equivalent to one (1)
report with a detailed
month pay or at least one-half (1/2) month pay for every year
enumeration of expenses
of service, whichever is higher. Since the law speaks of "pay,"
incurred.
the question arises, "What exactly does the term connote?" We
3. Bislig Allowance — correlate Art. 283 with Art. 97 of the same Code on definition of
terms. "Pay" is not defined therein but "wage." In Songco the
The Bislig Allowance is
Court explained that both words (as well as salary) generally
given to Division
refer to one and the same meaning, i.e., a reward or recompense
Managers and corporate
for services performed. Specifically, "wage" is defined in letter
officers assigned in Bislig
(f) as the remuneration or earnings, however designated,
on account of the hostile
capable of being expressed in terms of money, whether fixed or
environment prevailing
ascertained on a time, task, piece, or commission basis, or other
therein. But once the
method of calculating the same, which is payable by an
recipient is transferred
employer to an employee under a written or unwritten contract
elsewhere outside Bislig,
of employment for work done or to be done, or for services
the allowance ceases.
rendered or to be rendered and includes the fair and reasonable
Applying Art. 97, par. (f), of the Labor Code which defines value, as determined by the Secretary of Labor, of board, lodging, or
"wage," the Executive Labor Arbiter opined that the subject other facilities customarily furnished by the employer to the employee.
allowances, being customarily furnished by respondent PICOP
We invite attention to the above-underlined clause. Stated
and regularly received by petitioners, formed part of the latter's
differently, when an employer customarily furnishes his
wages. Resolving the controversy from another angle, on the
employee board, lodging or other facilities, the fair and
strength of the ruling in Santos v. NLRC 2 and Soriano
reasonable value thereof, as determined by the Secretary of
v. NLRC 3 that in the computation of separation pay account
Labor and Employment, is included in "wage." In order to
should be taken not just of the basic salary but also of the regular
ascertain whether the subject allowances form part of
allowances that the employee had been receiving, he concluded
petitioner's "wages," we divide the discussion on the following
that the allowances should be included in petitioners' base pay.
— "customarily furnished;" "board, lodging or other facilities;"
Thus respondent PICOP was ordered on 28 April 1994 to pay
and, "fair reasonable value as determined by the Secretary of
petitioners Four Million Four Hundred Eighty-One Thousand
Labor."
Pesos P(4,481,000.00) representing separation pay differentials
plus ten per cent (10%) thereof as attorney's fees. 4 "Customary" is founded on long-established and constant
practice 13 connoting regularity. 14 The receipt of an allowance
The National Labor Relations Commission (NLRC) did not the
on a monthly basis does not ipso facto characterize it as regular
view of the Executive Labor Arbiter. On 7 October 1994 it set
and forming part of salary 15 because the nature of the grant is a
aside the assailed decision by decreeing that the allowances did
factor worth considering. We agree with the observation of the
not form part of the salary base used in computing separation
Office of the Solicitor General that the subject allowances were
pay. 5 Its ruling was based on the finding that the cases relied
temporarily, not regularly, received by petitioners because —
upon by the Executive Labor Arbiter were inapplicable since
they involved illegal dismissal where separation pay was In the case of the housing allowance, once a
granted in lieu of reinstatement which was no longer feasible. vacancy occurs in the company-provided
Instead, what it considered in point was Estate of the late Eugene housing accommodations, the employee
J. Kneebone v. NLRC 6 where the Court held that representation concerned transfers to the company premises
and transportation allowances were deemed not part of salary and his housing allowance is discontinued . .
and should therefore be excluded in the computation of ..
separation benefits. Relating the present case with Art. 97, par.
On the other hand, the transportation
(f), of the Labor Code, the NLRC likewise found that petitioners' allowance is in the form of advances for
allowances were contingency-based and thus not included in actual transportation expenses subject to
their salaries. On 26 September 1995 reconsideration was liquidation . . . given only to employees who
denied.7 have personal cars.
In this petition for certiorari, petitioners submit that their
The Bislig allowance is given to Division
allowances are included in the definition of "facilities" in Art. 97, Managers and corporate officers assigned in
par. (f), of the Labor Code, being necessary and indispensable Bislig, Surigao del Norte. Once the officer is
for their existence and subsistence. Furthermore they claim that transferred outside Bislig, the allowance
their availment of the monetary equivalent of those "facilities" stops. 16
on a monthly basis was characterized by permanency,
regularity and customariness. And to fortify their arguments We add that in the availment of the transportation allowance,
they insist on the applicability of Santos, 8 Soriano, 9 The Insular respondent PICOP set another requirement that the personal
Life Assurance Company, 10 Planters Products, Inc.11 and cars be used by the employees in the performance of their
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 38
duties. When the conditions for availment ceased to exist, the In Santos 19 the Court decreed that in the computation of
allowance reached the cutoff point. The finding of the NLRC separation pay awarded in lieu of reinstatement, account must
along the same line likewise merits concurrence, i.e., petitioners' be taken not only of the basic salary but also of transportation
continuous enjoyment of the disputed allowances was based on and emergency living allowances. Later, the Court in Soriano,
contingencies the occurrence of which wrote finis to such citing Santos, was general in its holding that the salary base
enjoyment. properly used in computing separation pay where
reinstatement was no longer feasible should include not just the
Although it is quite easy to comprehend "board" and "lodging,"
basic salary but also the regular allowances that the employee
it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the
had been receiving. Insular merely reiterated the
Rules Implementing the Labor Code gives meaning to the term
aforementioned rulings. The rationale is not difficult to discern.
as including articles or services for the benefit of the employee
It is the obligation of the employer to pay an illegally dismissed
or his family but excluding tools of the trade or articles or
employee the whole amount of his salaries plus all other
service primarily for the benefit of the employer or necessary to
benefits, bonuses and general increases to which he would have
the conduct of the employer's business. The Staff/Manager's
been normally entitled had he not been dismissed and had not
allowance may fall under "lodging" but the transportation and
stopped working. 20 The same holds true in case of retrenched
Bislig allowances are not embraced in "facilities" on the main
employees. And thus we applied Insular and Soriano in Planters
consideration that they are granted as well as the
in the computation of separation pay of retrenched employees.
Staff/Manager's allowance for respondent PICOP's benefit and
Songco likewise involved retrenchment and was relied upon in
convenience, i.e., to insure that petitioners render quality
Planters, Soriano and Santos in determining the proper amount
performance. In determining whether a privilege is a facility, the
of separation pay. As culled from the foregoing jurisprudence,
criterion is not so much its kind but its purpose. 17 That the
separation pay when awarded to an illegally dismissed
assailed allowances were for the benefit and convenience of
employee in lieu of reinstatement or to a retrenched employee
respondent company was supported by the circumstance that
should be computed based not only on the basic salary but also
they were not subjected to withholding tax. Revenue Audit
on the regular allowances that the employee had been receiving.
Memo Order No. 1-87 pertinently provides —
But in view of the previous discussion that the disputed
3.2. . . . transportation, representation or allowances were not regularly received by petitioners herein,
entertainment expenses shall not constitute there was no reason at all for petitioners to resort to the above
taxable compensation if: cases.
(a) It is for necessary travelling and Neither is Kneebone applicable, contrary to the finding of the
representation or entertainment expenses NLRC, because of the difference in factual circumstances. In
paid or incurred by the employee in the Kneebone, the Court was tasked to resolve the issue whether
pursuit of the trade or business of the there presentation and transportation allowances formed part of
employer, and salary as to be considered in the computation
(b) The employee is required to, and does, of retirement benefits. The ruling was in the negative on the main
make an accounting/liquidation for such ground that the retirement plan of the company expressly excluded
expense in accordance with the specific such allowances from salary.
requirements of substantiation for such WHEREFORE, the petition is DISMISSED. The resolution of
category or expense. public respondent National Labor Relations Commission dated
Board and lodging allowances furnished to 7 October 1994 holding that the Staff/Manager's, transportation
an employee not in excess of the latter's needs and Bislig allowances did not form part of the salary base used
and given free of charge, constitute income to in computing the separation pay of petitioners, as well as its
the latter except if such allowances or benefits resolution dated 26 September 1995 denying reconsideration, is
are furnished to the employee for the AFFIRMED. No costs.
convenience of the employer and as necessary SO ORDERED.
incident to proper performance of his duties
Puno, Mendoza, Quisumbing and Buena, JJ., concur.
in which case such benefits or allowances do
not constitute taxable income. 18
The Secretary of Labor and Employment under Sec. 6, Rule VII,
Book III, of the Rules Implementing the Labor Code may from
time to time fix in appropriate issuances the "fair and reasonable
value of board, lodging and other facilities customarily
furnished by an employer to his employees." Petitioners'
allowances do not represent such fair and reasonable value as
determined by the proper authority simply because the
Staff/Manager's allowance and transportation allowance were
amounts given by respondent company in lieu of actual
provisions for housing and transportation needs whereas the
Bislig allowance was given in consideration of being assigned to
the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC,
subject allowances did not form part of petitioners' wages.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 39
or a total aggregate amount of TWO
HUNDRED TEN THOUSAND
G.R. No. 111042 October 26, 1999
TWO HUNDRED TWELVE AND
AVELINO LAMBO and VICENTE BELOCURA, petitioners, 64/100 (P210,212.64).
vs.
All other claims are dismissed for lack of
NATIONAL LABOR RELATIONS COMMISSION and J.C.
merit.
TAILOR SHOP and/or JOHNNY CO, respondents.
SO ORDERED. 2
MENDOZA, J.:
On appeal by private respondents, the NLRC reversed the
This is a petition for certiorari to set aside the decision 1 of the
decision of the Labor Arbiter. It found that petitioners had not
National Labor Relations Commission (NLRC) which reversed
been dismissed from employment but merely threatened with a
the awards made by the Labor Arbiter in favor of petitioners,
closure of the business if they insisted on their demand for a
except one for P4,992.00 to each, representing 13th month pay.
"straight payment of their minimum wage," after petitioners, on
The facts are as follows. January 17, 1989, walked out of a meeting with private
respondents and other employees. According to the NLRC,
Petitioners Avelino Lambo and Vicente Belocura were
during that meeting, the employees voted to maintain the
employed as tailors by private respondents J.C. Tailor Shop
company policy of paying them according to the volume of
and/or Johnny Co on September 10, 1985 and March 3, 1985,
work finished at the rate of P18.00 per dozen of tailored clothing
respectively. They worked from 8:00 a.m. to 7:00 p.m. daily,
materials. Only petitioners allegedly insisted that they be paid
including Sundays and holidays. As in the case of the other 100
the minimum wage and other benefits. The NLRC held
employees of private respondents, petitioners were paid on a
petitioners guilty of abandonment of work and accordingly
piece-work basis, according to the style of suits they made.
dismissed their claims except that for 13th month pay. The
Regardless of the number of pieces they finished in a day, they
dispositive portion of its decision reads:
were each given a daily pay of at least P64.00.
WHEREFORE, in view of the foregoing, the
On January 17, 1989, petitioners filed a complaint against
appealed decision is hereby vacated and a
private respondents for illegal dismissal and sought recovery of
new one entered ordering respondents to pay
overtime pay, holiday pay, premium pay on holiday and rest
each of the complainants their 13th month
day, service incentive leave pay, separation pay, 13th month
pay in the amount of P4,992.00. All other
pay, and attorney’s fees.1âwphi1.nêt
monetary awards are hereby deleted.
After hearing, Labor Arbiter Jose G. Gutierrez found private
SO ORDERED. 3
respondents guilty of illegal dismissal and accordingly ordered
them to pay petitioners’ claims. The dispositive portion of the Petitioners allege that they were dismissed by private
Labor Arbiter’s decision reads: respondents as they were about to file a petition with the
Department of Labor and Employment (DOLE) for the payment
WHEREFORE, in the light of the
of benefits such as Social Security System (SSS) coverage, sick
foregoing, judgment is hereby
leave and vacation leave. They deny that they abandoned their
rendered declaring the
work.
complainants to have been illegally
dismissed and ordering the The petition is meritorious.
respondents to pay the
First. There is no dispute that petitioners were employees of
complainants the following
private respondents although they were paid not on the basis of
monetary awards:
time spent on the job but according to the quantity and the
AVELINO LAMBO VICENTE quality of work produced by them. There are two categories of
BELOCURA employees paid by results: (1) those whose time and
I. BACKWAGES P64,896.00 P64,896.00 performance are supervised by the employer. (Here, there is an
element of control and supervision over the manner as to how
II. OVERTIME PAY 13,447.90 13,447.90 the work is to be performed. A piece-rate worker belongs to this
III. HOLIDAY PAY 1,399.30 1,399.30 category especially if he performs his work in the company
premises.); and (2) those whose time and performance are
IV. 13TH MONTH PAY 4,992.00 4,992.00 unsupervised. (Here, the employer’s control is over the result of
V. SEPARATION PAY 9,984.00 11,648.00 the work. Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit accomplished.
—————— ——————
Piece-rate payment is generally practiced in garment factories
TOTAL P94,719.20 P96,383.20 = where work is done in the company premises, while payment
P191,102.40 on pakyao and takay basis is commonly observed in the
Add: 10% Attorney's Fees 19,110.24 agricultural industry, such as in sugar plantations where the
work is performed in bulk or in volumes difficult to
—————— quantify.4 Petitioners belong to the first category, i.e.,
GRAND TOTAL P210,212.64 supervised employees.

========= In determining the existence of an employer-employee


relationship, the following elements must be considered: (1) the
selection and engagement of the employee; (2) the payment of
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 40
wages; (3) the power of dismissal; and (4) the power to control their employment relationship. 12 Abandonment is a matter of
the employee’s conduct. 5 Of these elements, the most important intention; it cannot be inferred or presumed from equivocal
criterion is whether the employer controls or has reserved the acts. 13
right to control the employee not only as to the result of the
Third. Private respondents invoke the compromise
work but also as to the means and methods by which the result
agreement, 14 dated March 2, 1993, between them and petitioner
is to be accomplished. 6
Avelino Lambo, whereby in consideration of the sum of
In this case, private respondents exercised control over the work P10,000.00, petitioner absolved private respondents from
of petitioners. As tailors, petitioners worked in the company’s liability for money claims or any other obligations.
premises from 8:00 a.m. to 7:00 p.m. daily, including Sundays
To be sure, not all quitclaims are per se invalid or against public
and holidays. The mere fact that they were paid on a piece-rate
policy. But those (1) where there is clear proof that the waiver
basis does not negate their status as regular employees of
was wangled from an unsuspecting or gullible person or (2)
private respondents. The term "wage" is broadly defined in Art.
where the terms of settlement are unconscionable on their face
97 of the Labor Code as remuneration or earnings, capable of
are invalid. In these cases, the law will step in to annul the
being expressed in terms of money whether fixed or ascertained
questionable transaction. 15However, considering that the Labor
on a time, task, piece or commission basis. Payment by the piece
Arbiter had given petitioner Lambo a total award of P94,719.20,
is just a method of compensation and does not define the
the amount of P10,000.00 to cover any and all monetary claims
essence of the relations. 7 Nor does the fact that petitioners are
is clearly unconscionable. As we have held in another
not covered by the SSS affect the employer-employee
case, 16 the subordinate position of the individual employee vis-
relationship.
a-vis management renders him especially vulnerable to its
Indeed, the following factors show that petitioners, although blandishments, importunings, and even intimidations, and
piece-rate workers, were regular employees of private results in his improvidently waiving benefits to which he is
respondents: (1) within the contemplation of Art. 280 of the clearly entitled. Thus, quitclaims, waivers or releases are looked
Labor Code, their work as tailors was necessary or desirable in upon with disfavor for being contrary to public policy and are
the usual business of private respondents, which is engaged in ineffective to bar claims for the full measure of the workers’
the tailoring business; (2) petitioners worked for private legal rights. 17 An employee who is merely constrained to accept
respondents throughout the year, their employment not being the wages paid to him is not precluded from recovering the
dependent on a specific project or season; and, (3) petitioners difference between the amount he actually received and that
worked for private respondents for more than one year. 8 amount which he should have received.
Second. Private respondents contend, however, that petitioners Fourth. The Labor Arbiter awarded backwages, overtime pay,
refused to report for work after learning that the J.C. Tailoring holiday pay, 13th month pay, separation pay and attorney’s
and Dress Shop Employees Union had demanded their fees, corresponding to 10% of the total monetary awards, in
(petitioners’) dismissal for conduct unbecoming of employees. favor of petitioners.
In support of their claim, private respondents presented the
As petitioners were illegally dismissed, they are entitled to
affidavits 9 of Emmanuel Y. Caballero, president of the union,
reinstatement with backwages. Considering that petitioners
and Amado Cabañero, member, that petitioners had not been
were dismissed from the service on January 17, 1989, i.e., prior
dismissed by private respondents but that practically all
to March 21, 1989, 18 the Labor Arbiter correctly applied the rule
employees of the company, including the members of the union
in the Mercury Drug case, 19 according to which the recovery of
had asked management to terminate the services of petitioners.
backwages should be limited to three years without
The employees allegedly said they were against petitioners’
qualifications or deductions. Any award in excess of three years
request for change of the mode of payment of their wages, and
is null and void as to the excess. 20
that when a meeting was called to discuss this issue, a petition
for the dismissal of petitioners was presented, prompting the The Labor Arbiter correctly ordered private respondents to give
latter to walk out of their jobs and instead file a complaint for separation pay. Considerable time has lapsed since petitioners’
illegal dismissal against private respondents on January 17, dismissal, so that reinstatement would now be impractical and
1989, even before all employees could sign the petition and hardly in the best interest of the parties. In lieu of reinstatement,
management could act upon the same.1âwphi1.nêt separation pay should be awarded to petitioners at the rate of
one month salary for every year of service, with a fraction of at
To justify a finding of abandonment of work, there must be
least six (6) months of service being considered as one (1) year. 21
proof of a deliberate and unjustified refusal on the part of an
employee to resume his employment. The burden of proof is on The awards for overtime pay, holiday pay and 13th month pay
the employer to show an unequivocal intent on the part of the are in accordance with our finding that petitioners are regular
employee to discontinue employment. 10 Mere absence is not employees, although paid on a piece-rate basis. 22 These awards
sufficient. It must be accompanied by manifest acts unerringly are based on the following computation of the Labor Arbiter:
pointing to the fact that the employee simply does not want to AVELINO LAMBO
work anymore. 11
I. BACKWAGES: Jan. 17/89
Private respondents failed to discharge this burden. Other than - Jan. 17/92 = 36 mos.
the self-serving declarations in the affidavits of their two
employees, private respondents did not adduce proof of overt P 64.00/day x 26 days =
acts of petitioners showing their intention to abandon their 1,664.00/mo. x 36 mos. = P59,904.00
work. On the contrary, the evidence shows that petitioners lost
13th Mo. Pay:
no time in filing the case for illegal dismissal against private
respondent. This fact negates any intention on their part to sever
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 41
P1,664.00/yr. x 3 yrs. = 82.00/day 3 days = 246.00
4,992.00 P64,896.00
41.00/day x 3 days = (123.00) P123.00
————
41.00/day x 30% = ————
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
12.30/day x 3 days = 36.90 159.90
Jan. 17/86 - April 30/87 = 15 mos. & 12 day =
————
(15 mos. x 26 days + 12 days) = 402 days
Oct. 1/87 - Dec. 13/87 = 1 RH
*2 hours = 25%
P 49.00/day x 200% =
402 days x 2 hrs./days = 804 hrs.
98.00/day x 1 day = P98.00
P 32.00/day ÷ 8 hrs. =
49.00/day x 1 day = (49.00) 49.00
4.00/hr. x 25% =
————
1.00/hr. + P4.00/hr. =
Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs
5.00/hr. x 804 hrs. = 4,020.00
P 64.00/day x 200% =
May 1/87 - Sept. 30/87 = 4 mos. & 26 days =
128.00/day x 9 days = P1,152.00
(4 mos. x 26 days + 26 days)
64.00/day x 9 days =
= 130 days
(576.00) P576.00
130 days x 2 hrs./day = 260
64.00/day x 30% = ————
hrs.
19.20/day x 8 days = 153.60 729.60 1,399.30
P 41.00/day ÷ 8 hrs. =
——— ———
5.12/hr. x 25% =
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3
1.28/hr. + P5.12/hr. =
yrs.
6.40/hr. x 260 hrs. = P1,664.00
P 64.00/day x 26 days =
Oct. 1/87 - Dec. 13/87 = 2 mos. & 11 days =
1,664.00/yr. x 3 yrs. =
(2 mos. x 26 days + 11 days) = 63 days 4,992.00
63 days x 2 hrs./day = 126 hrs. V. SEPARATION PAY: Sept. 10/85 -
Jan. 17/92 = 6 yrs.
P 49.00/day ÷ 8 hrs. =
P1,664.00/mo. x 6 yrs. =
6.12/hr. x 25% =
9,984.00
1.53/hr. + P6.12/hr. =
————
7.65/hr. x 126 hrs. = P963.90
TOTAL AWARD
Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days = OF AVELINO
(13 mos. x 26 days + 2 days) = 340 days LAMBO
P94,719.20
340 days x 2 hrs./day = 680 hrs.
========
P 64.00/day ÷ 8 hrs. =
VICENTE BELOCURA
8.00/hr. x 25% =
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36
2.00/hr. + P8.00/hr = mos.
10.00/hr. x 680 hrs. = P6,800.00 P13,447.90 Same computation as A.
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89 Lambo P64,896.00
Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
P 32.00/day x 200% = Same computation as A.
Lambo 13,447.90
64.00/day x 12 days = 768.00
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
32.00/day x 12 days = (384.00) P384.00
Same computation as A.
32.00/day x 30% = ————
Lambo 1,399.30
9.60/day x 8 days = 76.80 460.80
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89
———
Same computation as A.
May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs Lambo 4,992.00
P 41.00/day x 200% =

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 42


V. SEPARATION PAY: March 3/85 - Jan. 17/92 WHEREFORE, the decision of the National Labor Relations
= 7 yrs. Commission is SET ASIDE and another one is RENDERED
ordering private respondents to pay petitioners the total
P1,664.00/mo. x 7 yrs. =
amount of One Hundred Eighty-One Thousand One Hundred
11,648.00
Two Pesos and 40/100 (P181,102.40), as computed
————— above.1âwphi1.nêt
TOTAL AWARD OF SO ORDERED.
VICENTE BELOCURA
P96,383.20
=========
SUMMARY
AVELINO LAMBO VICENTE BELOCURA
———————— —————————
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MO. PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
————— —————
TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorney's Fees 19,110.24
—————
GRAND TOTAL P210,212.64
=========
Except for the award of attorney’s fees in the amount of
P19,110.24, the above computation is affirmed. The award of
attorney’s fees should be disallowed, it appearing that
petitioners were represented by the Public Attorney’s Office.
With regard to petitioner Avelino Lambo, the amount of
P10,000.00 paid to him under the compromise agreement
should be deducted from the total award of P94,719.20.
Consequently, the award to each petitioner should be as
follows:
AVELINO LAMBO VICENTE BELOCURA
———————— —————————
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
————— —————
P 94,719.20
Less 10,000.00
—————
TOTAL P84,719.20 P96,383.20
GRAND TOTAL P181,102.40
=========

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 43


Coverage 1989 CBA from the other related section on sick leave with pay
benefits, specifically Section 3 thereof, in its attempt to justify
Art. 97. Definitions. As used in this Title: the discontinuance or withdrawal of the privilege of
(b) “Employer” includes any person acting directly or indirectly commutation or conversion to cash of the unenjoyed portion of
in the interest of an employer in relation to an employee and the sick leave benefit to regular intermittent workers. The
shall include the government and all its branches, subdivisions manner they were deprived of the privilege previously
and instrumentalities, all government-owned or controlled recognized and extended to them by petitioner-company
corporations and institutions, as well as non-profit private during the lifetime of the CBA of October 16, 1985 until three (3)
institutions, or organizations. months from its renewal on April 15, 1989, or a period of three
(3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. It must be
Prohibition against diminution/elimination noted that the 1989 CBA has two (2) sections on sick leave with
pay benefits which apply to two (2) distinct classes of workers
in petitioner's company, namely: (1) the regular non-
Art. 100. Prohibition against elimination or diminution of
benefits. Nothing in this Book shall be construed to eliminate or intermittent workers or those workers who render a daily eight-
hour service to the company and are governed by Section 1,
in any way diminish supplements, or other employee benefits
Article VIII of the 1989 CBA; and (2) intermittent field workers
being enjoyed at the time of promulgation of this Code.
who are members of the regular labor pool and the present
regular extra labor pool as of the signing of the agreement on
Art. 127. Non-diminution of benefits. No wage order issued by April 15, 1989 or those workers who have irregular working
any regional board shall provide for wage rates lower than the days and are governed by Section 3, Article VIII of the 1989
statutory minimum wage rates prescribed by Congress. (As CBA. It is not disputed that both classes of workers are entitled
amended by Republic Act No. 6727, June 9, 1989) to sick leave with pay benefits provided they comply with the
conditions set forth under Section 1 in relation to the last
paragraph of Section 3, to wit: (1) the employee-applicant must
G.R. No. 102132. March 19, 1993. be regular or must have rendered at least one year of service
Davao v Abarquez with the company; and (2) the application must be accompanied
by a certification from a company-designated physician. the
DAVAO INTEGRATED PORT STEVEDORING SERVICES, phrase "herein sick leave privilege," as used in the last sentence
petitioner, vs. RUBEN V. ABARQUEZ, in his capacity as an of Section 1, refers to the privilege of having a fixed 15-day sick
accredited Voluntary Arbitrator and THE ASSOCIATION OF leave with pay which, as mandated by Section 1, only the non-
TRADE UNIONS (ATU-TUCP), respondents. intermittent workers are entitled to. This fixed 15-day sick leave
Libron, Gaspar & Associates for petitioner. with pay benefit should be distinguished from the variable
number of days of sick leave, not to exceed 15 days, extended to
Bansalan B. Metilla for Association of Trade Unions
intermittent workers under Section 3 depending on the number
(ATUTUCP).
of hours of service rendered to the company, including overtime
SYLLABUS pursuant to the schedule provided therein. It is only fair and
reasonable for petitioner-company not to stipulate a fixed 15-
1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR
day sick leave with pay for its regular intermittent workers
RELATIONS; COLLECTIVE BARGAINING AGREEMENT;
since, as the term "intermittent" implies, there is irregularity in
DEFINED; NATURE THEREOF; CONSTRUCTION TO BE
their work-days. Reasonable and practical interpretation must
PLACED THEREON. — A collective bargaining agreement
be placed on contractual provisions. Interpetatio fienda est ut
(CBA), as used in Article 252 of the Labor Code, refers to a
res magis valeat quam pereat. Such interpretation is to be
contract executed upon request of either the employer or the
adopted, that the thing may continue to have efficacy rather
exclusive bargaining representative incorporating the
than fail.
agreement reached after negotiations with respect to wages,
hours of work and all other terms and conditions of 3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND
employment, including proposals for adjusting any grievances PURPOSE. — Sick leave benefits, like other economic benefits
or questions arising under such agreement. While the terms and stipulated in the CBA such as maternity leave and vacation
conditions of a CBA constitute the law between the parties, it is leave benefits, among others, are by their nature, intended to be
not, however, an ordinary contract to which is applied the replacements for regular income which otherwise would not be
principles of law governing ordinary contracts. A CBA, as a earned because an employee is not working during the period
labor contract within the contemplation of Article 1700 of the of said leaves. They are non-contributory in nature, in the sense
Civil Code of the Philippines which governs the relations that the employees contribute nothing to the operation of the
between labor and capital, is not merely contractual in nature benefits. By their nature, upon agreement of the parties, they are
but impressed with public interest, thus, it must yield to the intended to alleviate the economic condition of the workers.
common good. As such, it must be construed liberally rather 4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR;
than narrowly and technically, and the courts must place a CASE AT BAR. — Petitioner-company's objection to the
practical and realistic construction upon it, giving due authority of the Voluntary Arbitrator to direct the commutation
consideration to the context in which it is negotiated and of the unenjoyed portion of the sick leave with pay benefits of
purpose which it is intended to serve. intermittent workers in his decision is misplaced. Article 261 of
2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — It is thus the Labor Code is clear. The questioned directive of the herein
erroneous for petitioner to isolate Section 1, Article VIII of the public respondent is the necessary consequence of the exercise
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 44
of his arbitral power as Voluntary Arbitrator under Article 261 provided however, that only those regular workers of the
of the Labor Code "to hear and decide all unresolved grievances company whose work are not intermittent, are entitled to the
arising from the interpretation or implementation of the herein sick leave privilege.
Collective Bargaining Agreement." We, therefore, find that no
xxx xxx xxx
grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of Section 3. — All intermittent field workers of the company who
Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted are members of the Regular Labor Pool shall be entitled to
with and is absolutely correct. vacation and sick leaves per year of service with pay under the
following schedule based on the number of hours rendered
5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION
including overtime, to wit:
AGAINST ELIMINATION OR DIMINUTION OF BENEFITS;
BENEFITS GRANTED PURSUANT TO COMPANY PRACTICE Hours of Service Per Vacation Sick Leave
OR POLICY CANNOT BE PEREMPTORILY WITHDRAWN. — Calendar Year Leave
Whatever doubt there may have been early on was clearly
obliterated when petitioner-company recognized the said Less than 750 NII NII
privilege and paid its intermittent workers the cash equivalent 751 — 825 6 days 6 days
of the unenjoyed portion of their sick leave with pay benefits
826 — 900 7 7
during the lifetime of the CBA of October 16, 1985 until three (3)
months from its renewal on April 15, 1989. Well-settled is it that 901 — 925 8 8
the said privilege of commutation or conversion to cash, being
926 — 1,050 9 9
an existing benefit, the petitioner-company may not unilaterally
withdraw, or diminish such benefits. It is a fact that petitioner- 1,051 — 1,125 10 10
company had, on several instances in the past, granted and paid 1,126 — 1,200 11 11
the cash equivalent of the unenjoyed portion of the sick leave
benefits of some intermittent workers. Under the circumstances, 1,201 — 1,275 12 12
these may be deemed to have ripened into company practice or 1,276 — 1,350 13 13
policy which cannot be peremptorily withdrawn.
1,351 — 1,425 14 14
DECISION
1,426 — 1,500 15 15
ROMERO, J p:
The conditions for the availment of the herein vacation and sick
In this petition for certiorari, petitioner Davao Integrated Port leaves shall be in accordance with the above provided Sections
Services Corporation seeks to reverse the Award 1 issued on 1 and 2 hereof, respectively."
September 10, 1991 by respondent Ruben V. Abarquez, in his
Upon its renewal on April 15, 1989, the provisions for sick leave
capacity as Voluntary Arbitrator of the National Conciliation
with pay benefits were reproduced under Sections 1 and 3,
and Mediation Board, Regional Arbitration Branch XI in Davao
Article VIII of the new CBA, but the coverage of the said benefits
City in Case No. AC-211-BX1-10-003-91 which directed
was expanded to include the "present Regular Extra Labor Pool
petitioner to grant and extend the privilege of commutation of
as of the signing of this Agreement." Section 3, Article VIII, as
the unenjoyed portion of the sick leave with pay benefits to its
revised, provides, thus:
intermittent field workers who are members of the regular labor
pool and the present regular extra pool in accordance with the "Section 3. — All intermittent field workers of the company who
Collective Bargaining Agreement (CBA) executed between are members of the Regular Labor Pool and present Regular
petitioner and private respondent Association of Trade Unions Extra Labor Pool as of the signing of this agreement shall be
(ATU-TUCP), from the time it was discontinued and henceforth. entitled to vacation and sick leaves per year of service with pay
under the following schedule based on the number of hours
The facts are as follows:
rendered including overtime, to wit:
Petitioner Davao Integrated Port Stevedoring Services
Hours of Service Per Vacation Sick Leave
(petitioner-company) and private respondent ATU-TUCP
(Union), the exclusive collective bargaining agent of the rank Calendar Year Leave
and file workers of petitioner-company, entered into a collective
Less than 750 NII NII
bargaining agreement (CBA) on October 16, 1985 which, under
Sections 1 and 3, Article VIII thereof, provide for sick leave with 751 — 825 6 days 6 days
pay benefits each year to its employees who have rendered at 826 — 900 7 7
least one (1) year of service with the company, thus:
901 — 925 8 8
"ARTICLE VIII
926 — 1,050 9 9
Section 1. Sick Leaves — The Company agrees to grant 15 days
sick leave with pay each year to every regular non-intermittent 1,051 — 1,125 10 10
worker who already rendered at least one year of service with 1,126 — 1,200 11 11
the company. However, such sick leave can only be enjoyed
1,201 — 1,275 12 12
upon certification by a company designated physician, and if
the same is not enjoyed within one year period of the current 1,276 — 1,350 13 13
year, any unenjoyed portion thereof, shall be converted to cash
1,351 — 1,425 14 14
and shall be paid at the end of the said one year period. And
1,426 — 1,500 15 15
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 45
The conditions for the availment of the herein vacation and sick 1989 CBA that only the regular workers whose work are not
leaves shall be in accordance with the above provided Sections intermittent are entitled to the benefit of conversion to cash of
1 and 2 hereof, respectively." the unenjoyed portion of sick leave, thus: ". . . And provided,
however, that only those regular workers of the Company
During the effectivity of the CBA of October 16, 1985 until three
whose work are not intermittent are entitled to the herein sick
(3) months after its renewal on April 15, 1989, or until July 1989
leave privilege."
(a total of three (3) years and nine (9) months), all the field
workers of petitioner who are members of the regular labor pool Petitioner-company further argued that while the intermittent
and the present regular extra labor pool who had rendered at workers were paid the cash equivalent of their unenjoyed sick
least 750 hours up to 1,500 hours were extended sick leave with leave with pay benefits during the previous management of Mr.
pay benefits. Any unenjoyed portion thereof at the end of the Beltran who misinterpreted Sections 1 and 3 of Article VIII of
current year was converted to cash and paid at the end of the the 1985 CBA, it was well within petitioner-company's rights to
said one-year period pursuant to Sections 1 and 3, Article VIII rectify the error it had committed and stop the payment of the
of the CBA. The number of days of their sick leave per year said sick leave with pay benefits. An error in payment,
depends on the number of hours of service per calendar year in according to petitioner-company, can never ripen into a
accordance with the schedule provided in Section 3, Article VIII practice.
of the CBA.
We find the arguments unmeritorious.
The commutation of the unenjoyed portion of the sick leave
A collective bargaining agreement (CBA), as used in Article 252
with pay benefits of the intermittent workers or its conversion
of the Labor Code, refers to a contract executed upon request of
to cash was, however, discontinued or withdrawn when
either the employer or the exclusive bargaining representative
petitioner-company under a new assistant manager, Mr.
incorporating the agreement reached after negotiations with
Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the
respect to wages, hours of work and all other terms and
latter's resignation in June 1989), stopped the payment of its
conditions of employment, including proposals for adjusting
cash equivalent on the ground that they are not entitled to the
any grievances or questions arising under such agreement.
said benefits under Sections 1 and 3 of the 1989 CBA.
While the terms and conditions of a CBA constitute the law
The Union objected to the said discontinuance of commutation
between the parties, 3 it is not, however, an ordinary contract to
or conversion to cash of the unenjoyed sick leave with pay
which is applied the principles of law governing ordinary
benefits of petitioner's intermittent workers contending that it is
contracts. 4 A CBA, as a labor contract within the contemplation
a deviation from the true intent of the parties that negotiated the
of Article 1700 of the Civil Code of the Philippines which
CBA; that it would violate the principle in labor laws that
governs the relations between labor and capital, is not merely
benefits already extended shall not be taken away and that it
contractual in nature but impressed with public interest, thus, it
would result in discrimination between the non-intermittent
must yield to the common good. As such, it must be construed
and the intermittent workers of the petitioner-company.
liberally rather than narrowly and technically, and the courts
Upon failure of the parties to amicably settle the issue on the must place a practical and realistic construction upon it, giving
interpretation of Sections 1 and 3, Article VIII of the 1989 CBA, due consideration to the context in which it is negotiated and
the Union brought the matter for voluntary arbitration before purpose which it is intended to serve. 5
the National Conciliation and Mediation Board, Regional
It is thus erroneous for petitioner to isolate Section 1, Article VIII
Arbitration Branch XI at Davao City by way of complaint for
of the 1989 CBA from the other related section on sick leave with
enforcement of the CBA. The parties mutually designated
pay benefits, specifically Section 3 thereof, in its attempt to
public respondent Ruben Abarquez, Jr. to act as voluntary
justify the discontinuance or withdrawal of the privilege of
arbitrator.
commutation or conversion to cash of the unenjoyed portion of
After the parties had filed their respective position papers, 2 the sick leave benefit to regular intermittent workers. The
public respondent Ruben Abarquez, Jr. issued on September 10, manner they were deprived of the privilege previously
1991 an Award in favor of the Union ruling that the regular recognized and extended to them by petitioner-company
intermittent workers are entitled to commutation of their during the lifetime of the CBA of October 16, 1985 until three (3)
unenjoyed sick leave with pay benefits under Sections 1 and 3 months from its renewal on April 15, 1989, or a period of three
of the 1989 CBA, the dispositive portion of which reads: (3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. Petitioner-
"WHEREFORE, premises considered, the management of the
company is of the mistaken notion that since the privilege of
respondent Davao Integrated Port Stevedoring Services
commutation or conversion to cash of the unenjoyed portion of
Corporation is hereby directed to grant and extend the sick
the sick leave with pay benefits is found in Section 1, Article
leave privilege of the commutation of the unenjoyed portion of
VIII, only the regular non-intermittent workers and no other can
the sick leave of all the intermittent field workers who are
avail of the said privilege because of the proviso found in the
members of the regular labor pool and the present extra pool in
last sentence thereof.
accordance with the CBA from the time it was discontinued and
henceforth. It must be noted that the 1989 CBA has two (2) sections on sick
leave with pay benefits which apply to two (2) distinct classes
SO ORDERED."
of workers in petitioner's company, namely: (1) the regular non-
Petitioner-company disagreed with the aforementioned ruling intermittent workers or those workers who render a daily eight-
of public respondent, hence, the instant petition. hour service to the company and are governed by Section 1,
Petitioner-company argued that it is clear from the language Article VIII of the 1989 CBA; and (2) intermittent field workers
and intent of the last sentence of Section 1, Article VIII of the who are members of the regular labor pool and the present

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 46


regular extra labor pool as of the signing of the agreement on 1989 CBA that regular intermittent workers are not entitled to
April 15, 1989 or those workers who have irregular working commutation of the unenjoyed portion of their sick leave with
days and are governed by Section 3, Article VIII of the 1989 pay benefits?
CBA.
Whatever doubt there may have been early on was clearly
It is not disputed that both classes of workers are entitled to sick obliterated when petitioner-company recognized the said
leave with pay benefits provided they comply with the privilege and paid its intermittent workers the cash equivalent
conditions set forth under Section 1 in relation to the last of the unenjoyed portion of their sick leave with pay benefits
paragraph of Section 3, to wit: (1) the employee-applicant must during the lifetime of the CBA of October 16, 1985 until three (3)
be regular or must have rendered at least one year of service months from its renewal on April 15, 1989. Well-settled is it that
with the company; and (2) the application must be accompanied the said privilege of commutation or conversion to cash, being
by a certification from a company-designated physician. an existing benefit, the petitioner-company may not unilaterally
withdraw, or diminish such benefits. 10 It is a fact that
Sick leave benefits, like other economic benefits stipulated in the
petitioner-company had, on several instances in the past,
CBA such as maternity leave and vacation leave benefits, among
granted and paid the cash equivalent of the unenjoyed portion
others, are by their nature, intended to be replacements for
of the sick leave benefits of some intermittent workers. 11 Under
regular income which otherwise would not be earned because
the circumstances, these may be deemed to have ripened into
an employee is not working during the period of said leaves. 6
company practice or policy which cannot be peremptorily
They are non-contributory in nature, in the sense that the
withdrawn. 12
employees contribute nothing to the operation of the benefits. 7
By their nature, upon agreement of the parties, they are Moreover, petitioner-company's objection to the authority of the
intended to alleviate the economic condition of the workers. Voluntary Arbitrator to direct the commutation of the
unenjoyed portion of the sick leave with pay benefits of
After a careful examination of Section 1 in relation to Section 3,
intermittent workers in his decision is misplaced. Article 261 of
Article VIII of the 1989 CBA in light of the facts and
the Labor Code is clear. The questioned directive of the herein
circumstances attendant in the instant case, we find and so hold
public respondent is the necessary consequence of the exercise
that the last sentence of Section 1, Article VIII of the 1989 CBA,
of his arbitral power as Voluntary Arbitrator under Article 261
invoked by petitioner-company does not bar the regular
of the Labor Code "to hear and decide all unresolved grievances
intermittent workers from the privilege of commutation or
arising from the interpretation or implementation of the
conversion to cash of the unenjoyed portion of their sick leave
Collective Bargaining Agreement." We, therefore, find that no
with pay benefits, if qualified. For the phrase "herein sick leave
grave abuse of discretion was committed by public respondent
privilege," as used in the last sentence of Section 1, refers to the
in issuing the award (decision). Moreover, his interpretation of
privilege of having a fixed 15-day sick leave with pay which, as
Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted
mandated by Section 1, only the non-intermittent workers are
with and is absolutely correct.
entitled to. This fixed 15-day sick leave with pay benefit should
be distinguished from the variable number of days of sick leave, WHEREFORE, in view of the foregoing, the petition is
not to exceed 15 days, extended to intermittent workers under DISMISSED. The award (decision) of public respondent dated
Section 3 depending on the number of hours of service rendered September 10, 1991 is hereby AFFIRMED. No costs.
to the company, including overtime pursuant to the schedule
SO ORDERED.
provided therein. It is only fair and reasonable for petitioner-
company not to stipulate a fixed 15-day sick leave with pay for
its regular intermittent workers since, as the term "intermittent"
implies, there is irregularity in their work-days. Reasonable and
practical interpretation must be placed on contractual
provisions. Interpetatio fienda est ut res magis valeat quam
pereat. Such interpretation is to be adopted, that the thing may
continue to have efficacy rather than fail. 8
We find the same to be a reasonable and practical distinction
readily discernible in Section 1, in relation to Section 3, Article
VIII of the 1989 CBA between the two classes of workers in the
company insofar as sick leave with pay benefits are concerned.
Any other distinction would cause discrimination on the part of
intermittent workers contrary to the intention of the parties that
mutually agreed in incorporating the questioned provisions in
the 1989 CBA.
Public respondent correctly observed that the parties to the CBA
clearly intended the same sick leave privilege to be accorded the
intermittent workers in the same way that they are both given
the same treatment with respect to vacation leaves - non-
commutable and non-cumulative. If they are treated equally
with respect to vacation leave privilege, with more reason
should they be on par with each other with respect to sick leave
privileges. 9 Besides, if the intention were otherwise, during its
renegotiation, why did not the parties expressly stipulate in the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 47
G.R. No. 91231 February 4, 1991 After conciliation efforts of the National Conciliation and
Mediation Board (NCMB) yielded negative results, the dispute
NESTLÉ PHILIPPINES, INC., petitioner, was certified to the NLRC by the Secretary of Labor on October
vs. 28, 1988.
THE NATIONAL LABOR RELATIONS
After the parties had filed their pleadings, the NLRC issued a
COMMISSION and UNION OF FILIPRO resolution on June 5, 1989, whose pertinent disposition
EMPLOYEES, respondents. regarding the union's demand for liberalization of the
Siguion Reyna, Montecillo & Ongsiako for petitioner. company's retirement plan for its workers, provides as follows:
Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for xxx xxx xxx
private respondent.
7. Retirement Plan
The company shall continue implementing its
retirement plan modified as follows:
GRIÑO-AQUINO, J.:
a) for fifteen years of service or less — an amount equal
Nestlé Philippines, Inc., by this petition for certiorari, seeks to to 100% of the employee's monthly salary for every
annul, on the ground of grave abuse of discretion, the decision year of service;
dated August 8, 1989 of the National Labor Relations
b) more than 15 but less than 20 years — 125% of the
Commission (NLRC), Second Division, in Cert. Case No. 0522
employee's monthly salary for every year of service;
entitled, "In Re: Labor Dispute of Nestlé Philippines, Inc."
insofar as it modified the petitioner's existing non-contributory c) 20 years or more — 150% of the employee's monthly
Retirement Plan. salary for every year of service. (pp. 58-59, Rollo.)
Four (4) collective bargaining agreements separately covering Both parties separately moved for reconsideration of the
the petitioner's employees in its: decision.
1. Alabang/Cabuyao factories; On August 8, 1989, the NLRC issued a resolution denying the
motions for reconsideration. With regard to the Retirement
2. Makati Administration Office. (Both
Plan, the NLRC held:
Alabang/Cabuyao factories and Makati office were
represented by the respondent, Union of Filipro Anent management's objection to the modification of
Employees [UFE]); its Retirement Plan, We find no cogent reason to alter
our previous decision on this matter.
3. Cagayan de Oro Factory represented by WATU; and
While it is not disputed that the plan is non-
4. Cebu/Davao Sales Offices represented by the Trade
contributory on the part of the workers, tills does not
Union of the Philippines and Allied Services (TUPAS),
automatically remove it from the ambit of collective
all expired on June 30, 1987. bargaining negotiations. On the contrary, the plan is
Thereafter, UFE was certified as the sole and exclusive specifically mentioned in the previous bargaining
bargaining agent for all regular rank-and-file employees at the agreements (Exhibits "R-1" and "R-4"), thereby
petitioner's Cagayan de Oro factory, as well as its Cebu/Davao integrating or incorporating the provisions thereof to
Sales Office. the agreement. By reason of its incorporation, the plan
assumes a consensual character which cannot be
In August, 1987, while the parties, were negotiating, the terminated or modified at will by either party.
employees at Cabuyao resorted to a "slowdown" and walk-outs Consequently, it becomes part and parcel of CBA
prompting the petitioner to shut down the factory. Marathon negotiations.
collective bargaining negotiations between the parties ensued.
However, We need to clarify Our resolution on this
On September 2, 1987, the UFE declared a bargaining deadlock. issue. When we increased the emoluments in the plan,
On September 8, 1987, the Secretary of Labor assumed the conditions for the availment of the benefits set forth
jurisdiction and issued a return to work order. In spite of that therein remain the same. (p. 32, Rollo.)
order, the union struck, without notice, at the
Alabang/Cabuyao factory, the Makati office and Cagayan de On December 14, 1989, the petitioner filed this petition
Oro factory on September 11, 1987 up to December 8, 1987. The for certiorari, alleging that since its retirement plan is non-
company retaliated by dismissing the union officers and contributory, it (Nestlé) has the sole and exclusive prerogative
members of the negotiating panel who participated in the illegal to define the terms of the plan "because the workers have no
strike. The NLRC affirmed the dismissals on November 2, 1988. vested and demandable rights thereunder, the grant thereof
being not a contractual obligation but merely gratuitous. At
On January 26, 1988, UFE filed a notice of strike on the same most the company can only be directed to maintain the same but
ground of CBA deadlock and unfair labor practices. However, not to change its terms. It should be left to the discretion of the
on March 30, 1988, the company was able to conclude a CBA company on how to improve or mollify the same" (p. 10, Rollo).
with the union at the Cebu/Davao Sales Office, and on August
5, 1988, with the Cagayan de Oro factory workers. The union The Court agrees with the NLRC's finding that the Retirement
assailed the validity of those agreements and filed a case of Plan was "a collective bargaining issue right from the start" (p.
unfair labor practice against the company on November 16, 109, Rollo) for the improvement of the existing Retirement Plan
1988. was one of the original CBA proposals submitted by the UFE on
May 8, 1987 to Arthur Gilmour, president of Nestlé Philippines.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 48
The union's original proposal was to modify the existing plan whimsical. The benefits and concessions given to the employees
by including a provision for early retirement. The company did were based on the NLRC's evaluation of the union's demands,
not question the validity of that proposal as a collective the evidence adduced by the parties, the financial capacity of the
bargaining issue but merely offered to maintain the existing Company to grant the demands, its longterm viability, the
non-contributory retirement plan which it believed to be still economic conditions prevailing in the country as they affect the
adequate for the needs of its employees, and competitive with purchasing power of the employees as well as its concommitant
those existing in the industry. The union thereafter modified its effect on the other factors of production, and the recent trends
proposal, but the company was adamant. Consequently, the in the industry to which the Company belongs (p. 57, Rollo). Its
impassé on the retirement plan become one of the issues decision is not vitiated by abuse of discretion.
certified to the NLRC for compulsory arbitration.
WHEREFORE, the petition for certiorari is dismissed, with costs
The company's contention that its retirement plan is non- against the petitioner.
negotiable, is not well-taken.1âwphi1 The NLRC correctly
SO ORDERED.
observed that the inclusion of the retirement plan in the
collective bargaining agreement as part of the package of
economic benefits extended by the company to its employees to
provide them a measure of financial security after they shall
have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote
industrial peace, gives "a consensual character" to the plan so
that it may not be terminated or modified at will by either party
(p. 32, Rollo).
The fact that the retirement plan is non-contributory, i.e., that
the employees contribute nothing to the operation of the plan,
does not make it a non-issue in the CBA negotiations. As a
matter of fact, almost all of the benefits that the petitioner has
granted to its employees under the CBA — salary increases, rice
allowances, mid-year bonuses, 13th and 14th month pay,
seniority pay, medical and hospitalization plans, health and
dental services, vacation, sick & other leaves with pay — are
non-contributory benefits. Since the retirement plan has been an
integral part of the CBA since 1972, the Union's demand to
increase the benefits due the employees under said plan, is a
valid CBA issue. The deadlock between the company and the
union on this issue was resolvable by the Secretary of Labor, or
the NLRC, after the Secretary had assumed jurisdiction over the
labor dispute (Art. 263, subparagraph [i] of the Labor Code).
The petitioner's contention, that employees have no vested or
demandable right to a non-contributory retirement plan, has no
merit for employees do have a vested and demandable right
over existing benefits voluntarily granted to them by their
employer. The latter may not unilaterally withdraw, eliminate
or diminish such benefits (Art. 100, Labor Code; Tiangco, et al.
vs. Hon. Leogardo, et al., 122 SCRA 267).
This Court ruled similarly in Republic Cement Corporation vs.
Honorable Panel of Arbitrators, G.R. No. 89766, Feb. 19, 1990:
. . . Petitioner's claim that retirement benefits, being
noncontributory in nature, are not proper subjects for
voluntary arbitration is devoid of merit. The expired
CBA previously entered into by the parties included
provisions for the implementation of a "Retirement
and Separation Plan." it is only to be expected that the
parties would seek a renewal or an improvement of
said item in the new CBA. In fact, the parties
themselves expressly included retirement benefits
among the economic issues to be resolved by voluntary
arbitration. Petitioner is estopped from now contesting
the validity of the increased award granted by the
arbitrators. (p. 145, Rollo.)
The NLRC's resolution of the bargaining deadlock between
Nestlé and its employees is neither arbitrary, capricious, nor

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 49


supported by substantial evidence, the different issues are taken
up, in the order they are raised in the brief for the petitioners.
G.R. No. L-12444 February 28, 1963
1. First assignment of error. — The respondent court
STATES MARINE CORPORATION and ROYAL
erred in holding that it had jurisdiction over case No.
LINE, INC., petitioners, 740-V, notwithstanding the fact that those who had
vs. dispute with the petitioners, were less than thirty (30)
CEBU SEAMEN'S ASSOCIATION, in number.
INC., respondent. The CIR made a finding that at the time of the
Pedro B. Uy Calderon for petitioners. filing of the petition in case No. 740-V,
Gaudioso C. Villagonzalo for respondent. respondent Union had more than thirty
members actually working with the
PAREDES, J.: companies, and the court declared itself with
Petitioners States Marine Corporation and Royal Line, Inc. were jurisdiction to take cognizance of the case.
engaged in the business of marine coastwise transportation, Against this order, the herein petitioners did
employing therein several steamships of Philippine registry. not file a motion for reconsideration or a
They had a collective bargaining contract with the respondent petition for certiorari. The finding of fact
Cebu Seamen's Association, Inc. On September 12, 1952, the made by the CIR became final and conclusive,
respondent union filed with the Court of Industrial Relations which We are not now authorized to alter or
(CIR), a petition (Case No. 740-V) against the States Marine modify. It is axiomatic that once the CIR had
Corporation, later amended on May 4, 1953, by including as acquired jurisdiction over a case, it continues
party respondent, the petitioner Royal Line, Inc. The Union to have that jurisdiction, until the case is
alleged that the officers and men working on board the terminated (Manila Hotel Emp. Association
petitioners' vessels have not been paid their sick leave, vacation v. Manila Hotel Company, et al., 40 O.G. No.
leave and overtime pay; that the petitioners threatened or 6, p. 3027). It was abundantly shown that
coerced them to accept a reduction of salaries, observed by other there were 56 members who signed Exhibits
shipowners; that after the Minimum Wage Law had taken effect, A, A-I to A-8, and that 103 members of the
the petitioners required their employees on board their vessels, Union are listed in Exhibits B, B-1 to B-35, F,
to pay the sum of P.40 for every meal, while the masters and F-1 and K-2 to K-3. So that at the time of the
officers were not required to pay their meals and that because filing of the petition, the respondent union
Captain Carlos Asensi had refused to yield to the general had a total membership of 159, working with
reduction of salaries, the petitioners dismissed said captain who the herein petitioners, who were presumed
now claims for reinstatement and the payment of back wages interested in or would be benefited by the
from December 25, 1952, at the rate of P540.00, monthly. outcome of the case (NAMARCO v. CIR, L-
17804, Jan. 1963). Annex D, (Order of the CIR,
The petitioners' shipping companies, answering, averred that dated March 8, 1954), likewise belies the
very much below 30 of the men and officers in their employ contention of herein petitioner in this regard.
were members of the respondent union; that the work on board The fact that only 7 claimed for overtime pay
a vessel is one of comparative ease; that petitioners have and only 7 witnesses testified, does not
suffered financial losses in the operation of their vessels and that warrant the conclusion that the employees
there is no law which provides for the payment of sick leave or who had some dispute with the present
vacation leave to employees or workers of private firms; that as petitioners were less than 30. The ruling of the
regards the claim for overtime pay, the petitioners have always CIR, with respect to the question of
observed the provisions of Comm. Act No. 444, (Eight-Hour jurisdiction is, therefore, correct.
Labor Law), notwithstanding the fact that it does not apply to
those who provide means of transportation; that the shipowners 2. Second assignment of error. — The CIR erred in
and operators in Cebu were paying the salaries of their officers holding, that inasmuch as in the shipping articles, the
and men, depending upon the margin of profits they could herein petitioners have bound themselves to supply
realize and other factors or circumstances of the business; that the crew with provisions and with such "daily
in enacting Rep. Act No. 602 (Minimum Wage Law), the subsistence as shall be mutually agreed upon" between
Congress had in mind that the amount of P.40 per meal, the master and the crew, no deductions for meals could
furnished the employees should be deducted from the daily be made by the aforesaid petitioners from their wages
wages; that Captain Asensi was not dismissed for alleged union or salaries.
activities, but with the expiration of the terms of the contract 3. Third assignment of error. — The CIR erred in holding
between said officer and the petitioners, his services were that inasmuch as with regard to meals furnished to
terminated. crew members of a vessel, section 3(f) of Act No. 602 is
A decision was rendered on February 21, 1957 in favor of the the general rule, which section 19 thereof is the
respondent union. The motion for reconsideration thereof, exception, the cost of said meals may not be legally
having been denied, the companies filed the present writ of deducted from the wages or salaries of the aforesaid
certiorari, to resolve legal question involved. Always bearing in crew members by the herein petitioners.
mind the deep-rooted principle that the factual findings of the 4. Fourth assignment of error. — The CIR erred in
Court of Industrial Relations should not be disturbed, if declaring that the deduction for costs of meals from the
wages or salaries after August 4, 1951, is illegal and
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 50
same should be reimbursed to the employee twenty centavos daily for agricultural workers and not
concerned, in spite of said section 3, par. (f) of Act No. more than forty centavos daily for other employees
602. covered by this Act.
It was shown by substantial evidence, that since the beginning Petitioners maintain, in view of the above provisions, that in
of the operation of the petitioner's business, all the crew of their fixing the minimum wage of employees, Congress took into
vessels have been signing "shipping articles" in which are stated account the meals furnished by employers and that in fixing the
opposite their names, the salaries or wages they would receive. rate of forty centavos per meal, the lawmakers had in mind that
All seamen, whether members of the crew or deck officers or the latter amount should be deducted from the daily wage,
engineers, have been furnished free meals by the ship owners or otherwise, no rate for meals should have been provided.
operators. All the shipping articles signed by the master and the
However, section 19, same law, states —
crew members, contained, among others, a stipulation, that "in
consideration of which services to be duly performed, the said SEC. 19. Relations to other labor laws and practices.—
master hereby agrees to pay to the said crew, as wages, the sums Nothing in this Act shall deprive an employee of the
against their names respectively expressed in the contract; and right to seek fair wages, shorter working hours and
to supply them with provisions as provided herein ..." (Sec. 8, par. better working conditions nor justify an employer in
[b], shipping articles), and during the duration of the contract violating any other labor law applicable to
"the master of the vessel will provide each member of the his employees, in reducing the wage now paid to any of his
crew such daily subsistence as shall be mutually agreed daily employees in excess of the minimum wage established under
upon between said master and crew; or, in lieu of such this Act, or in reducing supplements furnished on the date
subsistence the crew may reserve the right to demand at the of enactment.
time of execution of these articles that adequate daily rations be At first blush, it would appear that there exists a contradiction
furnished each member of the crew." (Sec. 8, par. [e], shipping between the provisions of section 3(f) and section 19 of Rep. Act
articles). It is, therefore, apparent that, aside from the payment No. 602; but from a careful examination of the same, it is evident
of the respective salaries or wages, set opposite the names of the that Section 3(f) constitutes the general rule, while section 19 is
crew members, the petitioners bound themselves to supply the the exception. In other words, if there are no supplements given,
crew with ship's provisions, daily subsistence or daily rations, within the meaning and contemplation of section 19, but merely
which include food. facilities, section 3(f) governs. There is no conflict; the two
This was the situation before August 4, 1951, when the provisions could, as they should be harmonized. And even if
Minimum Wage Law became effective. After this date, there is such a conflict, the respondent CIR should resolve the
however, the companies began deducting the cost of meals from same in favor of the safety and decent living laborers (Art. 1702,
the wages or salaries of crew members; but no such deductions new Civil Code)..
were made from the salaries of the deck officers and engineers It is argued that the food or meals given to the deck officers,
in all the boats of the petitioners. Under the existing laws, marine engineers and unlicensed crew members in question,
therefore, the query converges on the legality of such were mere "facilities" which should be deducted from wages,
deductions. While the petitioners herein contend that the and not "supplements" which, according to said section 19,
deductions are legal and should not be reimbursed to the should not be deducted from such wages, because it is provided
respondent union, the latter, however, claims that same are therein: "Nothing in this Act shall deprive an employee of the
illegal and reimbursement should be made. right to such fair wage ... or in reducing supplements furnished
Wherefore, the parties respectfully pray that the foregoing on the date of enactment." In the case of Atok-Big Wedge Assn.
stipulation of facts be admitted and approved by this Honorable v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the
Court, without prejudice to the parties adducing other evidence two terms are defined as follows —
to prove their case not covered by this stipulation of "Supplements", therefore, constitute extra
facts. 1äwphï1.ñët remuneration or special privileges or benefits given to
We hold that such deductions are not authorized. In the or received by the laborers over and above their ordinary
coastwise business of transportation of passengers and freight, earnings or wages. "Facilities", on the other hand, are
the men who compose the complement of a vessel are provided items of expense necessary for the laborer's and his
with free meals by the shipowners, operators or agents, because family's existence and subsistence so that by express
they hold on to their work and duties, regardless of "the stress provision of law (Sec. 2[g]), they form part of the wage
and strain concomitant of a bad weather, unmindful of the and when furnished by the employer are deductible
dangers that lurk ahead in the midst of the high seas." therefrom, since if they are not so furnished, the
laborer would spend and pay for them just the same.
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602),
provides as follows — In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
(f) Until and unless investigations by the Secretary of ordinary earning or wage, is supplement; and when said benefit
Labor on his initiative or on petition of any interested or privilege is part of the laborers' basic wages, it is a facility.
party result in a different determination of the fair and The criterion is not so much with the kind of the benefit or item
reasonable value, the furnishing of meals shall be valued (food, lodging, bonus or sick leave) given, but its purpose.
at not more than thirty centavos per meal for Considering, therefore, as definitely found by the respondent
agricultural employees and not more than forty centavos court that the meals were freely given to crew members prior to
for any other employees covered by this Act, and the August 4, 1951, while they were on the high seas "not as part of
furnishing of housing shall be valued at not more than their wages but as a necessary matter in the maintenance of the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 51
health and efficiency of the crew personnel during the voyage", 8. Eighth assignment of error.— The CIR erred in ordering
the deductions therein made for the meals given after August 4, petitioners to reinstate Capt. Carlos Asensi to his former
1951, should be returned to them, and the operator of the position, considering the fact that said officer had been
coastwise vessels affected should continue giving the same employed since January 9, 1953, as captain of a vessel belonging
benefit.. to another shipping firm in the City of Cebu.
In the case of Cebu Autobus Company v. United Cebu Autobus The CIR held —
Employees Assn., L-9742, Oct. 27, 1955, the company used to pay
Finding that the claims of Captain Carlos Asensi for
to its drivers and conductors, who were assigned outside of the
back salaries from the time of his alleged lay-off on
City limits, aside from their regular salary, a certain percentage
March 20, 1952, is not supported by the evidence on
of their daily wage, as allowance for food. Upon the effectivity
record, the same is hereby dismissed. Considering,
of the Minimum Wage Law, however, that privilege was
however, that Captain Asensi had been laid-off for a
stopped by the company. The order CIR to the company to
long time and that his failure to report for work is not
continue granting this privilege, was upheld by this Court.
sufficient cause for his absolute dismissal, respondents
The shipping companies argue that the furnishing of meals to are hereby ordered to reinstate him to his former job
the crew before the effectivity of Rep. Act No. 602, is of no without back salary but under the same terms and
moment, because such circumstance was already taken into conditions of employment existing prior to his lay-off,
consideration by Congress, when it stated that "wage" includes without loss of seniority and other benefits already
the fair and reasonable value of boards customarily furnished acquired by him prior to March 20, 1952. This Court is
by the employer to the employees. If We are to follow the theory empowered to reduce the punishment meted out to an
of the herein petitioners, then a crew member, who used to erring employee (Standard Vacuum Oil Co., Inc. v.
receive a monthly wage of P100.00, before August 4, 1951, with Katipunan Labor Union, G.R. No. L-9666, Jan. 30,
no deduction for meals, after said date, would receive only 1957). This step taken is in consonance with section 12
P86.00 monthly (after deducting the cost of his meals at P.40 per of Comm. Act 103, as amended." (p. 16, Decision,
meal), which would be very much less than the P122.00 monthly Annex 'G').
minimum wage, fixed in accordance with the Minimum Wage
The ruling is in conformity with the evidence, law and equity.
Law. Instead of benefiting him, the law will adversely affect said
crew member. Such interpretation does not conform with the Ninth and Tenth assignments of error. — The CIR erred in denying
avowed intention of Congress in enacting the said law. a duly verified motion for new trial, and in overruling
petitioner's motion for reconsideration.
One should not overlook a fact fully established, that only
unlicensed crew members were made to pay for their meals or The motion for new trial, supported by an affidavit, states that
food, while the deck officers and marine engineers receiving the movants have a good and valid defense and the same is
higher pay and provided with better victuals, were not. This based on three orders of the WAS (Wage Administration
pictures in no uncertain terms, a great and unjust discrimination Service), dated November 6, 1956. It is alleged that they would
obtaining in the present case (Pambujan Sur United Mine inevitably affect the defense of the petitioners. The motion for
Workers v. CIR, et al., L-7177, May 31, 1955). new trial is without merit. Having the said wage Orders in their
possession, while the case was pending decision, it was not
Fifth, Sixth and Seventh assignments of error.— The CIR erred in
explained why the proper move was not taken to introduce
holding that Severino Pepito, a boatsman, had rendered
them before the decision was promulgated. The said wage
overtime work, notwithstanding the provisions of section 1, of
orders, dealing as they do, with the evaluation of meals and
C.A. No. 444; in basing its finding ofthe alleged overtime, on the
facilities, are irrelevant to the present issue, it having been found
uncorroborated testimony of said Severino Pepito; and in
and held that the meals or food in question are not facilities but
ordering the herein petitioners to pay him. Severino Pepito was
supplements. The original petition in the CIR having been filed
found by the CIR to have worked overtime and had not been
on Sept. 12, 1952, the WAS could have intervened in the manner
paid for such services. Severino Pepito categorically stated that
provided by law to express its views on the matter. At any rate,
he worked during the late hours of the evening and during the
the admission of the three wage orders have not altered the
early hours of the day when the boat docks and unloads. Aside
decision reached in this case.
from the above, he did other jobs such as removing rusts and
cleaning the vessel, which overtime work totalled to 6 hours a IN VIEW HEREOF, the petition is dismissed, with costs against
day, and of which he has not been paid as yet. This statement the petitioners.
was not rebutted by the petitioners. Nobody working with him Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes,
on the same boat "M/V Adriana" contrawise. The testimonies of J.B.L., Barrera, Dizon, Regala and Makalintal, JJ., concur.
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.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 52


full irrespective of their working days, but which were reduced
effective February, 1980, in contravention of Article 100 of the
G.R. No. L-57636 May 16, 1983
new Labor Code which prohibits the elimination or diminution
Tiangco v Leogardo of existing benefits. 4
REYNALDO TIANGCO and VICTORIA The petitioners denied the laborers' contention, claiming that
TIANGCO, petitioners, the laborers were all given, in addition to their regular daily
vs. wage, a daily extra pay in amounts ranging from 30 centavos to
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the 10 pesos which are sufficient to offset the laborers' claim for
Ministry of Labor and Employment, AURELIO service incentive leave and legal holiday pay. As regards the
ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO claim for emergency allowance differentials, the petitioners
CARABIO, JESUS GILBUENA, PEPITO GILBUENA, admitted that they discontinued their practice of paying their
DOMINADOR LASERNA, CLEMENTE VILLARUEL, employees a fixed monthly allowance, and effective February,
RUSTOM OFQUERIA, ERNESTO DIONG, GRACIANO 1980, they no longer paid allowances for non-working days.
DURANA, AGUEDO MARABE, SOLOMON CLARIN, They argued, however, that no law was violated as their refusal
ALCAFONE ESGANA, JUAN CASTRO, ANTONIO to pay allowances for non-working days is in consonance with
GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA, the principle of "no work, no allowance"; and that they could
ROBERTO BAYON-ON, ELIAS ESCARAN, ERNESTO not pay private respondents a fixed monthly allowance without
BATOY, EDDIE BATOBALANOS, TOMAS CAPALAR, risking the viability of their business. 5
JUAN GIHAPON, JOSE OFQUERIA, FRUTO GIHAPON,
PEPITO BATOY, and SERAFIO YADAWON, respondents. Resolving the case, the Director of the National Capitol Region
of the Ministry of Labor and Employment ruled that the daily
Florencio Pineda for petitioners.
extra pay given to private respondents was a ,'production
The Solicitor General for respondents. incentive benefit", separate and distinct from the service
incentive leave pay and legal holiday pay, payment of which
cannot be used to offset a benefit provided by law, and ordered
CONCEPCION, JR., J.: the petitioners to pay the private respondents their service
Petition for certiorari and prohibition, with preliminary incentive leave pay and legal holiday pay. However, he denied
injunction and/or restraining order, to annul and set aside the the laborers' claim for differentials in the emergency cost of
order of the respondent Deputy Minister of Labor which living allowance for the reason that the emergency cost of living
modified and affirmed the order of Director of the National allowance accrues only when the laborers actually work
Capitol Region of the Ministry of Labor directing the petitioners following the principle of "no work, no pay," and private
to pay the private respondents their legal holiday pay, service respondents are not entitled to a fixed monthly allowance since
incentive pay, and differentials in their emergency cost of living they work on a part time basis which average only four (4) days
allowances. a week. The private respondents should not be paid their
allowances during non-working days. 6
The petitioner, Reynaldo Tiangco, is a fishing operator who
owns the Reynaldo Tiangco Fishing Company and a fleet of From this order, both parties appealed.
fishing vessels engaged in deep-sea fishing which operates from On May 22, 1981, the respondent Deputy Minister of Labor and
Navotas, Rizal. His business is capitalized at Employment modified the order and directed the petitioners to
P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish restore and pay the individual respondents their fixed monthly
broker whose business is capitalized at P100,000.00.2 allowance from March, 1980 and to pay them the amount of
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, P58,860.00, as underpayment of their living allowance from
Rogelio Carabio, Abraham Gilbuena, Rustom Ofqueria, Ernesto May, 1977 to February 21, 1980. 7
Diong, Jesus Gilbuena, Clemente (Emerenciano) Villaruel, When their motion for the reconsideration of the above order
Dominador Lacerna, and Graciano Durana, are batillos engaged was denied, the petitioners interposed the present recourse.
by the petitioner Reynaldo Tiangco to unload the fish catch from
The petitioners claim that the respondent Deputy Minister of
the vessels and take them to the Fish Stall of the petitioner
Labor and Employment acted in excess of jurisdiction, or with
Victoria Tiangco. The private respondents, Eddie Batobalanos,
grave abuse of discretion in ordering them to pay the private
Aguedo Marabe, Gregorio Laylay, Fruto Gihapon, Solomon
respondents a fixed monthly allowance from March, 1980,
Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro,
despite the "no work, no pay," law; the private respondents'
Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto
consent to receive an allowance for days worked for, as stated
Batoy, Serafio Yadawon, Juan Gihapon, Elias Escaran and
in their appeal; and the findings of the Director of the National
Roberto Bayon-on, were batillos engaged by Victoria
Capitol Region that private respondents work for other
Tiangco. 3 The work of these batillos were limited to days of
employers and are part-time employees of the petitioners.
arrival of the fishing vessels and their working days in a month
are comparatively few. Their working hours average four (4) Indeed, the record shows that the private respondents work for
hours a day. the petitioners on a part-time basis and their work average only
four (4) days a week. It is not also disputed that the private
On April 8, 1980, the private respondents filed a complaint
respondents work for more than one employer so that the
against the petitioners with the Ministry of Labor and
private respondents should be paid their living allowance only
Employment for non-payment of their legal holiday pay and
for the days they actually worked in a week or month and all
service incentive leave pay, as well as underpayment of their
the employers of the employee shall share proportionately in
emergency cost of living allowances which used to be paid in
the payment of the allowance of the employee. Section 12 of the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 53
Rules and Regulations implementing P.D. 525 which made Section 16 of the Rules on P.D. 1123 similarly
mandatory the payment of emergency cost of living allowances prohibits diminution of benefits. It provides,
to workers in the private section, provides, as follows: as follows:
Section 12. Allowance on Daily Paid & Part — Section 16. Relation to other agreements. —
Time employees. — Employees who are paid Nothing herein shall prevent employers from
on a daily basis shall be paid their allowances granting allowances to their employees in
for the number of days they actually worked excess of those provided under the Decree
in a week or month, on the basis of the scales and the Rules nor shall it be construed to
provided in Section 7 hereof. countenance any reduction of benefits
already being enjoyed.
In case of part-time employment, the
allowances shall be paid in the amount The petitioners further claim that the respondent Deputy
proportionate to the time worked by the Minister of Labor and Employment erred in ordering them to
employee, or higher. If employed by more pay the amount of P58,860.00 to the private respondents as
than one employer, all employers of such underpayment of respondents' allowances from May, 1977 to
employee shall share proportionately in the February 20, 1980. The petitioners contend that the emergency
payment of the allowance of the employee. cost of living allowances of the private respondents had been
paid in full.
Section 11 of the Rules implementing P.D.
1123, increasing the emergency allowance We find no merit in the contention. However, a revision of the
under P.D. 525, also provides, as follows: amount due the private respondents is in order for the reason
that the respondent Deputy Minister of Labor and Employment
Section 11. Allowances of full-time and part-time
failed to take into consideration, in computing the amount due
employees. — Employees shall be paid in full
each worker, the fact that the private respondents are employed
the monthly allowances on the basis of the
by two different individuals whose businesses are divergent
scales provided in Section 3 hereof, regardless
and capitalized at various amounts, contrary to the provisions
of the number of their regular working days,
of P.D. 525 and subsequent amendatory decrees, wherein the
if they incur no absence during the month. If
amount of the emergency cost of living allowance to be paid to
they incur absences, the amounts
a worker is made to depend upon the capitalization of the
corresponding to their absences may be
business of his employer or its total assets, whichever is higher.
deducted from the monthly allowance.
Thus, Section 7 of the Rules and Regulations implementing P.D.
In case of part-time employment, the 525 reads, as follows:
allowance to be paid shall be proportionate to
Section 7. Amount of Allowances. — Every
the time worked by the employee. This
covered employer shall give to each of his
requirement shall apply to any employee
employees who is receiving less than P600.00
with more than one employer.
a month not less than the following
However, the respondent Deputy Minister of Labor and allowances;
Employment correctly ruled that since the petitioners had been
(a) P50.00 where the authorized capital stock
paying the private respondents a fixed monthly emergency
or total assets, whichever is applicable and
allowance since November, 1976 up to February, 1980, as a
higher, is 71 million or more;
matter of practice and/or verbal agreement between the
petitioners and the private respondents, the discontinuance of (b) P30.00 where the authorized capital stock
the practice and/or agreement unilaterally by the petitioners or total assets, whichever is applicable and
contravened the provisions of the Labor Code, particularly higher is at least P100,000.00 but less than P
Article 100 thereof which prohibits the elimination or 1miilion and
diminution of existing benefits.
(c) P15.00 where the authorized capital stock
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules or total assets, whichever is applicable and
on P. D. 1123 also prohibits the diminution of any benefit higher, is less than P100,000.00.
granted to the employees under existing laws, agreements, and
Nothing herein shall prevent employers from
voluntary employer practice. Section 15 of the Rules on P.D. 525
granting allowances to their employees who
provides, as follows:
will receive more than P600.00 a month,
Section 15. Relation to Agreement. — Nothing including the allowances. An employer,
herein shall prevent the employer and his however, may grant his employees an
employees from entering into any agreement allowance which if added to their monthly
with terms more favorable to the employees salary, will not yield to them more than
than those provided therein, or be construed P600.00 a month.
to sanction the diminution of any benefit
In this case, the private respondents admit that only ten (10) of
granted to the employees under existing
them, namely: Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio
laws, agreements, and voluntary employer
Carabio, Abraham Gilbuena, Rustom Ofquiera, Ernesto Diong,
practice.
Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna,
and Graciano Durana, were employees of the petitioner
Reynaldo Tiangco, while the remaining seventeen (17) were
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 54
employed by the petitioner Victoria Tiangco. 8 Accordingly, the month. 14 There was a difference of P30.00 a month in the case
workers of the petitioner Victoria Tiangco, whose business as of the petitioner Victoria Tiangco, and P50.00, a month, in the
fish broker is capitalized at P100,000.00, 9 should receive a lesser case of the petitioner Reynaldo Tiangco. Hence, for this period,
amount of allowance (P30.00) than those workers employed by the petitioner Victoria Tiangco should pay the amount of
the petitioner Reynaldo Tiangco whose business, as a fishing P150.00 to each batillo in her employ, while the petitioner
operator with a fleet of fishing vessels, is capitalized at more Reynaldo Tiangco should pay the amount of P250.00, as
than P2,000,000.00, and are entitled to receive a fixed monthly differentials in the cost of living allowances of the workers
allowance of P50.00 a month, each. under his employ.
After P.D. 525, the following amendatory decrees, directing the Upon the promulgation of P.D. 1634, directing the payment of
payment of additional allowances to employees, were an additional P60.00 a month effective September, 1979 and
promulgated: another P30.00 effective January 1, 1980, the workers of the
petitioner Victoria Tiangco were entitled to receive a fixed
1. P.D. 1123. providing for an across-the-
monthly allowance of P210.00 a month from September, 1979,
board increase of P60.00 a month effective
and P340.00, a month beginning January, 1980. The workers of
May 1, 1977;
the petitioner Reynaldo Tiangco, upon the other hand, were
2. P.D. 1614, which directed the payment of entitled to a monthly allowance of P230.00, effective September,
P60.00 monthly allowance effective April 1, 1979, and P260.00, a month beginning January, 1980. The record
1979; shows, however, that both petitioners paid their workers the
3. P.D. 1634, which provided for the payment amounts of P180.00 a month for the months of September to
of an additional P60.00 a month effective December, 1979, 15 and P210.00 a month for the months of
September 1, 1979, and another P30.00 a January and February, 1980. 16 There was underpayment,
month beginning January 1, 1980; and therefore, in the allowances of the workers of the petitioner
Victoria Tiangco in the amount of P30.00, a month, for the
4. P.D. 1678,which directed the payment of an months of September, 1979 to February, 1980, or P180.00 for
additional P2.00 a day from February 21, each batillo in her employ. The private respondents hired by the
1980. petitioner Reynaldo Tiangco, upon the other hand, are entitled
Hence, for the period from November, 1976 to April 30, 1977, to differentials in the amount of P50.00 a month for the same
the petitioner Victoria Tiangco should pay her workers a fixed period, or P300.00 each.
monthly allowance of P 30.00, while the workers of the Then, beginning February, 21, 1980, the workers should be paid
petitioner Reynaldo Tiangco were entitled to a fixed monthly an additional P2.00, a day, pursuant to P.D. 1678. The record
allowance of P50.00, each. The record shows that during this shows that the petitioners had complied with this
period, the petitioner Victoria Tiangco was paying her workers requirement. 17 The petitioners, however, failed to pay the fixed
a monthly allowance of P30.00 each. 10 Accordingly, there was monthly allowance of their workers which was P240.00, in the
no underpayment for this period insofar as her batillos are case of the workers employed by the petitioner Victoria Tiangco,
concerned. The petitioner Reynaldo Tiangco, however, paid his and P260.00, in the case of the workers of the petitioner
employees P30.00, instead of P50.00, as mandated by Reynaldo Tiangco. Thus, for the month of March, 1980, the
law. 11 Therefore, there was an underpayment of P20.00 a month petitioner Victoria Tiangco paid her workers varying amounts,
for each batillounder his employ. For the 6-month period, he the lowest of which was P30.00, paid to Eddie Batobalanos and
should pay his workers differentials in the amount of P120.00 Fruto Gihapon, and the highest of which was P210.00, paid to
each. Juan Gihapon and Roberto Bayonon. 18 Hence, there was
For the period from May, 1977 to March 1979, the workers of the underpayment in their emergency cost of living allowances.
petitioner Victoria Tiangco were entitled to a fixed monthly But, since, the respondents employed by Victoria Tiangco are
allowance of P90.00 in view of the promulgation of P.D. 1123 wining to accept P50.00 a month as differentials for the months
which granted an across-the-board increase of P60.00 a month of March, 1980 to May, 1980, 19 the workers employed by her
in their allowances. For this period, however, the said petitioner should be paid P50.00, each, for the month of March, 1980,
paid her workers only P60.00 a month, or a difference of P30.00 except Juan Gihapon and Roberto Bayon-on who should be paid
a month. 12 There was, therefore, an underpayment of P690.00 P30.00, each, for the said month, having received the amount of
for every batillounder her employ for the 23-month period. P210.00, each as allowance for that month.
With the addition of P60.00 across-the-board increase in their For the month of April, 1980, the workers of the petitioner,
allowances, the workers of the petitioner Reynaldo Tiangco Victoria Tiangco, were paid varying amounts ranging from
were entitled to receive a fixed monthly allowance of P110.00. P120.00 to P210.00. 20 Hence, there was also underpayment in
However, the record shows that his workers were only paid their allowances. Accordingly, they should be paid the amount
P60.00 a month, 13 or a difference of P50.00 a month. of P50.00, each, except for Juan Gihapon, Antonio Gilbuena,
Consequently, each batillo hired by him should be paid a Juan Castro, and Aguedo Marabe, who should be paid P40.00,
differential of P1,150.00 for the 23-month period. each, and Solomon Clarin, Daniel Cabrera, and Gregorio Laylay
who should be paid P30.00 each.
For the period from April, 1979 to August, 1979, the employees
of the petitioner Victoria Tiangco were entitled to a fixed For the month of May, 1980, the petitioner Victoria Tiangco,
monthly allowance of P150.00 while the workers employed by paid her workers varying amounts less that what was provided
the petitioner Reynaldo Tiangco were entitled to an allowance for by law. 21 Hence, they should be paid the amount of P50.00,
of P170.00, pursuant to P.D. 1614. The record shows, however, each, for this month.
that both petitioners paid their workers only P120.00 a
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 55
The petitioner, Reynaldo Tiangco, also paid the employees living allowance in full. 23 Hence, the said petitioner should pay
varying amounts, ranging from P210.00 to P250.00, as his workers the amount of P30.00 each, except for Pepito
emergency cost of living allowance, for the month of March, 22, Gilbuena, who should be paid the amount of P50.00, and
1980. 22 Since they were entitled to a fixed monthly allowance of Rustom Ofqueria, Jesus Gilbuena, and Graciano Durano, who
P260.00, each, there was underpayment in their cost of living are entitled to only P40.00 each.
allowances. Accordingly, the petitioner should pay the
The petitioner, Reynaldo Tiangco did not also pay his workers
respondent Pepito Gilbuena the amount of P50.00; the
their full cost of living allowance for the month of May, 1980.
respondents Dominador Lacerna and Graciano Durano, the
The workers were paid varying amounts of P130.00 to P150.00,
amount of P40.00, each; the respondent Ernesto Diong, the
instead of P260.00, as required by law. 24Hence, they should be
amount of P30.00; the respondents Rustom Ofqueria and
paid the amunt of P50.00 each for the month of May, 1980.
Aurelio Ilustrisimo, the amount of P20.00, each; and the
respondents Abraham Gilbuena, Jesus Gilbuena, Rogelio WHEREFORE, the petitioners Victoria Tiangco and Reynaldo
Carabio, and Emerenciano Villaruel, the amount of P10.00 each. Tiangco should be, as they are hereby, ordered to PAY the
private respondents the following amounts as differentials in
For the month of April, 1980, the workers of the petitioner
their emergency cost of living allowance:
Reynaldo Tiangco, were not also paid their emergency cost of
Petitioner Victoria Tiangco:

1. Eddie Pl,170.00
Batobalanos.............

2. Aguedo 1,160.00
Morabe.................

3. Gregorio 1,150.00
Laylay..................

4. Fruto 1,170.00
Gihapon.....................

5. Solomon Clarin 1,150.00


...................

6. Pepito 1,170.00
Batoy........................

7. Jose 1,170.00
Ofqueria.......................

8. Daniel 1,150.00
Cabrera.....................

9. Juan 1,160.00
Castro..........................

10. Alcafone 1,170.00


Esgana.................

11. Tomas Capalar 1,170.00


....................

12. Antonio 1,160.00


Gilbuena................

13. Ernesto 1,170.00


Batoy......................

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 56


14. Serapio 1,150.00
Yadawon................

15. Juan 1,140.00


Gihapon.......................

16. Elias Escaran 1,150.00


......................

17. Roberto Bayon- 1,130.00


on..............

Petitioner Reynaldo Tiangco:

1. Aurelio P
Ilustrisimo............ l,920.00

2. Pepito 1,970.00
Gilbuena.................

3. Rogelio 1,910.00
Carabio.................

4. Abraham 1,910.00
Gilbuena.............

5. Rustom 1,930.00
Ofqueria................

6. Ernesto 1,930.00
Diong....................

7. Jesus 1,920.00
Gilbuena...................

8. Emerenciano 1,910.00
Villaruel........

9. Dominador 1,940.00
Lacerna............

10. Graciano 1,950.00


Durano.................

With this modification, the judgment appealed from is


AFFIRMED in all other respects. With costs against the
petitioners.
SO ORDERED.
Makasiar (Chairman), Aquino, Guerrero, Abad Santos, De Castro and
Escolin JJ., concur.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 57


The two cases were jointly heard and decided by the Regional
Director. The latter's judgments 6 was for the petitioner's
G.R. No. 58094-95 March 15, 1989
reinstatement to his former positions without loss of seniority,
MAMERTO B. ASIS, petitioner, benefits and other privileges, the payment to him of back wages
vs. from date of his relief up to time of reinstatement, and the
MINISTER OF LABOR AND EMPLOYMENT, delivery to him of the monthly benefits from the time of their
temporary revocation up to actual restoration or, at his option,
CENTRAL AZUCARERA DE PILAR, and the money equivalent thereof. 7
EMMANUEL JAVELLANA, respondents.
The Deputy Minister of Labor however reversed this decision of
Belo, Ermitano Abiera & Associates for petitioner. the Regional Director, on appeal taken by the Central; the
Yolanda, Quisumbing-Javellana & Associates for respondent Deputy Minister ordered the dismissal of the petitioner's
Emmanuel Q. Javellana. complaint. 8 The Deputy Minister found that the evidence
satisfactorily established that the Central's suspension of the
V. Veloso & Associates for respondent Central Azucarera
petitioner's and others' monthly ration of gasoline and LPG, had
been caused by unavoidable financial constraints; that such a
suspension, in line with its conservation and cost-saving policy,
NARVASA, J.:
did not in truth effect any significant diminution of said
The facts of this case depict a picture that is hardly edifying: benefits, since the petitioner was nevertheless entitled to
avidity trying to wear the mantle of right. The facts raise a reimbursement of the actual amount of gas consumed; that
twofold issue: whether a company which has been haled to petitioner had encouraged his co-employees to file complaints
court by its own in-house counsel is obliged to continue his against the Central over the rations issue, and this, as well as his
employment and entrust its legal affairs to him, specially when institution of his own actions, had created an atmosphere of
his cause of action has been shown to be devoid of merit; and enmity in the Central, and caused the loss by the Central of that
whether a firm is bound to retain in its service a personnel trust and confidence in him so essential in a lawyer-client
manager who has incited the very employees under his relationship as that theretofore existing between them; and that
supervision and control to file complaints against it. Asserting a under the circumstances, petitioner's discharge as the Central's
right to sue his employer for a legitimate grievance without Legal Counsel and Head of the Manpower & Services
meriting retaliatory action, the petitioner claims that his Department was justified. The Deputy Minister's order of
dismissal for such conduct or on the ground, essentially, of loss dismissal was however subsequently modified, at the
of confidence, was illegal; and he asks this Court to annul the petitioner's instance, by decreeing the payment to the latter of
judgment of the respondent Commission, which upheld the separation pay equivalent to one month's salary for every year
termination of his services in respondent company. Said claim of service rendered. 9
finds no support in either the law or the established facts and
The petitioner theorizes that apart from the fact that the Deputy
must, therefore, be rejected.
Minister lacked jurisdiction to entertain the Central's appeal
The petitioner was appointed Legal Counsel of the Central from the decision of the Regional Director, he had gravely
Azucarera de Pilar 1 Later, concurrently with his position as abused his discretion in reaching his factual conclusions,
Legal Counsel, he was named Head of its Manpower and pejoratively described as guesswork and speculation.
Services Department.
The petitioner's theory of the Deputy Minister's lack of
In addition to his basic salaries and other fringe benefits, his jurisdiction, founded on the tardy payment by the Central of the
employer granted him, and a few other officials of the company, appeal fee of P 25.00, is quickly disposed of by simply adverting
a monthly ration of 200 liters of gasoline and a small tank of to our holding in Del Rosario & Sons Logging Enterprises, Inc. v.
liquefied petroleum gas (LPG). 2 This monthly ration was NLRC, 10 to wit:
temporarily revoked some five (5) years later as a cost reduction
It may be that, as held in Acda vs. MOLE, 119 SCRA 306 [1982],
measure of the Central .3 The petitioner and the other officials
payment of the appeal fee is by no means a mere technicality but
adversely affected moved for reconsideration. Their plea was
is an essential requirement in the perfection of an appeal.
denied.
However, where as in this case, the fee had been paid, unlike in
The petitioner then commenced an action against the Central the Acda case, although payment was delayed, the broader
with the Regional Office of the Ministry of Labor and interest of justice and the desired objective of resolving
Employment, seeking restoration of his monthly ration of controversies on the merits demanded that the appeal be given
gasoline and LPG which, as aforesaid, had been temporarily course as, in fact, it was so given by the NLRC. Besides, it was
suspended. The case was docketed as LRD Case No. 1632. within the inherent power of the NLRC to have allowed the late
Shortly afterwards, he filed another action against his employer, payment of the appeal fee.
docketed as LRD Case No. 1685, this time complaining against As regards the temporary revocation of the petitioner's monthly
the Central's memorandum ordaining his relief (by being placed ration of fuel, suffice it to point out that, as the Solicitor General
on leave of absence) as the Central's Legal Counsel and Head of stresses, this bad been occasioned by force of circumstances
the Manpower Services Department, impleaded by the affecting the Central's business. The monthly ration was not a
petitioner as co-respondent was Emmanuel Q. Javellana, the part of his basic salary, and is not indeed found in any of the
Finance Manager and Comptroller of the Central, who had management payroll vouchers pertinent to the
signed the memorandum for his relief. 4 The petitioner petitioner. 11 Moreover, the adverse consequences of the
theorized that he had in effect been dismissed, illegally. 5 suspension of the monthly rations had been largely if not
entirely negated by the Central's undertaking to reimburse the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 58
petitioner for his actual consumption of fuel during the period
of suspension. These facts are entirely distinct from those
obtaining in the case of States Marine Corporation and Royal Line,
Inc. v. Cebu Seamen's Association, Inc., 12 invoked by petitioner
and thus preclude application of the ruling therein laid down to
the case at bar.
A review of the record demonstrates that there is substantial
evidence supporting the factual findings of the respondent
Deputy Minister. Said findings, as well as the legal conclusions
derived therefrom, cannot be said to have been rendered with
grave abuse of discretion, and will thus be affirmed. In fine, and
as petitioner could not but have realized from the outset, neither
he nor any other employee similarly situated had any legitimate
grievance against the Central.
WHEREFORE, the petition is DISMISSED for lack of merit, with
costs against petitioner.
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 59


for lunch; P1.00 for dinner; and P1.00 for lodging. Ponseca —
during the period involved — did not leave Manila. Therefore,
G.R. No. L-24632 October 26, 1968
he spent nothing for meals and lodging outside of Manila.
LEXAL LABORATORIES and/or JOSE ANGELES, Because he spent nothing, there is nothing to be reimbursed.
Manager, petitioners, Since per diems are in the nature of reimbursement, Ponseca
vs. should not be entitled to per diems.
NATIONAL CHEMICAL INDUSTRIES Besides, back wages are what an employee has lost "in the way
WORKERS UNION-PAFLU (Lexal Laboratories of wages" due to his dismissal. So that, because Ponseca earned
P4.50 a day, "then that is the amount which he lost daily by
Chapter) and THE COURT OF INDUSTRIAL
reason of his dismissal, nothing more nothing less:"5
RELATIONS, respondents.
We, accordingly, rule that CIR erred in including per diems in
Matias, Liboro & Benitez for petitioners. the back wages due and payable to Guillermo Ponseca.
F. M. de los Reyes for respondents.
2. The rest is a matter of mathematical computation but first to
SANCHEZ, J.: the facts. The union's evidence is that since the last part of
Condensed, the question before us is this: Are per October, 1958 Ponseca had been reporting everyday to the
diems included in backpay? This problem came about because of bodega of respondents.6 Anyway, prior to Ponseca's dismissal,
the implementation of the decision of the Court of Industrial he worked daily either in Manila or in the provinces. 7
Relations (CIR) of June 29, 19631 directing petitioner Lexal But the order of February 15, 1965 credits Ponseca with 1,856
Laboratories (Lexal) to reinstate Guillermo Ponseca, a dismissed days for the period from November 5, 1958 to November 24,
employee, to his former position "with full back wages from the 1963. We checked the accuracy of this figure. We found that
day of his dismissal up to the time he is actually reinstated there should only be 1,846 days from November 5, 1958 to
without loss of his seniority rights and of such other rights and November 24, 1963, viz:
privileges enjoyed by him prior to his lay-off."
CIR, confirming the report of its Chief Examiner and Economist, November 5, 1958 to 57 days
ruled in its order of February 16, 1965 that Ponseca was entitled December 31, 1958
to back wages from November 5, 1958 when he ceased reporting
for work, to November 24, 1963 a day prior to his reinstatement January 1, 1959 to December 365 days
on November 25, 1963; and that for the number of days that he 31, 1959
was supposed to be in Manila, he was to earn P4.50 a day, and
during the periods when he should have been in the provinces,
January 1, 1960 to December 366 days
P4.50 a day plus a per diem of P4.00 or a total of P8.50 daily. This
31, 1960
order was subsequently modified by CIR's resolution of May 22,
1965 which directed the deduction of P5,000.00 previously paid
Ponseca under the judgment and P610.00 which Ponseca earned January 1, 1961 to December 365 days
from other sources during his lay-off. 31, 1961
Petitioners vigorously objected to the inclusion of the P4.00 per
diem in the computation of Ponseca's back wages because the January 1, 1962 to December 365 days
latter "did not actually spend for his meals and lodgings for he was 31, 1962
all the time in Manila, his station." CIR brushed this contention
aside. Whereupon, petitioners appealed to this Court from the January 1, 1963 to November 328 days
order of February 16, 1965 and the resolution of May 22, 1965. 2 24, 1963
1. Our attention has not been drawn to a rule of law or
jurisprudence which holds that per diems are integral parts of TOTAL 1,846
regular wages or salaries. Neither is it suggested in the record days
that per diems formed part of the terms of employment between
petitioners and respondent union (of which Ponseca is a This brings us to the total amount due from Lexa1 to Guillermo
member), or with Ponseca himself for that matter. Nor was Ponseca, as follows: .
pronouncement made either in the original decision or in the
questioned order and resolution of CIR that per diems are part of 1,846 days x P4.50 P8,307.00
back wages. CIR simply hit upon the idea that per diems should
be paid as part of the back wages because they were "paid to Less: Advance payment P5,000.00
him regularly."
Per diem, the dictionary definition tells us, is "a daily allowance" Earnings from other sources P610.00 P5,610.008
given "for each day he (an officer or employee) was away from
his home base".3 It would seem to us that per diem is intended to
NET BACKPAY P2,697.00 .
cover the cost of lodging and subsistence of officers and
employees when the latter are on duty outside of their
For the foregoing reasons, the order of February 16, 1965, and
permanent station.4 Lexal concedes that whenever its employee,
the resolution of May 22, 1965, both of the Court of Industrial
Guillermo Ponseca, was out of Manila, he was allowed a per
Relations, in its Case No. 2002-ULP, entitled "National Chemical
diem of P4.00 broken down as follows: P1.00 for breakfast; P1.00
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 60
Industries Workers Union-PAFLU (Lexal Laboratories
Chapter), Complainant, versus Lexal Laboratories and Jose
Angeles, its Manager, Respondents", are hereby modified; and
Judgment is hereby rendered ordering petitioner Lexal
Laboratories to pay Guillermo Ponseca, by way of net backpay,
the sum of P2,697.00.
No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Angeles,
Fernando and Capistrano, JJ., concur.
Zaldivar, J., is on leave.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 61


G.R. No. 101761. March 24, 1993. pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap
National Sugar Refineries v NLRC (P1,269.00 per month) in basic pay compared to the highest paid
NATIONAL SUGAR REFINERIES CORPORATION, rank-and-file employee; (3) longevity pay was increased on top
petitioner, vs. NATIONAL LABOR RELATIONS of alignment adjustments; (4) they were entitled to increased
COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) company COLA of P225.00 per month; (5) there was a grant of
TUCP, respondents. P100.00 allowance for rest day/holiday work.
Jose Mario C. Bunag for petitioner. On May 11, 1990, petitioner NASUREFCO recognized herein
respondent union, which was organized pursuant to Republic
The Solicitor General and the Chief Legal Officer, NLRC, for
Act NO. 6715 allowing supervisory employees to form their
public respondent.
own unions, as the bargaining representative of all the
Zoilo V. de la Cruz for private respondent. supervisory employees at the NASUREFCO Batangas Sugar
Refinery.
DECISION
Two years after the implementation of the JE Program,
REGALADO, J p:
specifically on June 20, 1990, the members of herein respondent
The main issue presented for resolution in this original petition union filed a complainant with the executive labor arbiter for
for certiorari is whether supervisory employees, as defined in non-payment of overtime, rest day and holiday pay allegedly in
Article 212 (m), Book V of the Labor Code, should be considered violation of Article 100 of the Labor Code.
as officers or members of the managerial staff under Article 82,
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido
Book III of the same Code, and hence are not entitled to overtime
rendered a decision 2 disposing as follows:
rest day and holiday pay.
"WHEREFORE, premises considered, respondent National
Petitioner National Sugar Refineries Corporation
Sugar refineries Corporation is hereby directed to —
(NASUREFCO), a corporation which is fully owned and
controlled by the Government, operates three (3) sugar 1. pay the individual members of complainant union the usual
refineries located at Bukidnon, Iloilo and Batangas. The overtime pay, rest day pay and holiday pay enjoyed by them
Batangas refinery was privatized on April 11, 1992 pursuant to instead of the P100.00 special allowance which was
Proclamation No. 50. 1 Private respondent union represents the implemented on June 11, 1988; and
former supervisors of the NASUREFCO Batangas Sugar
2. pay the individual members of complainant union the
Refinery, namely, the Technical Assistant to the Refinery
difference in money value between the P100.00 special
Operations Manager, Shift Sugar Warehouse Supervisor, Senior
allowance and the overtime pay, rest day pay and holiday pay
Financial/Budget Analyst, General Accountant, Cost
that they ought to have received from June 1, 1988.
Accountant, Sugar Accountant, Junior Financial/Budget
Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, All other claims are hereby dismissed for lack of merit.
Shift Electrical Supervisor, General Services Supervisor, SO ORDERED."
Instrumentation Supervisor, Community Development Officer,
Employment and Training Supervisor, Assistant Safety and In finding for the members therein respondent union, the labor
Security Officer, Head and Personnel Services, Head Nurse, ruled that the along span of time during which the benefits were
Property Warehouse Supervisor, Head of Inventory Control being paid to the supervisors has accused the payment thereof
Section, Shift Process Supervisor, Day Maintenance Supervisor to ripen into contractual obligation; at the complainants cannot
and Motorpool Supervisor. be estopped from questioning the validity of the new
compensation package despite the fact that they have been
On June 1, 1988, petitioner implemented a Job Evaluation (JE) receiving the benefits therefrom, considering that respondent
Program affecting all employees, from rank-and-file to union was formed only a year after the implementation of the
department heads. The JE Program was designed to rationalized Job Evaluation Program, hence there was no way for the
the duties and functions of all positions, reestablish levels of individual supervisors to express their collective response
responsibility, and recognize both wage and operational thereto prior to the formation of the union; and the comparative
structures. Jobs were ranked according to effort, responsibility, computations presented by the private respondent union
training and working conditions and relative worth of the job. showed that the P100.00 special allowance given NASUREFCO
As a result, all positions were re-evaluated, and all employees fell short of what the supervisors ought to receive had the
including the members of respondent union were granted overtime pay rest day pay and holiday pay not been
salary adjustments and increases in benefits commensurate to discontinued, which arrangement, therefore, amounted to a
their actual duties and functions. diminution of benefits.
We glean from the records that for about ten years prior to the On appeal, in a decision promulgated on July 19, 1991 by its
JE Program, the members of respondent union were treated in Third Division, respondent National Labor Relations
the same manner as rank-and file employees. As such, they used Commission (NLRC) affirmed the decision of the labor arbiter
to be paid overtime, rest day and holiday pay pursuant to the on the ground that the members of respondent union are not
provisions of Articles 87, 93 and 94 of the Labor Code as managerial employees, as defined under Article 212 (m) of the
amended. With the implementation of the JE Program, the Labor Code and, therefore, they are entitled to overtime, rest
following adjustments were made: (1) the members of day and holiday pay. Respondent NLRC declared that these
respondent union were re-classified under levels S-5 to S-8 supervisory employees are merely exercising recommendatory
which are considered managerial staff for purposes of powers subject to the evaluation, review and final action by
compensation and benefits; (2) there was an increase in basic their department heads; their responsibilities do not require the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 62
exercise of discretion and independent judgment; they do not in which they are employed or of a department or subdivision
participate in the formulation of management policies nor in the thereof, and to other officers or members of the managerial
hiring or firing of employees; and their main function is to carry staff." (Emphasis supplied.)
out the ready policies and plans of the corporation. 3
xxx xxx xxx
Reconsideration of said decision was denied in a resolution of
public respondent dated August 30, 1991. 4 'Sec. 2. Exemption. — The provisions of this rule shall not apply
to the following persons if they qualify for exemption under the
Hence this petition for certiorari, with petitioner NASUREFCO
condition set forth herein:
asseverating that public respondent commission committed a
grave abuse of discretion in refusing to recognized the fact that xxx xxx xxx
the members of respondent union are members of the (b) Managerial employees, if they meet all of the following
managerial staff who are not entitled to overtime, rest day and conditions, namely:
holiday pay; and in making petitioner assume the "double
burden" of giving the benefits due to rank-and-file employees (1) Their primary duty consists of the management of the
together with those due to supervisors under the JE Program. establishment in which they are employed or of a department
or subdivision thereof:
We find creditable merit in the petition and that the
extraordinary writ of certiorari shall accordingly issue. (2) They customarily and regularly direct the work of two or
more employees therein:
The primordial issue to be resolved herein is whether the
members of respondent union are entitled to overtime, rest day (3) They have the authority to hire or fire other employees of
and holiday pay. Before this can be resolved, however it must lower rank; or their suggestions and recommendations as to the
of necessity be ascertained first whether or not the union hiring and firing and as to the promotion or any other change of
members, as supervisory employees, are to be considered as status of other employees are given particular weight.
officers or members of the managerial staff who are exempt (c) Officers or members of a managerial staff if they perform the
from the coverage of Article 82 of the Labor Code. following duties and responsibilities:
It is not disputed that the members of respondent union are (1) The primary duty consists of the performance of work
supervisory employees, as defined employees, as defined under directly related to management policies of their employer;
Article 212(m), Book V of the Labor Code on Labor Relations,
(2) Customarily and regularly exercise discretion and
which reads:
independent judgment;
"(m) 'Managerial employee' is one who is vested with powers or
(3) (i) Regularly and directly assist a proprietor or a managerial
prerogatives to lay down and execute management policies
employee whose primary duty consists of the management of
and/or to hire, transfer, suspend, lay-off, recall, discharged,
the establishment in which he is employed or subdivision
assign or discipline employees. Supervisory employees are
thereof; or (ii) execute under general supervision work along
those who, in the interest of the employer effectively
specialized or technical lines requiring special training,
recommend such managerial actions if the exercise of such
experience, or knowledge; or (iii) execute under general
authority is not merely routinary or clerical in nature but
supervision special assignments and tasks; and
requires the use of independent judgment. All employees not
falling within any of those above definitions are considered (4) Who do not devote more 20 percent of their hours worked in
rank-and-file employees of this Book." a work-week to activities which are not directly and closely
related to the performance of the work described in paragraphs
Respondent NLRC, in holding that the union members are
(1), (2), and above."
entitled to overtime, rest day and holiday pay, and in ruling that
the latter are not managerial employees, adopted the definition It is the submission of petitioner that while the members of
stated in the aforequoted statutory provision. respondent union, as supervisors, may not be occupying
managerial positions, they are clearly officers or members of the
Petitioner, however, avers that for purposes of determining
managerial staff because they meet all the conditions prescribed
whether or not the members of respondent union are entitled to
by law and, hence, they are not entitled to overtime, rest day
overtime, rest day and holiday pay, said employees should be
and supervisory employees under Article 212 (m) should be
considered as "officers or members of the managerial staff" as
made to apply only to the provisions on Labor Relations, while
defined under Article 82, Book III of the Labor Code on
the right of said employees to the questioned benefits should be
"Working Conditions and Rest Periods" and amplified in
considered in the light of the meaning of a managerial employee
Section 2, Rule I, Book III of the Rules to Implement the Labor
and of the officers or members of the managerial staff, as
Code, to wit:
contemplated under Article 82 of the Code and Section 2, Rule I
"Art. 82 Coverage. — The provisions of this title shall apply to Book III of the implementing rules. In other words, for purposes
employees in all establishments and undertakings whether for of forming and joining unions, certification elections, collective
profit or not, but not to government employees, managerial bargaining, and so forth, the union members are supervisory
employees, field personnel, members of the family of the employees. In terms of working conditions and rest periods and
employer who are dependent on him for support, domestic entitlement to the questioned benefits, however, they are
helpers, persons in the personal service of another, and workers officers or members of the managerial staff, hence they are not
who are paid by results as determined by the Secretary of Labor entitled thereto.
in Appropriate regulations.
While the Constitution is committed to the policy of social
"As used herein, 'managerial employees' refer to those whose justice and the protection of the working class, it should not be
primary duty consists of the management of the establishment supposed that every labor dispute will be automatically decided
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 63
in favor of labor. Management also has its own rights which, as 6) coordinates and communicates with other inter and intra
such, are entitled to respect and enforcement in the interest of department supervisors when necessary;
simple fair play. Out of its concern for those with less privileges
7) recommends disciplinary actions/promotions;
in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer. 8) recommends measures to improve work methods, equipment
Such favoritism, however, has not blinded us to the rule that performance, quality of service and working conditions;
justice is in every case for the deserving, to be dispensed in the 9) sees to it that safety rules and regulations and procedure and
light of the established facts and the applicable law and are implemented and followed by all NASUREFCO employees,
doctrine. 5 recommends revisions or modifications to said rules when
This is one such case where we are inclined to tip the scales of deemed necessary, and initiates and prepares reports for any
justice in favor of the employer. observed abnormality within the refinery;
The question whether a given employee is exempt from the 10) supervises the activities of all personnel under him and goes
benefits of the law is a factual one dependent on the to it that instructions to subordinates are properly implemented;
circumstances of the particular case, In determining whether an and
employee is within the terms of the statutes, the criterion is the 11) performs other related tasks as may be assigned by his
character of the work performed, rather than the title of the immediate superior.
employee's position. 6
From the foregoing, it is apparent that the members of
Consequently, while generally this Court is not supposed to respondent union discharge duties and responsibilities which
review the factual findings of respondent commission, ineluctably qualify them as officers or members of the
substantial justice and the peculiar circumstances obtaining managerial staff, as defined in Section 2, Rule I Book III of the
herein mandate a deviation from the rule. aforestated Rules to Implement the Labor Code, viz.: (1) their
A cursory perusal of the Job Value Contribution Statements 7 of primary duty consists of the performance of work directly
the union members will readily show that these supervisory related to management policies of their employer; (2) they
employees are under the direct supervision of their respective customarily and regularly exercise discretion and independent
department superintendents and that generally they assist the judgment; (3) they regularly and directly assist the managerial
latter in planning, organizing, staffing, directing, controlling employee whose primary duty consist of the management of a
communicating and in making decisions in attaining the department of the establishment in which they are employed (4)
company's set goals and objectives. These supervisory they execute, under general supervision, work along specialized
employees are likewise responsible for the effective and efficient or technical lines requiring special training, experience, or
operation of their respective departments. More specifically, knowledge; (5) they execute, under general supervision, special
their duties and functions include, among others, the following assignments and tasks; and (6) they do not devote more than
operations whereby the employee: 20% of their hours worked in a work-week to activities which
are not directly and clearly related to the performance of their
1) assists the department superintendent in the following:
work hereinbefore described.
a) planning of systems and procedures relative to department
Under the facts obtaining in this case, we are constrained to
activities;
agree with petitioner that the union members should be
b) organizing and scheduling of work activities of the considered as officers and members of the managerial staff and
department, which includes employee shifting scheduled and are, therefore, exempt from the coverage of Article 82. Perforce,
manning complement; they are not entitled to overtime, rest day and holiday.
c) decision making by providing relevant information data and The distinction made by respondent NLRC on the basis of
other inputs; whether or not the union members are managerial employees,
to determine the latter's entitlement to the questioned benefits,
d) attaining the company's set goals and objectives by giving his
is misplaced and inappropriate. It is admitted that these union
full support;
members are supervisory employees and this is one instance
e) selecting the appropriate man to handle the job in the where the nomenclatures or titles of their jobs conform with the
department; and nature of their functions. Hence, to distinguish them from a
f) preparing annual departmental budget; managerial employee, as defined either under Articles 82 or 212
(m) of the Labor Code, is puerile and in efficacious. The
2) observes, follows and implements company policies at all controversy actually involved here seeks a determination of
times and recommends disciplinary action on erring whether or not these supervisory employees ought to be
subordinates; considered as officers or members of the managerial staff. The
3) trains and guides subordinates on how to assume distinction, therefore, should have been made along that line
responsibilities and become more productive; and its corresponding conceptual criteria.
4) conducts semi-annual performance evaluation of his II. We likewise no not subscribe to the finding of the labor
subordinates and recommends necessary action for their arbiter that the payment of the questioned benefits to the union
development/advancement; members has ripened into a contractual obligation.
5) represents the superintendent or the department when A. Prior to the JE Program, the union members, while being
appointed and authorized by the former; supervisors, received benefits similar to the rank-and-file
employees such as overtime, rest day and holiday pay, simply
because they were treated in the same manner as rank-and-file
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 64
employees, and their basic pay was nearly on the same level as these positions removed them from the coverage of the law,
those of the latter, aside from the fact that their specific functions ergo, their exemption therefrom.
and duties then as supervisors had not been properly defined
As correctly pointed out by petitioner, if the union members
and delineated from those of the rank-and-file. Such fact is
really wanted to continue receiving the benefits which attach to
apparent from the clarification made by petitioner in its motion
their former positions, there was nothing to prevent them from
for reconsideration 8 filed with respondent commission in
refusing to accept their promotions and their corresponding
NLRC Case No. CA No. I-000058, dated August 16, 1991,
benefits. As the sating goes by, they cannot have their cake and
wherein, it lucidly explained:
eat it too or, as petitioner suggests, they could not, as a simple
"But, complainants no longer occupy the same positions they matter of law and fairness, get the best of both worlds at the
held before the JE Program. Those positions formerly classified expense of NASUREFCO.
as 'supervisory' and found after the JE Program to be rank-and-
Promotion of its employees is one of the jurisprudentially-
file were classified correctly and continue to receive overtime,
recognized exclusive prerogatives of management, provided it
holiday and restday pay. As to them, the practice subsists.
is done in good faith. In the case at bar, private respondent
"However, those whose duties confirmed them to be union has miserably failed to convince this Court that the
supervisory, were re-evaluated, their duties re-defined and in petitioner acted implementing the JE Program. There is no
most cases their organizational positions re-designated to showing that the JE Program was intended to circumvent the
confirm their superior rank and duties. Thus, after the JE law and deprive the members of respondent union of the
program, complainants cannot be said to occupy the same benefits they used to receive.
positions." 9
Not so long ago, on this particular score, we had the occasion to
It bears mention that this positional submission was never hold that:
refuted nor controverted by respondent union in any of its
". . . it is the prerogative of the management to regulate,
pleadings filed before herein public respondent or with this
according to its discretion and judgment, all aspects of
Court. Hence, it can be safely concluded therefrom that the
employment. This flows from the established rule that labor law
members of respondent union were paid the questioned
does not authorize the substitution of the judgment of the
benefits for the reason that, at that time, they were rightfully
employer in the conduct of its business. Such management
entitled thereto. Prior to the JE Program, they could not be
prerogative may be availed of without fear of any liability so
categorically classified as members or officers of the managerial
long as it is exercised in good faith for the advancement of the
staff considering that they were then treated merely on the same
employer's interest and not for the purpose of defeating on
level as rank-and-file. Consequently, the payment thereof could
circumventing the rights of employees under special laws or
not be construed as constitutive of voluntary employer practice,
valid agreement and are not exercised in a malicious, harsh,
which cannot be now be unilaterally withdrawn by petitioner.
oppressive, vindictive or wanton manner or out of malice or
To be considered as such, it should have been practiced over a
spite." 13
long period of time, and must be shown to have been consistent
and deliberate. 10 WHEREFORE, the impugned decision and resolution of
respondent National Labor Relations Commission promulgated
The test or rationale of this rule on long practice requires an
on July 19, 1991 and August 30, 1991, respectively, are hereby
indubitable showing that the employer agreed to continue
ANNULLED and SET ASIDE for having been rendered and
giving the benefits knowingly fully well that said employees are
adopted with grave abuse of discretion, and the basic complaint
not covered by the law requiring payment thereof. 11 In the case
of private respondent union is DISMISSED.
at bar, respondent union failed to sufficiently establish that
petitioner has been motivated or is wont to give these benefits
out of pure generosity.
B. It remains undisputed that the implementation of the JE
Program, the members of private respondent union were re-
classified under levels S-5 S-8 which were considered under the
program as managerial staff purposes of compensation and
benefits, that they occupied re-evaluated positions, and that
their basic pay was increased by an average of 50% of their basic
salary prior to the JE Program. In other words, after the JE
Program there was an ascent in position, rank and salary. This
in essence is a promotion which is defined as the advancement
from one position to another with an increase in duties and
responsibilities as authorized by law, and usually accompanied
by an increase in salary. 12
Quintessentially, with the promotion of the union members,
they are no longer entitled to the benefits which attach and
pertain exclusively to their positions. Entitlement to the benefits
provided for by law requires prior compliance with the
conditions set forth therein. With the promotion of the members
of respondent union, they occupied positions which no longer
met the requirements imposed by law. Their assumption of

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 65


Witholding of Bonus supported by substantial evidence, the different issues are taken
up, in the order they are raised in the brief for the petitioners.
G.R. No. L-12444 February 28, 1963
1. First assignment of error. — The respondent court
STATES MARINE CORPORATION and ROYAL erred in holding that it had jurisdiction over case No.
LINE, INC., petitioners, 740-V, notwithstanding the fact that those who had
vs. dispute with the petitioners, were less than thirty (30)
CEBU SEAMEN'S ASSOCIATION, in number.
INC., respondent. The CIR made a finding that at the time of the
filing of the petition in case No. 740-V,
Pedro B. Uy Calderon for petitioners.
respondent Union had more than thirty
Gaudioso C. Villagonzalo for respondent.
members actually working with the
PAREDES, J.: companies, and the court declared itself with
jurisdiction to take cognizance of the case.
Petitioners States Marine Corporation and Royal Line, Inc. were
engaged in the business of marine coastwise transportation, Against this order, the herein petitioners did
employing therein several steamships of Philippine registry. not file a motion for reconsideration or a
petition for certiorari. The finding of fact
They had a collective bargaining contract with the respondent
made by the CIR became final and conclusive,
Cebu Seamen's Association, Inc. On September 12, 1952, the
which We are not now authorized to alter or
respondent union filed with the Court of Industrial Relations
(CIR), a petition (Case No. 740-V) against the States Marine modify. It is axiomatic that once the CIR had
Corporation, later amended on May 4, 1953, by including as acquired jurisdiction over a case, it continues
to have that jurisdiction, until the case is
party respondent, the petitioner Royal Line, Inc. The Union
terminated (Manila Hotel Emp. Association
alleged that the officers and men working on board the
v. Manila Hotel Company, et al., 40 O.G. No.
petitioners' vessels have not been paid their sick leave, vacation
leave and overtime pay; that the petitioners threatened or 6, p. 3027). It was abundantly shown that
coerced them to accept a reduction of salaries, observed by other there were 56 members who signed Exhibits
A, A-I to A-8, and that 103 members of the
shipowners; that after the Minimum Wage Law had taken effect,
Union are listed in Exhibits B, B-1 to B-35, F,
the petitioners required their employees on board their vessels,
F-1 and K-2 to K-3. So that at the time of the
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 filing of the petition, the respondent union
Captain Carlos Asensi had refused to yield to the general had a total membership of 159, working with
the herein petitioners, who were presumed
reduction of salaries, the petitioners dismissed said captain who
interested in or would be benefited by the
now claims for reinstatement and the payment of back wages
outcome of the case (NAMARCO v. CIR, L-
from December 25, 1952, at the rate of P540.00, monthly.
17804, Jan. 1963). Annex D, (Order of the CIR,
The petitioners' shipping companies, answering, averred that dated March 8, 1954), likewise belies the
very much below 30 of the men and officers in their employ contention of herein petitioner in this regard.
were members of the respondent union; that the work on board The fact that only 7 claimed for overtime pay
a vessel is one of comparative ease; that petitioners have and only 7 witnesses testified, does not
suffered financial losses in the operation of their vessels and that warrant the conclusion that the employees
there is no law which provides for the payment of sick leave or who had some dispute with the present
vacation leave to employees or workers of private firms; that as petitioners were less than 30. The ruling of the
regards the claim for overtime pay, the petitioners have always CIR, with respect to the question of
observed the provisions of Comm. Act No. 444, (Eight-Hour jurisdiction is, therefore, correct.
Labor Law), notwithstanding the fact that it does not apply to
those who provide means of transportation; that the shipowners 2. Second assignment of error. — The CIR erred in
and operators in Cebu were paying the salaries of their officers holding, that inasmuch as in the shipping articles, the
herein petitioners have bound themselves to supply
and men, depending upon the margin of profits they could
the crew with provisions and with such "daily
realize and other factors or circumstances of the business; that
subsistence as shall be mutually agreed upon" between
in enacting Rep. Act No. 602 (Minimum Wage Law), the
Congress had in mind that the amount of P.40 per meal, the master and the crew, no deductions for meals could
furnished the employees should be deducted from the daily be made by the aforesaid petitioners from their wages
or salaries.
wages; that Captain Asensi was not dismissed for alleged union
activities, but with the expiration of the terms of the contract 3. Third assignment of error. — The CIR erred in holding
between said officer and the petitioners, his services were that inasmuch as with regard to meals furnished to
terminated. crew members of a vessel, section 3(f) of Act No. 602 is
A decision was rendered on February 21, 1957 in favor of the the general rule, which section 19 thereof is the
exception, the cost of said meals may not be legally
respondent union. The motion for reconsideration thereof,
deducted from the wages or salaries of the aforesaid
having been denied, the companies filed the present writ of
crew members by the herein petitioners.
certiorari, to resolve legal question involved. Always bearing in
mind the deep-rooted principle that the factual findings of the 4. Fourth assignment of error. — The CIR erred in
Court of Industrial Relations should not be disturbed, if declaring that the deduction for costs of meals from the
wages or salaries after August 4, 1951, is illegal and
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 66
same should be reimbursed to the employee twenty centavos daily for agricultural workers and not
concerned, in spite of said section 3, par. (f) of Act No. more than forty centavos daily for other employees
602. covered by this Act.
It was shown by substantial evidence, that since the beginning Petitioners maintain, in view of the above provisions, that in
of the operation of the petitioner's business, all the crew of their fixing the minimum wage of employees, Congress took into
vessels have been signing "shipping articles" in which are stated account the meals furnished by employers and that in fixing the
opposite their names, the salaries or wages they would receive. rate of forty centavos per meal, the lawmakers had in mind that
All seamen, whether members of the crew or deck officers or the latter amount should be deducted from the daily wage,
engineers, have been furnished free meals by the ship owners or otherwise, no rate for meals should have been provided.
operators. All the shipping articles signed by the master and the
However, section 19, same law, states —
crew members, contained, among others, a stipulation, that "in
consideration of which services to be duly performed, the said SEC. 19. Relations to other labor laws and practices.—
master hereby agrees to pay to the said crew, as wages, the sums Nothing in this Act shall deprive an employee of the
against their names respectively expressed in the contract; and right to seek fair wages, shorter working hours and
to supply them with provisions as provided herein ..." (Sec. 8, par. better working conditions nor justify an employer in
[b], shipping articles), and during the duration of the contract violating any other labor law applicable to
"the master of the vessel will provide each member of the his employees, in reducing the wage now paid to any of his
crew such daily subsistence as shall be mutually agreed daily employees in excess of the minimum wage established under
upon between said master and crew; or, in lieu of such this Act, or in reducing supplements furnished on the date
subsistence the crew may reserve the right to demand at the of enactment.
time of execution of these articles that adequate daily rations be At first blush, it would appear that there exists a contradiction
furnished each member of the crew." (Sec. 8, par. [e], shipping between the provisions of section 3(f) and section 19 of Rep. Act
articles). It is, therefore, apparent that, aside from the payment No. 602; but from a careful examination of the same, it is evident
of the respective salaries or wages, set opposite the names of the that Section 3(f) constitutes the general rule, while section 19 is
crew members, the petitioners bound themselves to supply the the exception. In other words, if there are no supplements given,
crew with ship's provisions, daily subsistence or daily rations, within the meaning and contemplation of section 19, but merely
which include food. facilities, section 3(f) governs. There is no conflict; the two
This was the situation before August 4, 1951, when the provisions could, as they should be harmonized. And even if
Minimum Wage Law became effective. After this date, there is such a conflict, the respondent CIR should resolve the
however, the companies began deducting the cost of meals from same in favor of the safety and decent living laborers (Art. 1702,
the wages or salaries of crew members; but no such deductions new Civil Code)..
were made from the salaries of the deck officers and engineers It is argued that the food or meals given to the deck officers,
in all the boats of the petitioners. Under the existing laws, marine engineers and unlicensed crew members in question,
therefore, the query converges on the legality of such were mere "facilities" which should be deducted from wages,
deductions. While the petitioners herein contend that the and not "supplements" which, according to said section 19,
deductions are legal and should not be reimbursed to the should not be deducted from such wages, because it is provided
respondent union, the latter, however, claims that same are therein: "Nothing in this Act shall deprive an employee of the
illegal and reimbursement should be made. right to such fair wage ... or in reducing supplements furnished
Wherefore, the parties respectfully pray that the foregoing on the date of enactment." In the case of Atok-Big Wedge Assn.
stipulation of facts be admitted and approved by this Honorable v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the
Court, without prejudice to the parties adducing other evidence two terms are defined as follows —
to prove their case not covered by this stipulation of "Supplements", therefore, constitute extra
facts. 1äwphï1.ñët remuneration or special privileges or benefits given to
We hold that such deductions are not authorized. In the or received by the laborers over and above their ordinary
coastwise business of transportation of passengers and freight, earnings or wages. "Facilities", on the other hand, are
the men who compose the complement of a vessel are provided items of expense necessary for the laborer's and his
with free meals by the shipowners, operators or agents, because family's existence and subsistence so that by express
they hold on to their work and duties, regardless of "the stress provision of law (Sec. 2[g]), they form part of the wage
and strain concomitant of a bad weather, unmindful of the and when furnished by the employer are deductible
dangers that lurk ahead in the midst of the high seas." therefrom, since if they are not so furnished, the
laborer would spend and pay for them just the same.
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602),
provides as follows — In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
(f) Until and unless investigations by the Secretary of ordinary earning or wage, is supplement; and when said benefit
Labor on his initiative or on petition of any interested or privilege is part of the laborers' basic wages, it is a facility.
party result in a different determination of the fair and The criterion is not so much with the kind of the benefit or item
reasonable value, the furnishing of meals shall be valued (food, lodging, bonus or sick leave) given, but its purpose.
at not more than thirty centavos per meal for Considering, therefore, as definitely found by the respondent
agricultural employees and not more than forty centavos court that the meals were freely given to crew members prior to
for any other employees covered by this Act, and the August 4, 1951, while they were on the high seas "not as part of
furnishing of housing shall be valued at not more than their wages but as a necessary matter in the maintenance of the
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 67
health and efficiency of the crew personnel during the voyage", 8. Eighth assignment of error.— The CIR erred in ordering
the deductions therein made for the meals given after August 4, petitioners to reinstate Capt. Carlos Asensi to his former
1951, should be returned to them, and the operator of the position, considering the fact that said officer had been
coastwise vessels affected should continue giving the same employed since January 9, 1953, as captain of a vessel belonging
benefit.. to another shipping firm in the City of Cebu.
In the case of Cebu Autobus Company v. United Cebu Autobus The CIR held —
Employees Assn., L-9742, Oct. 27, 1955, the company used to pay
Finding that the claims of Captain Carlos Asensi for
to its drivers and conductors, who were assigned outside of the
back salaries from the time of his alleged lay-off on
City limits, aside from their regular salary, a certain percentage
March 20, 1952, is not supported by the evidence on
of their daily wage, as allowance for food. Upon the effectivity
record, the same is hereby dismissed. Considering,
of the Minimum Wage Law, however, that privilege was
however, that Captain Asensi had been laid-off for a
stopped by the company. The order CIR to the company to
long time and that his failure to report for work is not
continue granting this privilege, was upheld by this Court.
sufficient cause for his absolute dismissal, respondents
The shipping companies argue that the furnishing of meals to are hereby ordered to reinstate him to his former job
the crew before the effectivity of Rep. Act No. 602, is of no without back salary but under the same terms and
moment, because such circumstance was already taken into conditions of employment existing prior to his lay-off,
consideration by Congress, when it stated that "wage" includes without loss of seniority and other benefits already
the fair and reasonable value of boards customarily furnished acquired by him prior to March 20, 1952. This Court is
by the employer to the employees. If We are to follow the theory empowered to reduce the punishment meted out to an
of the herein petitioners, then a crew member, who used to erring employee (Standard Vacuum Oil Co., Inc. v.
receive a monthly wage of P100.00, before August 4, 1951, with Katipunan Labor Union, G.R. No. L-9666, Jan. 30,
no deduction for meals, after said date, would receive only 1957). This step taken is in consonance with section 12
P86.00 monthly (after deducting the cost of his meals at P.40 per of Comm. Act 103, as amended." (p. 16, Decision,
meal), which would be very much less than the P122.00 monthly Annex 'G').
minimum wage, fixed in accordance with the Minimum Wage
The ruling is in conformity with the evidence, law and equity.
Law. Instead of benefiting him, the law will adversely affect said
crew member. Such interpretation does not conform with the Ninth and Tenth assignments of error. — The CIR erred in denying
avowed intention of Congress in enacting the said law. a duly verified motion for new trial, and in overruling
petitioner's motion for reconsideration.
One should not overlook a fact fully established, that only
unlicensed crew members were made to pay for their meals or The motion for new trial, supported by an affidavit, states that
food, while the deck officers and marine engineers receiving the movants have a good and valid defense and the same is
higher pay and provided with better victuals, were not. This based on three orders of the WAS (Wage Administration
pictures in no uncertain terms, a great and unjust discrimination Service), dated November 6, 1956. It is alleged that they would
obtaining in the present case (Pambujan Sur United Mine inevitably affect the defense of the petitioners. The motion for
Workers v. CIR, et al., L-7177, May 31, 1955). new trial is without merit. Having the said wage Orders in their
possession, while the case was pending decision, it was not
Fifth, Sixth and Seventh assignments of error.— The CIR erred in
explained why the proper move was not taken to introduce
holding that Severino Pepito, a boatsman, had rendered
them before the decision was promulgated. The said wage
overtime work, notwithstanding the provisions of section 1, of
orders, dealing as they do, with the evaluation of meals and
C.A. No. 444; in basing its finding ofthe alleged overtime, on the
facilities, are irrelevant to the present issue, it having been found
uncorroborated testimony of said Severino Pepito; and in
and held that the meals or food in question are not facilities but
ordering the herein petitioners to pay him. Severino Pepito was
supplements. The original petition in the CIR having been filed
found by the CIR to have worked overtime and had not been
on Sept. 12, 1952, the WAS could have intervened in the manner
paid for such services. Severino Pepito categorically stated that
provided by law to express its views on the matter. At any rate,
he worked during the late hours of the evening and during the
the admission of the three wage orders have not altered the
early hours of the day when the boat docks and unloads. Aside
decision reached in this case.
from the above, he did other jobs such as removing rusts and
cleaning the vessel, which overtime work totalled to 6 hours a IN VIEW HEREOF, the petition is dismissed, with costs against
day, and of which he has not been paid as yet. This statement the petitioners.
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.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 68


should be multiplied by 30 days to arrive at the monthly COLA
rate. The union alleged furthermore that prior to the effectivity
G.R. No. 74156 June 29, 1988
of Wage Order No. 6, Petitioner Corporation had been
GLOBE MACKAY CABLE AND RADIO computing and paying the monthly COLA on the basis of thirty
CORPORATION, FREDERICK WHITE and JESUS (30) days per month and that this constituted an employer
SANTIAGO, petitioners, practice, which should not be unilaterally withdrawn.
vs. After several grievance proceedings proved futile, the Union
NATIONAL LABOR RELATIONS COMMISSION, filed a complaint against Petitioner Corporation, its President,
F. White, and Vice-President, J. Santiago, for illegal deduction,
FFW-GLOBE MACKAY EMPLOYEES UNION and
underpayment, unpaid allowances, and violation of Wage
EDA CONCEPCION, respondents. Order No. 6. Petitioners White and Santiago were sought to be
Castillo, Laman, Tan & Pantaleon for petitioners. held personally liable for the money claims thus demanded.
Edwin D. Dellaban for private respondents. 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
MELENCIO-HERRERA, J.: have been impleaded; and that the monthly COLA should be
A special civil action for certiorari with a prayer for a Temporary computed on the basis of twenty two (22) days, since the
Restraining Order to enjoin respondents from enforcing the evidence showed that there are only 22 paid days in a month for
Decision of 10 March 1986 of the National Labor Relations monthly-paid employees in the company. His reasoning, inter
Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFW- alia, was as follows:
Globe Mackay Employees Union, et al., vs. Globe Mackay Cable To compel the respondent company to use 30
& Radio Corporation, et al.," the dispositive portion of which days in a month to compute the allowance
reads: and retain 22 days for vacation and sick leave,
WHEREFORE, premises considered, the overtime pay and other benefits is
appealed Decision is as it is hereby SET inconsistent and palpably unjust. If 30 days is
ASIDE and another one issued: used as divisor, then it must be used for the
computation of all benefits, not just the
1. Declaring respondents-appellees allowance. But this is not fair to complainants,
(petitioners herein) guilty of illegal not to mention that it will contravene the
deductions of cost-of-living allowance; provision of the parties' CBA.
2. Ordering respondents-appellees to pay On appeal, the NLRC reversed the Labor Arbiter, as heretofore
complainants-appellants their back stated, and held that Petitioner Corporation was guilty of illegal
allowances reckoned from the time of illegal deductions, upon the following considerations: (1) that the P3.00
deduction; and daily COLA under Wage Order No. 6 should be paid and
3. Ordering respondents-appellees from computed on the basis of thirty (30) days instead of twenty-two
further illegally deducting the allowances of (22) days since workers paid on a monthly basis are entitled to
complainants-appellants. COLA on Saturdays, Sundays and legal holidays "even if
unworked;" (2) that the full allowance enjoyed by Petitioner
SO ORDERED. Corporation's monthly-paid employees before the CBA
Presiding Commissioner of the NLRC, Diego P. Atienza, executed between the parties in 1982 constituted voluntary
concurred in the result, while Commissioner Cleto T. Villaltuya employer practice, which cannot be unilaterally withdrawn;
dissented and voted to affirm in toto the Labor Arbiter's and (3) that petitioners White and Santiago were properly
Decision. impleaded as respondents in the case below.
On 19 May 1986, we issued the Temporary Restraining Order Hence, this Petition, anchored on the charge of grave abuse of
enjoining respondents from enforcing the assailed Decision. On discretion by the NLRC.
2 September 1987, we gave due course to the petition and We are constrained to reverse the reversal.
required the submittal of memoranda, by the parties, which has
been complied with. Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5
and 6 uniformly read as follows:
The facts follow:
Section 5. Allowance for Unworked Days.
Wage Order No. 6, which took effect on 30 October 1984,
increased the cost-of-living allowance of non-agricultural All covered employees shall be entitled to
workers in the private sector. Petitioner corporation complied their daily living allowance during the days
with the said Wage Order by paying its monthly-paid that they are paid their basic wage, even if
employees the mandated P3.00 per day COLA. However, in unworked. (Emphasis supplied)
computing said COLA, Petitioner Corporation multiplied the P The primordial consideration, therefore, for entitlement to
3.00 daily COLA by 22 days, which is the number of working COLA is that basic wage is being paid. In other words, the
days in the company. payment of COLA is mandated only for the days that the
Respondent Union disagreed with the computation of the employees are paid their basic wage, even if said days are
monthly COLA claiming that the daily COLA rate of P3.00 unworked. So that, on the days that employees are not paid their
basic wage, the payment of COLA is not mandated. As held
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 69
in University of Pangasinan Faculty Union vs. University of cannot now be unilaterally withdrawn by petitioner. To be
Pangasinan, L-63122, February 20, 1984, 127 SCRA 691): considered as such, it should have been practiced over a long
period of time, and must be shown to have been consistent and
... it is evident that the intention of the law is
deliberate. Adequate proof is wanting in this respect. The test of
to grant ECOLA upon the payment of basic
long practice has been enunciated thus:
wages. Hence, we have the principle of 'No
Pay, No ECOLA. ... Respondent Company agreed to continue
giving holiday pay knowing fully well that said
Applied to monthly-paid employees if their monthly salary
employees are not covered by the law
covers all the days in a month, they are deemed paid their basic
requiring payment of holiday pay.' (Oceanic
wages for all those days and they should be entitled to their
Pharmacal Employees Union [FFW] vs.
COLA on those days "even if unworked," as the NLRC had
Inciong, L-50568, November 7, 1979, 94 SCRA
opined. Peculiar to this case, however, is the circumstance that
270). (Emphasis ours)
pursuant to the Collective Bargaining Agreement (CBA)
between Petitioner Corporation and Respondent Union, the Moreover, before Wage Order No. 4, there was lack of
monthly basic pay is computed on the basis of five (5) days a administrative guidelines for the implementation of the Wage
week, or twenty two (22) days a month. Thus, the pertinent Orders. It was only when the Rules Implementing Wage Order
provisions of that Agreement read: No. 4 were issued on 21 May 1984 that a formula for the
conversion of the daily allowance to its monthly equivalent was
Art. XV(a)—Eight net working hours shall
laid down, thus:
constitute the regular work day for five days.
Section 3. Application of Section 2--
Art. XV(b)—Forty net hours of work, 5
working days, shall constitute the regular xxx xxx xxx
work week.
(a) Monthly rates for non-agricultural workers
Art. XVI, Sec. 1(b)—All overtime worked in covered Under PDs 1614, 1634, 1678 and 1713:
excess of eight net hours daily or in excess of
xxx xxx xxx
5 days weekly shall be computed on hourly
basis at the rate of time and one half. (3) For workers who do not work and are not
considered paid on Saturdays and Sundays:
The Labor Arbiter also found that in determining the hourly rate
of monthly paid employees for purposes of computing overtime P60 + P90 + P60 + (P2.00 x 262) divided by 12
pay, the monthly wage is divided by the number of actual work = P 253.70 (Emphasis ours)
days in a month and then, by eight (8) working hours. If a As the Labor Arbiter had analyzed said formula:
monthly-paid employee renders overtime work, he is paid his
basic salary rate plus one-half thereof. For example, after Under the aforecited formula/guideline,
examining the specimen payroll of employee Jesus L. Santos, the issued for the first time, when applied to a
Labor Arbiter found: company like respondent which observes a 5-
day work week (or where 2 days in a week,
the employee Jesus L. Santos, who worked on not necessarily Saturday and Sunday, are not
Saturday and Sunday was paid base pay plus considered paid), the monthly equivalent of a
50% premium. This is over and above his daily allowance is arrived at by multiplying
monthly basic pay as supported by the fact the daily allowance by 262 divided by 12. This
that base pay was paid. If the 6th and 7th days formula results in the equivalent of 21.8 days
of the week are deemed paid even if in a month.
unworked and included in the monthly
salary, Santos should not have been paid his Absent clear administrative guidelines, Petitioner Corporation
base pay for Saturday and Sunday but should cannot be faulted for erroneous application of the law. Payment
have received only the 50% overtime may be said to have been made by reason of a mistake in the
premium. construction or application of a "doubtful or difficult question
of law." (Article 2155, 1 in relation to Article 2154 2 of the Civil
Similarly, the specimen payrolls of employees, Dennis Dungon Code). Since it is a past error that is being corrected, no vested
and Rene Sanvictores, showed that in computing the vacation right may be said to have arisen nor any diminution of benefit
and sick leaves of the employees, Petitioner Corporation under Article 100 of the Labor Code3 may be said to have
consistently used twenty-two (22) days. resulted by virtue of the correction.
Under the peculiar circumstances obtaining, therefore, where With the conclusions thus reached, there is no further need to
the company observes a 5-day work week, it will have to be held discuss the liability of the officers of Petitioner Corporation.
that the COLA should be computed on the basis of twenty two
(22) days, which is the period during which the monthly-paid WHEREFORE, certiorari is granted, the Decision of the National
employees of Petitioner Corporation receive their basic wage. Labor Relations Commission, dated 10 March 1986, is SET
The CBA is the law between the parties and, if not acceptable, ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985,
can be the subject of future re-negotiation. is hereby REINSTATED. The Temporary Restraining Order
heretofore issued is hereby made permanent.
2) Payment in full by Petitioner Corporation of the COLA before
the execution of the CBA in 1982 and in compliance with Wage SO ORDERED.
Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be
construed as constitutive of voluntary employer practice, which
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 70
reason or ground for disturbing the finding contained in the
decision fixing the amount of P3.20 as the minimum wage.
G.R. No. L-5276 March 3, 1953
It is next contended that the efficiency bonus paid the laborer
ATOK-BIG WEDGE MINING CO.,
should have been included in his (minimum) wage, in the same
INC., petitioner, manner as the value of living quarters. Whether or not bonus
vs. forms part of wages depends upon the circumstances or
ATOK-BIG WEDGE MUTUAL BENEFIT condition for its payment. If it is an additional compensation
ASSOCIATION, respondent. which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business
Vicente Hilado, Pedro Lopez and Artemio A. Almendral for or greater production or output, then it is part of the wage. But
petitioner. if it is paid only if profits are realized or a certain amount of
Sanidad, Ayson and Casia for respondent. productivity achieved, it cannot be considered part of the
LABRADOR, J.: wages. In the case at bar, it is not payable to all but to laborers
only. It is also paid on the basis of actual production or actual
This is an appeal by certiorari against a decision of the Court of
work accomplished. If the desired goal of production is not
Industrial Relations. On September 4, 1950, demand was
obtained or the amount of actual work accomplished, the bonus
submitted to petitioner by respondent union through its officers
does not accrue. It is evidence that under the circumstances it is
for various concession, among which were (a) an increase of
paid only when the labor becomes more efficient or more
P0.50 in wages, (b) commutation of sick and vacation leave if not
productive. It is only an inducement for efficiency, a prize
enjoyed during the year, (c) various privileges, such as free
therefor, not a part of the wage.
medical care, medicine, and hospitalization, (d) right to a closed
shop, check off, etc., (e) no dismissal without prior just cause The last question raised in the appeal is the grant of the increase
and with a prior investigation, etc. Some of the demands, were from September 4, 1950, the date of the presentation of the
granted by the petitioner, and the other were rejected, and so original demand, instead of from April 5, 1951, the date of the
hearings were held and evidence submitted on the latter. After amended demand. The decision states:
the hearing the respondent court rendered a decision, the most Both parties agreed that any award should be
important provisions of which were those fixing the minimum retroactive to the date of the presentation of the
wage for the laborers at P3.20, declaring that additional demand, which is September 4, 1950. (Annex A, p. 5.)
compensation representing efficiency bonus should not be
included as part of the wage, and making the award effective The terms of the stipulation are clearly against petitioner's
from September 4, 1950. It is against these portion of the contention. There being no question as to its (agreement)
decision that this appeal is taken. existence, the same must be given force and effect.

On the issue of the wage, it is contended by petitioner that as the The petition is hereby dismissed, with costs.
respondent court found that the laborer and his family at least Paras, C.J., Feria, Pablo, Bengzon, Padilla, Tuason, Reyes, Jugo, and
need the amount of P2.58 for food, this should be the basis for Angelo, JJ., concur.
the determination of his wage, not what he actually spends; that Montemayor, J., concur in the result.
it is not justifiable to fix a wage higher than that provided by
Republic Act No. 602; and that respondent union made the
demand in accordance with a pernicious practice of claiming
more after an original demand is granted. The respondent court
found that P2.58 is the minimum amount actually needed by the
laborer and his family. That does not mean that it is his actual
expense. A person's needs increase as his means increase. This
is true not only as to food but as to everything else — education,
clothing, entertainment, etc. The law guarantees the laborer
a fair and just wage. The minimum must be fair and just. The
"minimum wage" can by no means imply only the actual
minimum. Some margin or leeway must be provided, over and
above the minimum, to take care of contingencies such as
increase of prices of commodities and desirable improvement in
his mode of living. Certainly, the amount of P0.22 a day
(difference between P2.80 fixed and P2.58 actual) is not
excessive for this purpose. That the P3 minimum wage fixed in
the law is still far below what is considered a fair and just
minimum is shown by the fact that this amount is only for the
year after the law takes effect, as thereafter the law fixes it at P4.
Neither may it be correctly contended that the demand for
increase is due to an alleged pernicious practice. Frequent
demands for increase are indicative of a healthy spirit of
wakefulness to the demands of a progressing and an
increasingly more expensive world. We, therefore, find no

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 71


Collectors - no need for cash
G.R. No. 127598 February 22, 2000 bond, no
MANILA ELECTRIC COMPANY, petitioner, need to reduce
vs. quota and MAPL
Hon. SECRETARY OF LABOR LEONARDO
exclude
QUISUMBING and MERALCO EMPLOYEES and
CBU - confidential include
WORKERS ASSOCIATION (MEWA), respondent. employees
RESOLUTION
Union maintenance of
YNARES-SANTIAGO, J.: - closed shop
security membership
In the Decision promulgated on January 27, 1999, the Court
disposed of the case as follows: Contracting no need to
- consult first
WHEREFORE, the petition is granted and the orders of out consult union
public respondent Secretary of Labor dated August 19,
1996 and December 28, 1996 are set aside to the extent existing terms
set forth above. The parties are directed to execute a All benefits - all terms
and conditions
Collective Bargaining Agreement incorporating the
terms and conditions contained in the unaffected
Dec. 28, 1996- from Dec. 1,
portions of the Secretary of Labor's orders of August Retroactivity -
Dec. 27, 199(9) 1995
19, 1996 and December 28, 1996, and the modifications
set forth above. The retirement fund issue is remanded Dissatisfied with the Decision, some alleged members of private
to the Secretary of Labor for reception of evidence and respondent union (Union for brevity) filed a motion for
determination of the legal personality of the intervention and a motion for reconsideration of the said
MERALCO retirement fund.1 Decision. A separate intervention was likewise made by the
The modifications of the public respondent's resolutions include supervisor's union (FLAMES2) of petitioner corporation
the following: alleging that it has bona fide legal interest in the outcome of the
case.3 The Court required the "proper parties" to file a comment
January 27, 1999 Secretary's to the three motions for reconsideration but the Solicitor-
decision resolution General asked that he be excused from filing the comment
because the "petition filed in the instant case was granted" by
P1,900.00 for the Court.4 Consequently, petitioner filed its own consolidated
Wages - P2,200.00 comment. An "Appeal Seeking Immediate Reconsideration"
1995-96
was also filed by the alleged newly elected president of the
modified to one Union.5 Other subsequent pleadings were filed by the parties
X'mas bonus - 2 months and intervenors.
month
The issues raised in the motions for reconsideration had already
remanded to the been passed upon by the Court in the January 27, 1999 decision.
Retirees - granted No new arguments were presented for consideration of the
Secretary
Court. Nonetheless, certain matters will be considered herein,
particularly those involving the amount of wages and the
Loan to coops - denied granted
retroactivity of the Collective Bargaining Agreement (CBA)
arbitral awards.
GHSIP, HMP
and Petitioner warns that if the wage increase of P2,200.00 per
Housing granted up to month as ordered by the Secretary is allowed, it would simply
loans - P60,000.00 granted pass the cost covering such increase to the consumers through
an increase in the rate of electricity. This is a non sequitur. The
Court cannot be threatened with such a misleading argument.
Signing bonus - denied granted
An increase in the prices of electric current needs the approval
of the appropriate regulatory government agency and does not
40 days (typo automatically result from a mere increase in the wages of
Union leave - 30 days
error) petitioner's employees. Besides, this argument presupposes that
petitioner is capable of meeting a wage increase. The All Asia
High - not apply to members of Capital report upon which the Union relies to support its
voltage/pole those who are a team position regarding the wage issue cannot be an accurate basis
not exposed to and conclusive determinant of the rate of wage increase. Section
the risk 45 of Rule 130 Rules of Evidence provides:
Commercial lists and the like. — Evidence of statements
of matters of interest to persons engaged in an
occupation contained in a list, register, periodical, or
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 72
other published compilation is admissible as tending 1992-1997 CBA insofar as the last two-year period thereof is
to prove the truth of any relevant matter so stated if concerned. When the Secretary of Labor assumed jurisdiction
that compilation is published for use by persons and granted the arbitral awards, there was no question that
engaged in that occupation and is generally used and these arbitral awards were to be given retroactive effect.
relied upon by them therein. However, the parties dispute the reckoning period when
retroaction shall commence. Petitioner claims that the award
Under the afore-quoted rule, statement of matters contained in
should retroact only from such time that the Secretary of Labor
a periodical, may be admitted only "if that compilation is
rendered the award, invoking the 1995 decision in Pier 8
published for use by persons engaged in that occupation and is
case14 where the Court, citing Union of Filipino Employees v.
generally used and relied upon by them therein." As correctly
NLRC,15 said:
held in our Decision dated January 27, 1999, the cited report is a
mere newspaper account and not even a commercial list. At The assailed resolution which incorporated the CBA to
most, it is but an analysis or opinion which carries no persuasive be signed by the parties was promulgated on June 5,
weight for purposes of this case as no sufficient figures to 1989, the expiry date of the past CBA. Based on the
support it were presented. Neither did anybody testify to its provision of Section 253-A, its retroactivity should be
accuracy. It cannot be said that businessmen generally rely on agreed upon by the parties. But since no agreement to
news items such as this in their occupation. Besides, no evidence that effect was made, public respondent did not abuse
was presented that the publication was regularly prepared by a its discretion in giving the said CBA a prospective
person in touch with the market and that it is generally regarded effect. The action of the public respondent is within the
as trustworthy and reliable. Absent extrinsic proof of their ambit of its authority vested by existing law.
accuracy, these reports are not admissible.6 In the same manner,
On the other hand, the Union argues that the award should
newspapers containing stock quotations are not admissible in
retroact to such time granted by the Secretary, citing the 1993
evidence when the source of the reports is available.7 With more
decision of St. Luke's.16
reason, mere analyses or projections of such reports cannot be
admitted. In particular, the source of the report in this case can Finally, the effectivity of the Order of January 28, 1991,
be easily made available considering that the same is necessary must retroact to the date of the expiration of the
for compliance with certain governmental requirements. previous CBA, contrary to the position of petitioner.
Under the circumstances of the case, Article 253-A
Nonetheless, by petitioner's own allegations, its actual total net
cannot be properly applied to herein case. As correctly
income for 1996 was P5.1 billion.8 An estimate by the All Asia
stated by public respondent in his assailed Order of
financial analyst stated that petitioner's net operating income
April 12, 1991 dismissing petitioner's Motion for
for the same year was about P5.7 billion, a figure which the
Reconsideration —
Union relies on to support its claim. Assuming without
admitting the truth thereof, the figure is higher than the P4.171 Anent the alleged lack of basis for the
billion allegedly suggested by petitioner as its projected net retroactivity provisions awarded; we would
operating income. The P5.7 billion which was the Secretary's stress that the provision of law invoked by the
basis for granting the P2,200.00 is higher than the actual net Hospital, Article 253-A of the Labor Code,
income of P5.1 billion admitted by petitioner. It would be proper speaks of agreements by and between the
then to increase this Court's award of P1,900.00 to P2,000.00 for parties, and not arbitral awards . . .
the two years of the CBA award. For 1992, the agreed CBA wage Therefore, in the absence of a specific provision of law
increase for rank-and-file was P1,400.00 and was reduced to prohibiting retroactivity of the effectivity of arbitral
P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For awards issued by the Secretary of Labor pursuant to
supervisory employees, the agreed wage increase for the years Article 263(g) of the Labor Code, such as herein
1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. involved, public respondent is deemed vested with
Based on the foregoing figures, the P2,000.00 increase for the plenary and discretionary powers to determine the
two-year period awarded to the rank-and-file is much higher effectivity thereof.
than the highest increase granted to supervisory employees.9 As
mentioned in the January 27, 1999 Decision, the Court does "not In the 1997 case of Mindanao Terminal,17 the Court applied the
seek to enumerate in this decision the factors that should affect St. Luke's doctrine and ruled that:
wage determination" because collective bargaining disputes In St. Luke's Medical Center v. Torres, a deadlock also
particularly those affecting the national interest and public developed during the CBA negotiations between
service "requires due consideration and proper balancing of the management and the union. The Secretary of Labor
interests of the parties to the dispute and of those who might be assumed jurisdiction and ordered the retroaction of the
affected by the dispute."10 The Court takes judicial notice that CBA to the date of expiration of the previous CBA. As
the new amounts granted herein are significantly higher than in this case, it was alleged that the Secretary of Labor
the weighted average salary currently enjoyed by other rank- gravely abused its discretion in making his award
and-file employees within the community. It should be noted retroactive. In dismissing this contention this Court
that the relations between labor and capital is impressed with held:
public interest which must yield to the common good.11 Neither
Therefore, in the absence of a specific
party should act oppressively against the other or impair the
provision of law prohibiting retroactive of the
interest or convenience of the public.12Besides, matters of salary
effectivity of arbitral awards issued by the
increases are part of management prerogative.13
Secretary of Labor pursuant to Article 263(g)
On the retroactivity of the CBA arbitral award, it is well to recall of the Labor Code, such as herein involved,
that this petition had its origin in the renegotiation of the parties'
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 73
public respondent is deemed vested with by law. In contrast, providing seed money for the establishment
plenary and discretionary powers to of the employee's cooperative is a matter in which the employer
determine the effectivity thereof. has no business interest or legal obligation. Courts should not
be utilized as a tool to compel any person to grant loans to
The Court in the January 27, 1999 Decision, stated that the CBA
another nor to force parties to undertake an obligation without
shall be "effective for a period of 2 years counted from December
justification. On the contrary, it is the government that has the
28, 1996 up to December 27, 1999." Parenthetically, this actually
obligation to render financial assistance to cooperatives and the
covers a three-year period. Labor laws are silent as to when an
Cooperative Code does not make it an obligation of the
arbitral award in a labor dispute where the Secretary had
employer or any private individual.22
assumed jurisdiction by virtue of Article 263 (g) of the Labor
Code shall retroact. In general, a CBA negotiated within six Anent the 40-day union leave, the Court finds that the same is a
months after the expiration of the existing CBA retroacts to the typographical error. In order to avoid any confusion, it is herein
day immediately following such date and if agreed thereafter, declared that the union leave is only thirty (30) days as granted
the effectivity depends on the agreement of the parties.18 On the by the Secretary of Labor and affirmed in the Decision of this
other hand, the law is silent as to the retroactivity of a CBA Court.
arbitral award or that granted not by virtue of the mutual
The added requirement of consultation imposed by the
agreement of the parties but by intervention of the government.
Secretary in cases of contracting out for six (6) months or more
Despite the silence of the law, the Court rules herein that CBA
has been rejected by the Court. Suffice it to say that the employer
arbitral awards granted after six months from the expiration of
is allowed to contract out services for six months or more.
the last CBA shall retroact to such time agreed upon by both
However, a line must be drawn between management
employer and the employees or their union. Absent such an
prerogatives regarding business operationsper se and those
agreement as to retroactivity, the award shall retroact to the first
which affect the rights of employees, and in treating the latter,
day after the six-month period following the expiration of the
the employer should see to it that its employees are at least
last day of the CBA should there be one. In the absence of a CBA,
properly informed of its decision or modes of action in order to
the Secretary's determination of the date of retroactivity as part
attain a harmonious labor-management relationship and
of his discretionary powers over arbitral awards shall control.
enlighten the workers concerning their rights.23 Hiring of
It is true that an arbitral award cannot per se be categorized as workers is within the employer's inherent freedom to regulate
an agreement voluntarily entered into by the parties because it and is a valid exercise of its management prerogative subject
requires the interference and imposing power of the State thru only to special laws and agreements on the matter and the fair
the Secretary of Labor when he assumes jurisdiction. However, standards of justice.24 The management cannot be denied the
the arbitral award can be considered as an approximation of a faculty of promoting efficiency and attaining economy by a
collective bargaining agreement which would otherwise have study of what units are essential for its operation. It has the
been entered into by the parties.19 The terms or periods set forth ultimate determination of whether services should be
in Article 253-A pertains explicitly to a CBA. But there is nothing performed by its personnel or contracted to outside agencies.
that would prevent its application by analogy to an arbitral While there should be mutual consultation, eventually
award by the Secretary considering the absence of an applicable deference is to be paid to what management
law. Under Article 253-A: "(I)f any such agreement is entered decides.25 Contracting out of services is an exercise of business
into beyond six months, the parties shall agree on the duration judgment or management prerogative.26 Absent proof that
of retroactivity thereof." In other words, the law contemplates management acted in a malicious or arbitrary manner, the Court
retroactivity whether the agreement be entered into before or will not interfere with the exercise of judgment by an
after the said six-month period. The agreement of the parties employer.27 As mentioned in the January 27, 1999 Decision, the
need not be categorically stated for their acts may be considered law already sufficiently regulates this matter.28 Jurisprudence
in determining the duration of retroactivity. In this connection, also provides adequate limitations, such that the employer must
the Court considers the letter of petitioner's Chairman of the be motivated by good faith and the contracting out should not
Board and its President addressed to their stockholders, which be resorted to circumvent the law or must not have been the
states that the CBA "for the rank-and-file employees covering result of malicious or arbitrary actions.29 These are matters that
the period December 1, 1995 to November 30, 1997 is still with may be categorically determined only when an actual suit on the
the Supreme Court,"20 as indicative of petitioner's recognition matter arises.
that the CBA award covers the said period. Earlier, petitioner's
WHEREFORE, the motion for reconsideration is PARTIALLY
negotiating panel transmitted to the Union a copy of its
GRANTED and the assailed Decision is MODIFIED as follows:
proposed CBA covering the same period inclusive.21 In
(1) the arbitral award shall retroact from December 1, 1995 to
addition, petitioner does not dispute the allegation that in the
November 30, 1997; and (2) the award of wage is increased from
past CBA arbitral awards, the Secretary granted retroactivity
the original amount of One Thousand Nine Hundred Pesos
commencing from the period immediately following the last
(P1,900.00) to Two Thousand Pesos (P2,000.00) for the years
day of the expired CBA. Thus, by petitioner's own actions, the
1995 and 1996. This Resolution is subject to the monetary
Court sees no reason to retroact the subject CBA awards to a
advances granted by petitioner to its rank-and-file employees
different date. The period is herein set at two (2) years from
during the pendency of this case assuming such advances had
December 1, 1995 to November 30, 1997.
actually been distributed to them. The assailed Decision is
On the allegation concerning the grant of loan to a cooperative, AFFIRMED in all other respects.1âwphi1.nêt
there is no merit in the union's claim that it is no different from
SO ORDERED.
housing loans granted by the employer. The award of loans for
housing is justified because it pertains to a basic necessity of life.
It is part of a privilege recognized by the employer and allowed
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 74
benefits has decreased our overtime rate and
has affected the employees' take home pay.
G.R. No. 88168 August 30, 1990
3) The diminution of benefits being enjoyed
TRADERS ROYAL BANK, petitioner,
by the employees since the (sic) immemorial,
vs. e.g. mid-year bonus, from two (2) months
NATIONAL LABOR RELATIONS COMMISSION gross pay to two (2) months basic and year-
& TRADERS ROYAL BANK EMPLOYEES end bonus from three (3) months gross to only
UNION, respondents. two (2) months.

San Juan, Gonzalez, San Agustin & Sinense for petitioner. 4) The refusal by management to recall active
union members from the branches which
E.N.A. Cruz, Enfero & Associates for private respondent. were being transferred without prior notice,
solely at the instance of the branch, manager.
(p. 28, Rollo.)
GRIÑO-AQUINO, J.:
In the meantime, the parties who had been negotiating for a
This petition for certiorari seeks to nullify or set aside the
collective bargaining agreement, agreed on the terms of the
decision dated September 2, 1988 of the National Labor
CBA, to wit:
Relations Commission, which found the petitioner, Traders
Royal Bank (or TRB), guilty of diminution of benefits due the 1. The whole of the bonuses given in previous
private respondents and ordered it to pay the said employees' years is not demandable, i.e., there is no
claims for differentials in their holiday, mid-year, and year-end diminution, as to be liable for a differential, if
bonuses. the bonus given is less than that in previous
years.
On November 18, 1986, the Union, through its president, filed a
letter-complaint against TRB with the Conciliation Division of 2. Since only two months bonus is
the Bureau of Labor Relations claiming that: guaranteed, only to that extent are bonuses
deemed part of regular compensation.
First, the management of TRB per memo
dated October 10, 1986 paid the employees 3. As regards the third and fourth bonuses,
their HOLIDAY PAY, but has withheld from they are entirely dependent on the income of
the Union the basis of their computation. the bank, and not demandable as part of
compensation. (pp. 67-68, Rollo.)
Second, the computation in question, has
allegedly decreased the daily salary rate of Despite the terms of the CBA, however, the union insisted on
the employees. This diminution of existing pursuing the case, arguing that the CBA would apply
benefits has decreased our overtime rate and prospectively only to claims arising after its effectivity.
has affected the employees' take home pay. Petitioner, on the other hand, insisted that it had paid the
Third, the diminution of benefits being employees holiday pay. The practice of giving them bonuses at
enjoyed by the employees since time year's end, would depend on how profitable the operation of the
immemorial, e.g. mid-year bonus, from two bank had been. Generally, the bonus given was two (2) months
(2) months gross pay to two (2) months basic basic mid-year and two (2) months gross end-year.
and year-end bonus from three (3) months On September 2, 1988, the NLRC rendered a decision in favor of
gross to only two (2) months. the employees, the dispositive portion of which reads:
Fourth, the refusal by management to recall WHEREFORE, judgment is hereby rendered
active union members from the branches in favor of the petitioner and ordering
which were being transferred without prior respondent bank to pay petitioner members-
notice, solely at the instance of the branch employees the following:
manager. (p. 26, Rollo.)
1. Holiday differential for the period covering
In its answer to the union's complaint, TRB pointed out that the l983-1986 as embodied in Resolution No.
NLRC, not the Bureau of Labor Relations, had jurisdiction over 4984-1986 of respondent's Board of Directors
the money claims of the employees. but to start from November 11, 1983 and
On March 24, 1987, the Secretary of Labor certified the using the Divisor 251 days in determining the
complaint to the NLRC for resolution of the following issues daily rate of the employees;
raised by the complainants: 2. Mid-year bonus differential representing
l) The Management of TRB per memo dated the difference between two (2) months gross
October 10, 1986 paid the employees their pay and two (2) months basic pay and end-
holiday pay but has withheld from the union year bonus differential of one (1) month gross
the basis of their computation. pay for 1986.
2) The computation in question has allegedly The claim for holiday differential for the
decreased the daily salary rate of the period earlier than November 11, 1983 is
employees. This diminution of existing hereby dismissed, the same having
prescribed.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 75


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
vs. 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 vs.
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
midyear 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.
Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.
EN BANC

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 76


7. Uniform allowance of P600.00 per year from
January 1985 to January 1988, inclusive;
G.R. No. 107487 September 29, 1997
8. One-half (1/2) month pay 1987 Christmas Bonus
which was deducted from the retirement benefit of
Manilabank v NLRC each complainant;
9. Travel Plan and Car Plan with respect to the 23
complainants Senior Officers; and
THE MANILA BANKING CORPORATION ("Manilabank")
and ARNULFO B. AURELLANO in his capacity as Statutory 10. Car Plan and Gasoline Allowance benefits with
Receiver of Manilabank, petitioners, respect to the 15 complainants, Senior Managers and
vs. 54 Assistant Managers.
THE NATIONAL LABOR RELATIONS COMMISSION, annual interest thereon of 12% and attorney's fees amounting
VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN to 10% of the said amount.
G. ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior
Officers similarly situated; HORACE REYES and 14 other The antecedents show that on June 5, 1984, petitioner Manila
Senior Mangers similarly situated; AURORA VILLACERAN Banking Corporation (Manilabank) was placed under
and 34 others Assistant Managers similarly situated; comptrollership by then Central Bank Governor Jose B.
CONSUELO RIZARRI, EMERENCIANA SAMSON, Fernandez in view of the bank's financial distress.2
BRENDA C. BERMUDEZ, FLORYPEE ABRIGO, EMMA The decision of the Monetary Board of the Central Bank was
BALDERAMA, and 211 other Junior Officers similarly based on the findings that the bank was experiencing liquidity
situated, respondents. problems and had incurred chronic reserve deficiencies against
G.R. No. 107902 September 29, 1997 deposit liabilities. In fact, on May 23, 1984, a month before it was
placed under comptrollership, Manilabank was prohibited by
THE MANILA BANKING CORPORATION ("Manilabank")
the Monetary Board from granting new loans and making new
and ARNULFO B. AURELIANO in his capacity as Statutory
investments except investments in government securities with
Receiver of Manilabank, petitioners,
Central Bank support, and from declaring cash or stock
vs.
dividends.3
THE NATIONAL LABOR RELATIONS COMMISSION-
NCR, LABOR ARBITER FELIPE PATI and VICTOR L. A February 19, 1986 Central Bank report on Manilabank's
MENDOZA, RODOLFO VE. TIMBOL, RUBEN G. financial condition as of December 31, 1985 disclosed, among
ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior other things, that the bank's operations for the preceding year
Officers similarly situated; HORACE REYES, JOSE resulted in a net loss of P362.4 million. It likewise revealed that
BELMONTE and 14 other Senior Managers and 53 Managers the bank's financial condition continued to
similarly situated; AURORA VILLACERAN and 34 other deteriorate.4
Assistant Managers similarly situated; CONSUELO
RIZARRI, EMERENCIANA SAMSON, BRENDA C. Consequently, on May 22, 1987, the Monetary Board issued
BERMUDEZ, FLORYPEE ABRIGO, EMMA BALDERAMA, Resolution No. 505 prohibiting Manilabank from doing
and 211 other Junior Officers similarly situated, respondents. business in the Philippines. The said resolution reads:
Finding to be true the statements of the Assistant to the
Governor and Officer-in-Charge, Supervision and
KAPUNAN, J.: Examination Sector (SES) Department I, in his
The principal issue presented for resolution in these petitions memorandum dated April 28, 1987 submitting a report
for certiorari1 under Rule 65 of the Rules of Court is whether on the financial condition at The Manila Banking
or not public respondent. Corporation (TMBC) as of March 31, 1987, that the
financial condition of TMBC is one of insolvency and
National Labor Relations Commission (NLRC) committed
its continuance in business would involve probable
grave abuse of discretion in affirming with slight
loss to its depositors and creditors and considering,
modifications Labor Arbiter Felipe Pati's decision awarding
among other things, that:
herein private respondents' claim of P193,338,212.33
consisting of: 1. During the 3-month period
1. Wage increase of 25% of gross monthly wage from January 1 to March 31, 1987, TMBC
January 1985 to December 1988; incurred losses of 62.3 million,
before interest on Central Bank
2. Christmas Bonus of one and one-half (1-1/2) overdraft and penalties on reserve
months pay from December 1985 to December 1987; deficiencies (P242.9 million for the
3. Mid-year Bonus of one (1) month pay from 1985 to three months);
1988, inclusive; 2. Prior notices had been made to
4. Profit Sharing of 5% of net profit for 1985 and 1986; TMBC of a condition which may be
considered as one indicating
5. Differentials on accrued leaves, retirement
insolvency as defined under Sec. 29
benefits and Christmas and Mid-Year bonuses;
of R.A. No. 265, as amended, in
6. Longevity pay, Loyalty Bonus and Medical, Dental various letters of Mr. Antonio T.
and Optical Benefits; Castro, Jr., Special Assistant to the
Governor and Head, SES
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 77
Department I, dated December 9, On November 11, 1988, the Monetary Board issued Resolution
1985, December 13, 1985 and No. 1003 ordering the liquidation of Manilabank on account of
October 16, 1986 and in a letter of the insolvency. The resolution reads as follows:
Governor, dated February 27, 1987;
Having determined and confirmed on the basis of the
3. Mr. Vicente G. Puyat, in response memorandum of the Special Assistant to the Governor
to his request conveyed by Mrs. and Head, Supervision and Examination Sector (SES)
Reyes to the Monetary Board, for a Department I, and Receiver, The Manila Banking
chance to appear before the Corporation (TMBC), dated November 4, 1988,
Monetary Board in representation of submitting a report on the financial condition of TMBC
the majority stockholders of TMBC, as of July 31, 1988, that the financial condition of the
in connection with the rehabilitation bank continues to be one of insolvency and it can no
plan for TMBC, had been invited longer resume business with safety to its depositors,
three times to appear before the creditors and the general public, and considering the
Board: first on May 13, 1987, then on opinion of the Central Bank legal counsel that, with the
May 18, 1987 upon his request, and Supreme Court's decision dated March 10, 1988 (a)
on May 22, 1987, which invitations setting aside the decision of the Court of Appeals
he did not respond to himself and sustaining the decision of the Regional Trial Court to
neither did he attend the Board issue a writ of preliminary injunction dated July 14,
meetings held on May 18, 1987 and 1987 against the enforcement of Monetary Board
May 22, 1987; Resolution No. 505 dated May 22, 1987, (b) dissolving
the said writ of preliminary injunction, and (c) making
4. TMBC has not submitted a
permanent the temporary restraining order issued by
rehabilitation plan acceptable to the
the Supreme Court on February 16, 1988, the
Central Bank; and
liquidation of TMBC may now be ordered by the
5. The said Assistant to the Monetary Board and that its authority to order such
Governor, who was present during liquidation is not affected by the pendency of Civil
the Monetary Board meeting held Case No. 87-40659 nor of the Supreme Court's
on May 22, 1987, had categorically resolution of March 10, 1988 (enjoining the Court of
confirmed that, after considering all Appeals from interfering in the receivership of TMBC),
the adjustments, TMBC would still the Board decided as follows:
be insolvent even with an additional
1. To order the liquidation of TMBC
capital infusion of P500 million.
in accordance with Section 29 of R.A.
the Board decided as follows: No. 265, as amended; and
1. To prohibit TMBC to do business 2. To designate Mr. Renan V. Santos,
in the Philippines and place its Special Assistant to the Governor,
assets and affairs under receivership and Head, Supervision and
in accordance with the provisions of Examination Sector Department V,
Section 29 of R.A. No. 265, as as Liquidator of TMBC.6
amended; and
Of even date, private respondents filed a complaint against
2. To designate the Assistant to the Manilabank and its statutory receiver with. the arbitration
Governor and Officer-in-Charge, branch of the National Labor Relations Commission (NLRC)
SES Department I, as Receiver of claiming entitlement to the following additional benefits alleged
TMBC, to immediately take charge to have accrued from 1984 to their effective dates of
of its assets and liabilities, as termination, viz: (a) Wage increases; (b) Christmas bonuses; (c)
expeditiously as possible collect and Mid-year bonuses; (d) Profit sharing; (e) Car and travel plans;
gather all the assets and administer (f) Gasoline allowances; (g) Differentials on accrued leaves,
the same for the benefit of its retirement and other bonuses; (h) Longevity pay and loyalty
creditors exercising all the powers pay; (i) Medical, dental and optical benefits; and (j) Uniform
necessary for these purposes allowances.7 Such claim to entitlement of the foregoing benefits
including, but not limited to, was based on Manilabank's alleged practice, policy and
bringing suits and foreclosing tradition of awarding said benefits. They contended that the
mortgages in its name.5 policy has ripened into vested property rights in their favor.
Thereafter, Feliciano Miranda, Jr. was designated as receiver. He Manilabank, on its part, alleged that the additional benefits
immediately took charge of the bank's assets and liabilities. He sought are without basis in fact and in law. It argued that the
likewise terminated the employment of about 343 officers and same are conferred by management only when it deems
top managers of the bank. All these officers and top managers, necessary to do so. The award of the said benefits is in the nature
who are private respondents herein, were paid whatever of a "management prerogative" which, it contended, can be
separation and/or retirement benefits were due them. withheld by management upon a clear showing that the
company is not in a position to grant them either because of
financial difficulties or circumstances which do not warrant
conferment of such benefits. And since it was experiencing
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 78
financial distress, it claimed that it was in no position to give the On September 9, 1992, the NLRC issued a resolution on the
benefits sought. Additionally, it asseverated that it was merits of the case and, as above-stated, affirmed with slight
deprived of its right to present evidence in a fill-blown trial by modifications, the decision of the labor arbiter. The decretal
the labor arbiter. portion of the same reads:
On November 14, 1989, Labor Arbiter Felipe Pati rendered his WHEREFORE, except for the modification we
decision ordering Manilabank and its statutory receiver to pay provided on the manner "medical, dental and optical
in full all the claims of private respondents amounting to benefits" should be claimed/paid, and our awarding
P193,338,212.33, plus 12% interest annually and 10% of the total annual interest of 12% to whatever has been awarded
award as attorney's fees. The dispositive portion of the decision below, the appealed decision is hereby affirmed and
reads: respondents' appeal is hereby dismissed.
WHEREFORE, judgment is hereby rendered in favor SO ORDERED.9
of the complainants and against the respondents,
Petitioners filed a motion for reconsideration from the
ordering and authorizing the Receiver RENAN V.
aforequoted resolution.
SANTOS to pay, pursuant to the provisions of Article
110 of the Labor Code, as amended: On October 14, 1992, private respondents filed an ex
parte motion for the issuance of a writ of execution. Petitioners
1. The complainants the net amount
opposed the same, reasoning that the assets of Manilabank are
of claims due appearing opposite
exempt from execution and that the NLRC resolution had not
the name of each complainant listed
become final and executory.
in the Computation of Net Claim
consisting of six (6) pages hereto On October 22, 1992, the NLRC issued an order directing
attached and made part of this petitioners, under pain of contempt, to renew the certificate of
Decision; time deposit and to have the same issued in the name of, and
deposited with, the cashier of the NLRC.
2. The complainants' counsel the
amount equal to 10% of the total In response, petitioners Manilabank and Arnulfo Aurellano
amount awarded to complainants in filed a petition for certiorari before this Court, docketed as G.R.
this action as attorney's fees. No. 107487, to set aside said order alleging that the same was
issued with grave abuse of discretion because it (as re-phrased):
SO ORDERED.8
a. violated an existing statute.10
On November 25, 1989, petitioners Manilabank and the CB
statutory receiver appealed to the NLRC and posted an appeal b. arbitrarily compelled the Receiver to violate his
bond in the form of a certification from the Central Bank to the statutory duty to preserve Manilabank's assets for the
effect that a portion of Manilabank's funds in an amount equal benefit of all creditors.11
to that of the total award of the labor arbiter, has been reserved c. whimsically deprived petitioners of their right to file
and set aside by the Central Bank to answer for the private a motion for reconsideration of the Order.12
respondents' claims should they finally be adjudged to be
entitled thereto. d. was not anchored upon any cogent reason other
than to preempt petitioners from invoking the
On December 8, 1989, private respondents opposed the appeal corrective powers of this Honorable Court of last
and filed a motion for the issuance of a writ of execution of the resort.13
labor arbiter's judgment on the ground that the Central Bank
certification cannot be considered as an appeal bond. On November 26, 1992, petitioners' earlier motion for
reconsideration of the NLRC Decision dated September 9, 1992
On June 21, 1991, the NLRC issued an order requiring was denied for lack of merit in an order which dispositively
petitioners to deposit with the Cashier of the NLRC a cash bond reads as follows:
or its equivalent in treasury bills, warrants and/or other
government securities in the amount of P193,000,000.00, plus Wherefore, premises considered, order is hereby issued:
ten percent (10%) thereof as attorney's fees within ten (10) days 1. denying respondents'
from receipt thereof. motion for reconsideration;
On July 5, 1991, petitioners moved to reconsider said order. 2. directing the NLRC
However, pending resolution of said motion for Cashier to hold in her
reconsideration, petitioners submitted to the NLRC a Certificate custody re-submitted
of Time Deposit issued by the Philippine National Bank (PNB) Certificate of Time Deposit
in the amount of P212,700,000.00, payable to the receiver of No. 890530-D dated
Manilabank. October 27, 1992 with
On January 16, 1992, the NLRC held a hearing where the parties maturity date on December
agreed that the certificate of time deposit submitted by 28, 1992;
Manilabank to the NLRC be considered substantial compliance 3. directing the
of the requirement of an appeal bond, on the condition that it respondents to post an
will be periodically renewed and re-deposited with the NLRC additional bond, either in
Cashier upon its maturity, and that the securities deposited cash, surety, or certificate
should be free from any other claims or liens. of time deposit drawn in

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 79


the name of the Cashier, passed off by private
NLRC, in the amount of respondents as their
"P76,572,000.00" to cover, "evidence".15
the additional award
b. Public respondents unlawfully arrogated
detailed in our September
unto themselves the jurisdiction to pass upon
9, 1992 resolution;
the question of Manilabank's insolvency,
4. directing, accordingly, despite the pleaded pendency of that
the Executive Clerk to prejudicial question before the RTC of Manila
cause the personal service which had acquired exclusive jurisdiction to
of this Order upon the rule on the issue to the exclusion of all
parties, particularly the others.16
respondents and their
c. The money award adjudged against the
counsel; and
insolvent Manilabank violates all notions of
5. holding in abeyance the justice and equity, considering that the
execution of our September beneficiaries thereof are former officers and
9, 1992 resolution (despite top managers of Manilabank who, being part
its finality now) for a of management, were partly to blame for the
period of ten (10) calendar bank's financial decline.17
days from respondents'
d. A statutory receiver has the power to adopt
receipt of this Order, with
and implement prudent policies aimed at
the warning, however, that
preserving the assets of an insolvent bank
should this Commission
including regulating, according to his own
not receive a restraining
discretion and judgment, all aspects of
order from the Supreme
employment.18
Court within said period of
ten (10) calendar days, then e. Public respondents' arbitrary findings that
a writ of execution will be salary increases, Christmas and mid-year
issued to enforce our now bonuses and other benefits have been
final judgment. regularly and unconditionally paid by
Manilabank to private respondents, and that
SO
Manilabank earned profits in 1984, 1985 and
ORDER
1986, are contrary to the evidence on record
ED.14
and are based on pure unsubstantiated
Consequently, petitioners filed another petition guesswork.19
for certiorari before this Court, this time docketed as
f. The award of attorney's fees is
G.R. No. 107902, contending that:
unconscionable, especially in light of its
a. Public respondents, in grave abuse of dissipative effect on the remaining assets of
discretion, effectively violated petitioners' the insolvent Manilabank and its prejudicial
right to due process because — consequences on Manilabank's stockholders
and creditors.20
(1) The monstrous award
totalling about P212 g. The NLRC's award of legal interest on the
million was decided based amount awarded by the labor arbiter and its
purely on private order to deposit an additional bond to cover
respondents' worthless such interest have no legal basis and give an
papers which were never undue advantage to other creditors of the
identified nor supported insolvent Manilabank.21
by any single affidavit.
h. The NLRC's threat to execute the judgment
(2) The Labor Arbiter would be unlawful if carried out, because
proceeded to decide the Manilabank's assets are legally exempt from
case solely on the bases of execution.22
the pleadings filed, despite
On December 9, 1992, this Court ordered that G.R. No.
the enormity of the claims
107902 be consolidated with G.R. No. 107487.23
and the repeated demands
for a full-dress trial (which, On December 16, 1992, this Court issued a Resolution
ironically, were initially temporarily enjoining public respondent NLRC from
granted by the Office of the enforcing and/or carrying out the decision of the labor
Labor Arbiter), made arbiter dated November 14, 1989 and its resolution
necessary by the dated September 9, 1992 and order dated November
conflicting factual 26, 1992, all issued in NLRC NCR Case No. 00-11-
allegations of the parties 04624-88.24
and the worthless papers G.R. No. 107902 is impressed with merit.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 80
Both the Labor Arbiter and the NLRC opted to award of liquidity problems and excessive interbank
all the additional benefits claimed by the 343 private borrowings. In 1987, it was placed under receivership
respondents who had already been duly paid and was ordered to close operation. In 1988, it was
separation pay and/or retirement benefits upon ordered liquidated.
termination of their employment. The NLRC
It is evident, therefore, that petitioner bank was
erroneously adopted the findings of the labor arbiter,
operating on net losses from the years 1984, 1985 and
misapplying the time-honored rule that factual
1986, thus, resulting to its eventual closure in 1987 and
findings of quasi-judicial agencies are accorded not
liquidation in 1988. Clearly, there was no success in
only respect but even finality if supported by
business or realization of profits to speak of that would
substantial evidence. It declared that the additional
warrant the conferment of additional benefits sought
benefits sought are in the nature of "bonuses" which
by private respondents. No company should be
when made part of the wage or salary or compensation
compelled to act liberally and confer upon its
of an employee become demandable and enforceable.25
employees additional benefits over and above those
Both the Labor Arbiter's and the NLRC's findings and mandated by law when it is plagued by economic
conclusions are flawed. difficulties and financial losses. No act of enlightened
generosity and self-interest can be exacted from near
By definition, a "bonus" is a gratuity or act of liberality
empty, if not empty, coffers.
of the giver which the recipient has no right to demand
as a matter of right.26 It is something given in addition Consequently, on the ten (10) items awarded to herein
to what is ordinarily received by or strictly due the private respondents (enumerated at page 3) which
recipient. The granting of a bonus is basically a represent additional benefits, they having already been
management prerogative which cannot be forced upon paid separation and retirement benefits, we rule as
the employer who may not be obliged to assume the follows:
onerous burden of granting bonuses or other benefits
First. The award of 5% profit sharing of petitioner
aside from the employee's basic salaries or
bank's net profits for the years 1985 and 1986 is deleted
wages,27 especially so if it is incapable of doing so.
as there were clearly no profits to share during that
In Philippine Education Co., Inc., v. Court of Industrial period given the bank's financial status in 1985 and
Relations,28 cited in Philippine 1986 when it was operating on net losses.
Duplicators, Inc. v. NLRC,29 the Court expounded on
Second. The award of wage increases and Christmas
the nature of a bonus, thus:
and mid-year bonuses from 1985 to 1988, being in the
As a rule, a bonus is an amount granted and paid nature of gratuities and dependent as they on the
to an employee for his industry and loyalty which petitioner's liberality and capability to give, is likewise
contributed to the success of the employer's deleted for same reasons above stated.
business and made possible the rearization of
Third. The award of differentials on accrued leaves,
profits. It is an act of generosity of the employer
retirement benefits and Christmas and mid-year
for which the employee ought to be thankful
bonuses is also deleted as a necessary and logical
and grateful. It is also granted by an enlightened
consequence of the denial of the wage increases and
employer to spur the employee to greater efforts for
Christmas and mid-year bonuses.
the success of the business and realization of
bigger profits. . . . From the legal point of view, Fourth. The award of medical, dental and optical
a bonus is not a demandable and enforceable benefits is well-taken and, therefore, affirmed.
obligation. It is so when it is made part of the
Fifth. The claim for travel plans for 23 senior officers,
wage or salary or compensation. In such a
and car plans and gasoline allowances for 23 senior
case the latter would be a fixed amount
officers, 15 senior managers and 54 assistant managers
and the former would be a contingent one
may only be granted to those officers who have not yet
dependent upon the realization of profits. . . .
availed of the said benefit subject to the proper
(Emphasis supplied).30
determination by the labor arbiter.
Clearly then, a bonus is an amount given ex gratia to an
Sixth and last. Claims for longevity pay, loyalty
employee by an employer on account of success in
bonuses and uniform allowance of P600.00 for 1985
business or realization of profits. How then can an
may be granted given the apparent loyalty and
employer be made liable to pay additional benefits in
allegiance shown by herein private respondents to
the nature of bonuses to its employees when it has been
petitioner bank despite rough sailing during the said
operating on considerable net losses for a given period
period of time.
of time?
That disposes of G.R. No. 107902.
Records bear out that petitioner Manilabank was
already in dire financial straits in the mid-80's. As early With respect to G.R No. 107487, the same is dismissed,
as 1984, the Central Bank found that Manilabank had the issues raised therein having been rendered moot
been suffering financial losses. Presumably the and academic by the foregoing disquisitions and
problems commenced even before their discovery in disposition. Besides, it is beyond dispute that
1984. As earlier chronicled, the Central Bank placed employees indeed enjoy first preference in the event of
petitioner bank under comptrollership in 1984 because bankruptcy or liquidation of an employer's business.31

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 81


WHEREFORE, premises considered, G.R. No. 107902
is GRANTED and is hereby REMANDED to the Labor
Arbiter for the proper computation of the monetary
awards in accordance with the foregoing disquisition
and with reasonable dispatch. G.R. No. 107487 is
hereby DISMISSED.
SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno,
Mendoza, Panganiban and Torres, Jr., JJ., concur.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 82


First, the Department
deems the service award to
G.R. No. 111744 September 8, 1995
be part of the benefits of the
LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, employees of Insular Life.
BALTAZARA J. LOPEZ AND VILMA L. CRUZ, petitioners, Company policies and
vs. practices are fertile sources
NATIONAL LABOR RELATIONS COMMISSION and of employee's rights. These
INSULAR LIFE ASSURANCE CO., LTD., respondents. must be applied uniformly
as interpretation cannot
vary from one employee to
REGALADO, J.: another. . . .
This petition for certiorari seeks the nullification of the xxx xxx xxx
decision1 of the National Labor Relations Commission (NLRC)
promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, While it may be argued that the above-cited
and its resolution dated August 27, 1993 denying petitioner's case applies only to retirement benefits, we
motion for reconsideration thereof. The said decision set aside find solace in the cases of Liberation
on appeal, the decision of Labor Arbiter Alex Arcadio Lopez Steamship Co., Inc. vs. CIR and National
ordering private respondent to pay petitioners their service Development Company vs. Unlicensed Crew
awards, anniversary bonus and prorated performance bonus in members of Three Dons vessels (23 SCRA
the amount of P144,579.00 and 10% attorney's fees in the amount 1105) where the Supreme Court held that a
of P14,457.90.2 gratuity or bonus, by reason of its long and
regular concession indicating company
First, the undisputed facts. practice, may become regarded as part of
Petitioners were regular employees of private respondent regular compensation and thus demandable.
Insular Life Assurance Co:, Ltd., but they were dismissed on xxx xxx xxx
November 1, 1990 when their positions were declared
redundant. A special redundancy benefit was paid to them, Second, the award is earned at the pertinent
which included payment of accrued vacation leave and fifty anniversary date. At this time, entitlement to
percent (50%) of unused current sick leave, special redundancy the award becomes vested. The anniversary
benefit, equivalent to three (3) months salary for every year of date is the only crucial determining factor.
service; and additional cash benefits, in lieu of other benefits Since the award accrues on that date, it is of
provided by the company or required by law.3 no moment that the entitled employee is
separated from service (for whatever cause)
Before the termination of their services, petitioner Marcos had before the awards are physically handed out.
been in the employ of private respondent for more than twenty
(20) years, from August 26, ]970; petitioner Andrada, more than xxx xxx xxx
twenty-five (25) years, from July 26, 1965; petitioner Lopez, Third, even if the award has not accrued — as
exactly thirty (30) years, from October 31, 1960; and petitioner when an employee is separated from service
Cruz, more than twenty (20) years, from March 1, 1970. 4 because of redundancy before the applicable
Petitioners, particularly Baltazara J. Lopez, sent a letter dated 5th year anniversary, the material benefits of
October 23, 1990 to respondent company questioning the the award must be given, prorated, by Insular
redundancy package, She claimed that they should receive their Life. This is especially true (in) redundancy,
respective service awards and other prorated bonuses which wherein he/she had no control.
they had earned at the time they were dismissed. In addition, xxx xxx xxx
Lopez argued that "the cash service awards have already been
Fourth, the fact that you were required to sign
budgeted in a fund distinct and apart from redundancy fund. 5
"Release and Quitclaim" does not affect your
Thereafter, private respondent required petitioners to execute a right to the material benefits of the service
"Release and Quitclaim,"6 and petitioners complied but with a award. . . .8
written protest reiterating their previous demand that they were
Meanwhile, in the same year, private respondent celebrated its
nonetheless entitled to receive their service awards.
80th anniversary wherein the management approved the grant
On March 21, 1991, petitioners inquired from the Legal Service of an anniversary bonus equivalent to one (1) month salary only
of the Department of Labor and Employment7whether to permanent and probationary employees as of November 15,
respondent corporation could legally refuse the payment of 1990.9
their service awards as mandated in their Employee's Manual.
On March 26, 1991, respondent company announced the grant
About three months later the labor department issued its of performance bonus to both rank and file employees and
opinion, with pertinent authorities, responding to petitioners' supervisory specialist grade and managerial staff equivalent to
query as follows: two (2) months salary and 2.75 basic salary, respectively, as of
xxx xxx xxx December 30, 1990. The performance bonus, however, would be
given only to permanent employees as of March 30, 1991. 10
This Department believes that your query
presents several issues. These shall be Despite the aforequoted opinion of the Department of Labor
addressed point by point, thus: and Employment, private respondent refused to pay petitioners

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 83


service awards. This prompted the latter to file a consolidated Under prevailing jurisprudence, the fact that an employee has
complaint, which was assigned to NLRC Labor Arbiter Lopez, signed a satisfaction receipt for his claims does not necessarily
for payment of their service awards, including performance and result in the waiver thereof. The law does not consider as valid
anniversary bonuses. any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of
In their complaint, petitioners contended that they are likewise
release or quitclaim cannot bar an employee from demanding
entitled to the performance and anniversary bonuses because,
benefits to which he is legally entitled. 17
at the time the performance bonus was announced to be given,
they were only short of two (2) months service to be entitled to We have heretofore explained that the reason why quitclaims
the full amount thereof as they had already served the company commonly frowned upon as contrary to public policy, and why
for ten (10) months prior to the declaration of the grant of said they are held to be ineffective to bar claims for the full measure
benefit. Also, they lacked only fifteen (15) days to be entitled to of the workers' legal rights, is the fact that the employer and the
the full amount of the anniversary bonus when it was employee obviously do not stand on the same footing. The
announced to be given to employees as of November 15, 1990. employer drove the employee to the wall. The latter must have
harsh necessities of life. He thus found himself in no position to
In a decision dated October 8, 1992, the labor arbiter ordered
resist money proffered. His, then, is a case of adherence, not of
respondent company to pay petitioners their service awards,
choice. One thing sure, however, is that petitioners did not
anniversary bonuses and prorated performance bonuses,
relent on their claim. They pressed it. They are deemed not have
including ten percent (10%) thereof as attorney's fees.
waived any of their rights. Renuntiatio non praesumitur. 18
Respondent company appealed to public respondent NLRC
Along this line, we have more trenchantly declared that
claiming grave abuse of discretion committed by the labor
quitclaims and/or complete releases executed by the employees
arbiter in holding it liable to pay said service award,
do not estop them from pursuing their claims arising from
performance and anniversary bonuses, and in not finding that
unfair labor practices of the employer. The basic reason for this
petitioners were estopped from claiming the same as said
is that such quitclaims and/or complete releases are against
benefits had already been given to them.
public policy and, therefore, null and void. The acceptance of
In setting aside the decision of the labor arbiter, respondent termination does not divest a laborer of the right to prosecute
NLRC upheld the validity of the quitclaim document executed his employer for unfair labor practice acts. 19 While there maybe
by petitioners. For this conclusion, it rationalized that possible exceptions to this holding, we do not perceive any in
"(c)ertainly, before complainants signed the quitclaim and the case at bar.
release, they are aware of the nature of such document. In fact,
Furthermore, in the instant case, it is an undisputed fact that
they never assailed the genuineness and due execution of the
when petitioners signed the instrument of release and quitclaim,
same. Hence, we can safely say that they were not placed under
they made a written manifestation reserving their right to
duress or were compelled by means of force to sign the
demand the payment of their service awards. 20The element of
document." 11
total voluntariness in executing that instrument is negated by
Furthermore, the NLRC held that "(n)either was there any the fact that they expressly stated therein their claim for the
unwritten agreement between complainants and respondent service awards, a manifestation equivalent to a protest and a
upon separation, which entitled the former to other disavowal of any waiver thereof.
renumerations or benefits. On the contrary, they voluntarily
As earlier stated, petitioners even sought the opinion of the
accepted the redundancy benefit package, otherwise, they
Department of Labor and Employment to determine where and
would not have been separated from employment." 12
how they stood in the controversy. This act only shows their
Hence, this petition wherein it is postulated that the basic issue adamant desire to obtain their service awards and to underscore
is whether or not respondent NLRC committed reversible error their disagreement with the "Release and Quitclaim" they were
or grave abuse of discretion in affirming the validity of the virtually forced to sign in order to receive their separation pay.
"Release and Quitclaim" and, consequently, that petitioners are
We have pointed out in Veloso, et al., vs. Department of Labor and
not entitled to payment of service awards and other
Employment, et al.,21 that:
bonuses. 13 The Solicitor General public respondent NLRC and
private respondent company duly filed their respective While rights may be waived, the same must
comments. 14 not be contrary to law, public order, public
policy, morals or good customs or prejudicial
In their petition, petitioners stress that they have actually
to a third person with a right recognized by
devoted much, if not all, of their employable life with private
law.
respondent; that given their length of service, their loyalty to the
latter is easily demonstrable; and that the same length of service Article 6 of the Civil Code renders a quitclaim
had rendered slim, if not eliminated, their chances of getting agreement void ab initio where the quitclaim
employed somewhere else." 15 obligates the workers concerned to forego
their benefits while at the same time
On the other hand, respondent company reiterates its basic
exempting the employer from any liability
contention that the consideration for the settlement of
that it may choose to reject. This runs counter
petitioners' claim is credible and reasonable, more than satisfies
to Art. 22 of the Civil Code which provides
the legal requirement therefor, and that petitioners, in executing
that no one shall be unjustly enriched at the
the release and quitclaim, did so voluntarily and with full
expense of another.
knowledge of the consequences thereof. 16
The petition being meritorious, we find for petitioners.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 84
We agree with the further observations of the employees of respondent as of 15 November
Solicitor General who, in recommending the 1990 (pro rata even to probationary
setting aside of the decision of respondent employees; Annex 9) and not to complainants
NLRC, called attention to the fact that who have rendered service to respondent for
"contrary to private respondent's contention, most of the five year cycle. This is also true in
the "additional" redundancy package does the case of performance bonus which were
not and could not have covered the payment given to permanent employees of respondent
of the service awards, performance and as of 30 March 1991 and not to employees
anniversary bonuses since the private who have been connected with respondent
respondent company has initially maintained for most of 1990 but were separated prior to
the position that petitioners are not legally 30 March 1991.
entitled to the same. . . . Surprisingly, in a
We believe that the prerogative of the
sudden turnabout, private respondent now
employer to determine who among its
claims . . . that the subject awards and
employee shall be entitled to receive bonuses
bonuses are integrated in the redundancy
which are, as a matter of practice, given
package. It is evident, therefore, that private
periodically cannot be exercised
respondent has not truly consolidated the
arbitrarily. 23 (Emphasis and corrections in
payment of the subject awards and bonuses
parentheses supplied.)
in the redundancy package paid to the
petitioners. 22 The grant of service awards in favor of petitioners is more
importantly underscored in the precedent case of Insular Life
We are likewise in accord with the findings of
Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court
the labor arbiter that petitioners are indeed
ruled that "as to the service award differentials claimed by some
entitled to receive service awards and other
respondent union members, the company policy shall likewise
benefits, thus:
prevail, the same being based on the employment contracts or
Since each of the complainants have rendered collective bargaining agreements between the parties. As the
services to respondent in multiple(s) of five petitioners had explained, pursuant to their policies on the
years prior to their separation from matter, the service award differential is given at the end of the
employment, respondent should be paid year to an employee who has completed years of service
their service awards for 1990. divisible by 5.
We are not impressed with the contention of A bonus is not a gift or gratuity, but is paid for some services or
the respondent that service award is a bonus consideration and is in addition to what would ordinarily be
and therefore is an act of gratuity which the given. 25 The term "bonus" as used in employment contracts,
complainants have no right to also conveys an idea of something which is gratuitous, or which
demand. Service awards are governed by may be claimed to be gratuitous, over and above the prescribed
respondent's employee's manual and (are) wage which the employer agrees to pay.
therefore contractual in nature.
While there is a conflict of opinion as to the validity of an
On the matter of anniversary and agreement to pay additional sums for the performance of that
performance bonuses, it is not disputed that which the promisee is already under obligation to perform, so
it is respondent's practice to give an as to give the latter the right to enforce such promise after
anniversary bonus every five years from its performance, the authorities hold that if one enters into a
incorporation; that pursuant to this practice, contract of employment under an agreement that he shall be
respondent declared an anniversary bonus paid a certain salary by the week or some other stated period
for its 80th Anniversary in 1990; that per and, in addition, a bonus, in case he serves for a specified length
terms of this declaration, only the employees of time, there is no reason for refusing to enforce the promise to
of respondent as of 15 November 1990 will be pay the bonus, if the employee has served during the stipulated
given the bonus; and that complainants were time, on the ground that it was a promise of a mere gratuity.
separated from respondent only 25 days
This is true if the contract contemplates a continuance of the
before :the respondent's anniversary. On the
employment for a definite term, and the promise of the bonus is
other hand, it is also (not) disputed that
made at the time the contract is entered into. If no time is fixed
respondent regularly gives performance
for the duration of the contract of employment, but the
bonuses; that for its commendable
employee enters upon or continues in service under an offer of
performance in 1990, respondent declared a
a bonus if he remains therein for a certain time, his service, in
performance bonus; that per terms of this
case he remains for the required time, constitutes an acceptance
declaration, only permanent employees of
of the offer of the employer to pay the bonus and, after that
respondent as of March 30, 1991 will be given
acceptance, the offer cannot be withdrawn, but can be enforced
this bonus; and that complainants were
by the employee. 26
employees of respondents for the first 10
months of 1990. The weight of authority in American jurisprudence, with which
we are persuaded to agree, is that after the acceptance of a
We cannot see any cogent reason why an
promise by an employer to pay the bonus, the same cannot be
anniversary bonus which respondent gives
withdrawn, but may be enforced by the employee. 27 However,
only once in every five years were given to all
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 85
in the case at bar, equity demands that the performance and
anniversary bonuses should be prorated to the number of
months that petitioners actually served respondent company in
the year 1990. This observation should be taken into account in
the computation of the amounts to be awarded to petitioners.
WHEREFORE, the assailed decision and resolution of
respondent National Labor Relations Commission are hereby
SET ASIDE and the decision of Labor Arbiter Alex Arcadio
Lopez is REINSTATED.
SO ORDERED.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 86


BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE
VILLANUEVA, VIRGINIA MAGBAG, CORAZON
Payment by Result RILLION, PRECY MANALILI, ELENA RONOZ, IMELDA
MENDOZA, EDNA CANLAS and ANGELA
Art. 101. Payment by results. The Secretary of Labor and CANLAS, petitioners,
Employment shall regulate the payment of wages by results, vs.
including pakyao, piecework, and other non-time work, in NATIONAL LABOR RELATIONS COMMISSION, EMPIRE
order to ensure the payment of fair and reasonable wage rates, FOOD PRODUCTS, its Proprietor/President & Manager,
preferably through time and motion studies or in consultation MR. GONZALO KEHYENG and MRS. EVELYN
with representatives of workers’ and employers’ organizations. KEHYENG, respondents.

BOOK III – RULE VII


SECTION 8. Creditable Wage Increase. — DAVIDE, JR., J.:
a) No wage increase shall be credited as compliance with the In this special civil action for certiorari under Rule 65, petitioners
increases prescribed under the Act unless expressly provided seek to reverse the 29 March 1995 resolution 1 of the National
under collective bargaining agreements; and, such wage Labor Relations Commission (NLRC) in NLRC RAB III Case
increase was granted not earlier than April 1, 1989 but not No. 01-1964-91 which affirmed the Decision 2 of Labor Arbiter
later than July 1, 1989. Where the wage increase granted is less Ariel C. Santos dismissing their complaint for utter lack of
than the prescribed increase under the Act, the employer shall merit.
pay the difference.
The antecedents of this case, as summarized by the Office of
b) Anniversary wage increase provided in collective
the Solicitor General in its Manifestation and Motion in Lieu
agreements, merit wage increase, and those resulting from the
of Comment, 3 are as follows:
regularization or promotion of employees shall not be
credited as compliance thereto. The 99 persons named as petitioners in this
proceeding were rank-and-file employees of
respondent Empire Food Products, which
G.R. No. 123938 May 21, 1998 hired them on various dates (Paragraph 1,
Annex "A" of Petition, Annex "B;" Page 2,
LCP v NLRC Annex "F" of Petition).
LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in
Petitioners filed against private respondents
behalf of its members, ANA MARIE OCAMPO, MARY
a complaint for payment of money claim[s]
INTAL, ANNABEL CARESO, MARLENE MELQIADES,
and for violation of labor standard[s] laws
IRENE JACINTO, NANCY GARCIA, IMELDA
(NLRC Case No. RAB-111-10-1817-90). They
SARMIENTO, LENITA VIRAY, GINA JACINTO,
also filed a petition for direct certification of
ROSEMARIE DEL ROSARIO, CATHERINE ASPURNA,
petitioner Labor Congress of the
WINNIE PENA, VIVIAN BAA, EMILY LAGMAN, LILIAN
Philippines as their bargaining
MARFIL, NANCY DERACO, JANET DERACO, MELODY
representative (Case No. R0300-9010-RU-
JACINTO, CAROLYN DIZON, IMELDA MANALOTO,
005).
NORY VIRAY, ELIZA SALAZAR, GIGI MANALOTO,
JOSEFINA BASILIO, MARY ANN MAYATI, ZENAIDA On October 23, 1990, petitioners represented
GARCIA, MERLY CANLAS, ERLINDA MANALANG, by LCP President Benigno B. Navarro, Sr.
ANGELINA QUIAMBAO, LANIE GARCIA, ELVIRA and private respondents Gonzalo Kehyeng
PIEDRA, LOURDES PANLILIO, LUISA PANLILIO, LERIZA and Evelyn Kehyeng in behalf of Empire
PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T. Food Products, Inc. entered into a
OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE Memorandum of Agreement which
GACAD, EVELYN MANALO, NORA PATIO, JANETH provided, among others, the following:
CARREON, ROWENA MENDOZA, ROWENA MANALO,
LENY GARCIA, FELISISIMA PATIO, SUSANA 1. That in connection with the pending
SALOMON, JOYDEE LANSANGAN, REMEDIOS AGUAS, Petition for Direct Certification filed by the
JEANIE LANSANGAN, ELIZABETH MERCADO, JOSELYN Labor Congress with the DOLE,
MANALESE, BERNADETH RALAR, LOLITA ESPIRITU, Management of the Empire Food Products
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA has no objection [to] the direct certification
SALITA, JANETH RALAR, ERLINDA BASILIO, CORA of the LCP Labor Congress and is now
PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA recognizing the Labor Congress of the
BONUS, MARITESS OCAMPO, LIBERTY GELISANGA, Philippines (LCP) and its Local Chapter as
JANETH MANARANG, AMALIA DELA CRUZ, EVA the SOLE and EXCLUSIVE Bargaining
CUEVAS, TERESA MANIAGO, ARCELY PEREZ, LOIDA Agent and Representative for all rank and
BIE, ROSITA CANLAS, ANALIZA ESGUERRA, LAILA file employees of the Empire Food Products
MANIAGO, JOSIE MANABAT, ROSARIO DIMATULAC, regarding "WAGES, HOURS Of WORK,
NYMPA TUAZON, DAIZY TUASON, ERLINDA AND OTHER TERMS AND CONDITIONS
NAVARRO, EMILY MANARANG, EMELITA CAYANAN, OF EMPLOYMENT;"
MERCY CAYANAN, LUZVIMINDA CAYANAN, ANABEL
MANALO, SONIA DIZON, ERNA CANLAS, MARIAN
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 87
2. That with regards [sic] to NLRC CASE good harmonious relationship by
NO. RAB-III-10-1817-90 pending with the communicating the other party in writing
NLRC parties jointly and mutually agreed indicating said grievances before taking any
that the issues thereof, shall be discussed by action to another forum or government
the parties and resolve[d] during the agencies;
negotiation of the Collective Bargaining
Agreement; 8. That parties [to] this Memorandum of
Agreement jointly and mutually agreed to
3. That Management of the Empire Food respect, abide and comply with all the terms
Products shall make the proper adjustment and conditions hereof. Further agreed that
of the Employees Wages within fifteen (15) violation by the parties of any provision
days from the signing of this Agreement and herein shall constitute an act of ULP. (Annex
further agreed to register all the employees "A" of Petition).
with the SSS;
In an Order dated October 24, 1990,
4. That Employer, Empire Food Products Mediator Arbiter Antonio Cortez approved
thru its Management agreed to deduct thru the memorandum of agreement and
payroll deduction UNION DUES and other certified LCP "as the sole and exclusive
Assessment[s] upon submission by the LCP bargaining agent among the rank-and-file
Labor Congress individual Check-Off employee of Empire Food Products for
Authorization[s] signed by the Union purposes of collective bargaining with
Members indicating the amount to be respect to wages, hours of work and other
deducted and further agreed all terms and conditions of employment"
deduction[s] made representing Union (Annex "B" of Petition).
Dues and Assessment[s] shall be remitted
immediately to the LCP Labor Congress On November 9, 1990, petitioners through
Treasurer or authorized representative LCP President Navarro submitted to private
within three (3) or five (5) days upon respondents a proposal for collective
deductions [sic], Union dues not deducted bargaining (Annex "C" of Petition).
during the period due, shall be refunded or On January 23, 1991, petitioners filed a
reimbursed by the Employer/Management. complaint docketed as NLRC Case No.
Employer/Management further agreed to RAB-III-01-1964-91 against private
deduct Union dues from non-union respondents for:
members the same amount deducted from
union members without need of individual a. Unfair Labor Practice by way of Illegal
Check-Off Authorizations [for] Agency Fee; Lockout and/or Dismissal;

5. That in consideration [of] the foregoing b. Union busting thru Harassments [sic],
covenant, parties jointly and mutually threats, and interfering with the rights of
agreed that NLRC CASE NO. RAB-III-10- employees to self-organization;
1817-90 shall be considered provisionally
withdrawn from the Calendar of the c. Violation of the Memorandum of
National Labor Relations Commission Agreement dated October 23, 1990;
(NLRC), while the Petition for direct d. Underpayment of Wages in violation of
certification of the LCP Labor Congress R.A. No. 6640 and R.A. No. 6727, such as
parties jointly move for the direct Wages promulgated by the Regional Wage
certification of the LCP Labor Congress; Board;
6. That parties jointly and mutually agreed e. Actual, Moral and Exemplary Damages.
that upon signing of this Agreement, no (Annex "D" of Petition)
Harassments [sic], Threats, Interferences
[sic] of their respective rights under the law, After the submission by the parties of their
no Vengeance or Revenge by each partner respective position papers and presentation
nor any act of ULP which might disrupt the of testimonial evidence, Labor Arbiter Ariel
operations of the business; C. Santos absolved private respondents of
the charges of unfair labor practice, union
7. Parties jointly and mutually agreed that busting, violation of the memorandum of
pending negotiations or formalization of the agreement, underpayment of wages and
propose[d] CBA, this Memorandum of denied petitioners' prayer for actual, moral
Agreement shall govern the parties in the and exemplary damages. Labor Arbiter
exercise of their respective rights involving Santos, however, directed the reinstatement
the Management of the business and the of the individual complainants:
terms and condition[s] of employment, and
whatever problems and grievances may The undersigned Labor
arise by and between the parties shall be Arbiter is not oblivious to
resolved by them, thru the most cordial and the fact that respondents

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 88


have violated a cardinal namely, BENIGNO NAVARRO, JR. (28
rule in every February 1991, RECORD, p. 91; 8 March 1991,
establishment that a RECORD, p. 92, who adopted its POSITION
payroll and other papers PAPER AND CONSOLIDATED
evidencing hours of work, AFFIDAVIT, as Exhibit "A" and the annexes
payments, etc. shall thereto as Exhibit "B", "B-1" to "B-9",
always be maintained and inclusive.Minutes of the proceedings on
subjected to inspection record show that complainant further
and visitation by presented other witnesses,
personnel of the namely: ERLINDA BASILIO (13 March 1991,
Department of Labor and RECORD, p. 93; LOURDES PANTILLO,
Employment. As such MARIFE PINLAC, LENIE GARCIA (16 April
penalty, respondents 1991, Record, p. 96, see back portion
should not escape liability thereof ; 2 May 1991, Record, p. 102; 16 May
for this technicality, 1991, Record, p. 103, 11 June 1991, Record,
hence, it is proper that all p. 105). Formal offer of Documentary and
individual complainants Testimonial Evidence was made by
except those who resigned complainant on June 24, 1991 (Record, p.106-
and executed quitclaim[s] 109)
and releases prior to the
filing of this The Labor Arbiter must have overlooked the
complaint should be testimonies of some of the individual
reinstated to their former complainants which are now on record.
position[s] with the Other individual complainants should have
admonition to respondents been summoned with the end in view of
that any harassment, receiving their testimonies. The
intimidation, coercion or complainants should be afforded the time
any form of threat as a and opportunity to fully substantiate their
result of this immediately claims against the respondents. Judgment
executory reinstatement should be rendered only based on the
shall be dealt with conflicting positions of the parties. The
accordingly. Labor Arbiter is called upon to consider and
pass upon the issues of fact and law raised
SO ORDERED. (Annex "G" of petition) by the parties.
On appeal, the National Labor Relations Commission vacated Toward this end, therefore, it is Our
the Decision dated April 14, 1972 [sic] and remanded the case considered view [that] the case should be
to the Labor Arbiter for further proceedings for the following remanded to the Labor Arbiter of origin for
reasons: further proceedings. (Annex "H" of Petition)
The Labor Arbiter, through his decision, In a Decision dated July 27, 1994, Labor Arbiter Santos made
noted that ". . . complainant did not present the following determination:
any single witness while respondent
presented four (4) witnesses in the persons Complainants failed to present with
of Gonzalo Kehyeng, Orlando Cairo, Evelyn definiteness and clarity the particular act or
Kehyeng and Elvira Bulagan . . ." (p. 183, acts constitutive of unfair labor practice.
Records), that ". . . complainant before the
It is to be borne in mind that a declaration of
National Labor Relations Commission must
unfair labor practice connotes a finding
prove with definiteness and clarity the
of prima facie evidence of probability that a
offense charged. . . ." (Record, p. 183); that ".
criminal offense may have been committed
. . complainant failed to specify under what
so as to warrant the filing of a criminal
provision of the Labor Code particularly
information before the regular court. Hence,
Art. 248 did respondents violate so as to
evidence which is more than a scintilla is
constitute unfair labor practice . . ." (Record,
required in order to declare
p. 183); that "complainants failed to present
respondents/employers guilty of unfair
any witness who may describe in what
labor practice. Failing in this regard is fatal
manner respondents have committed unfair
to the cause of complainants. Besides, even
labor practice . . ." (Record, p. 185); that ". . .
the charge of illegal lockout has no leg to
complainant LCP failed to present anyone
stand on because of the testimony of
of the so-called 99 complainants in order to
respondents through their guard Orlando
testify who committed the threats and
Cairo (TSN, July 31, 1991 hearing; p. 5-35)
intimidation . . ." (Record, p. 185).
that on January 21, 1991, complainants
Upon review of the minutes of the refused and failed to report for work, hence
proceedings on record, however, it appears guilty of abandoning their post without
that complainant presented witnesses, permission from respondents. As a result of

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 89


complainants['] failure to report for work, rebut or deny Gonzalo Kehyeng's testimony
the cheese curls ready for repacking were all that complainants have been even receiving
spoiled to the prejudice of respondents. more than the minimum wage for an
Under cross-examination, complainants average workers [sic]. Certainly, a lazy
failed to rebut the authenticity of worker earns less than the minimum wage
respondents' witness testimony. but the same cannot be attributable to
respondents but to the lazy workers.
As regards the issue of harassments [sic],
threats and interference with the rights of Finally, the claim for moral and exemplary
employees to self-organization which is damages has no leg to stand on when no
actually an ingredient of unfair labor malice, bad faith or fraud was ever proven
practice, complainants failed to specify to have been perpetuated by respondents.
what type of threats or intimidation was
committed and who committed the same. WHEREFORE, premises considered, the
What are the acts or utterances constitutive complaint is hereby DISMISSED for utter
of harassments [sic] being complained of? lack of merit. (Annex "I" of Petition). 4
These are the specifics which should have On appeal, the NLRC, in its Resolution dated 29 March
been proven with definiteness and clarity 1995, 5 affirmed in toto the decision of Labor Arbiter Santos.
by complainants who chose to rely heavily In so doing, the NLRC sustained the Labor Arbiter's findings
on its position paper through that: (a) there was a dearth of evidence to prove the existence
generalizations to prove their case. of unfair labor practice and union busting on the part of
Insofar as violation of [the] Memorandum private respondents; (b) the agreement of 23 October 1990
of Agreement dated October 23, 1990 is could not be made the basis of an obligation within the ambit
concerned, both parties agreed that: of the NLRC's jurisdiction, as the provisions thereof,
particularly Section 2, spoke of a resolutory condition which
2 — That with regards [sic] could or could not happen; (c) the claims for underpayment of
to the NLRC Case No. wages were without basis as complainants were
RAB III-10-1817-90 admittedly "pakiao" workers and paid on the basis of their
pending with the NLRC, output subject to the lone limitation that the payment
parties jointly and conformed to the minimum wage rate for an eight-hour
mutually agreed that the workday; and (d) petitioners were not underpaid.
issues thereof shall be
discussed by the parties Their motion for reconsideration having been denied by the
and resolve[d] during the NLRC in its Resolution of 31 October 1995, 6petitioners filed
negotiation of the CBA. the instant special civil action for certiorari raising the
following issues:
The aforequoted provision does not speak
of [an] obligation on the part of respondents I
but on a resolutory condition that may occur WHETHER OR NOT THE PUBLIC
or may not happen. This cannot be made the RESPONDENT NATIONAL LABOR
basis of an imposition of an obligation over RELATIONS COMMISSION GRAVELY
which the National Labor Relations ABUSED ITS DISCRETION WHEN IT
Commission has exclusive jurisdiction DISREGARDED OR IGNORED NOT
thereof. ONLY THE EVIDENCE FAVORABLE TO
Anent the charge that there was HEREIN PETITIONERS, APPLICABLE
underpayment of wages, the evidence JURISPRUDENCE BUT ALSO ITS OWN
points to the contrary. The enumeration of DECISIONS AND THAT OF THIS
complainants' wages in their consolidated HONORABLE HIGHEST TRIBUNAL
Affidavits of merit and position paper WHICH [WAS] TANTAMOUNT NOT
which implies underpayment has no leg to ONLY TO THE DEPRIVATION OF
stand on in the light of the fact that PETITIONERS' RIGHT TO DUE PROCESS
complainants' admission that they are piece BUT WOULD RESULT [IN] MANIFEST
workers or paid on a pakiao [basis] i.e. a INJUSTICE.
certain amount for every thousand pieces of II
cheese curls or other products repacked. The
only limitation for piece workers WHETHER OR NOT THE PUBLIC
or pakiao workers is that they should RESPONDENT GRAVELY ABUSED ITS
receive compensation no less than the DISCRETION WHEN IT DEPRIVED THE
minimum wage for an eight (8) hour work PETITIONERS OF THEIR
[sic]. And compliance therewith was CONSTITUTIONAL RIGHT TO SELF-
satisfactorily explained by respondent ORGANIZATION, SECURITY OF
Gonzalo Kehyeng in his testimony (TSN, p. TENURE, PROTECTION TO LABOR, JUST
12-30) during the July 31, 1991 hearing. On AND HUMANE CONDITIONS OF WORK
cross-examination, complainants failed to AND DUE PROCESS.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 90


III support thereof, as well as the pertinent provisions of law and
jurisprudence.
WHETHER OR NOT THE PETITIONERS
WERE ILLEGALLY EASED OUT [OF] OR In their Reply, petitioners claim that the decisions of the
CONSTRUCTIVELY DISMISSED FROM NLRC and the Labor Arbiter were not supported by
THEIR ONLY MEANS OF LIVELIHOOD. substantial evidence; that abandonment was not proved; and
that much credit was given to self-serving statements of
IV Gonzalo Kehyeng, owner of Empire Foods, as to payment of
WHETHER OR NOT PETITIONERS just wages.
SHOULD BE REINSTATED FROM THE On 7 July 1997, we gave due course to the petition and
DATE OF THEIR DISMISSAL UP TO THE required the parties to file their respective memoranda.
TIME OF THEIR REINSTATEMENT, However, only petitioners and private respondents filed their
WITH BACKWAGES, STATUTORY memoranda, with the NLRC merely adopting its Comment as
BENEFITS, DAMAGES AND its Memorandum.
ATTORNEY'S FEES. 7
We find for petitioners.
We required respondents to file their
respective Comments. Invocation of the general rule that factual findings of the
NLRC bind this Court is unavailing under the circumstances.
In their Manifestation and Comment, private respondents Initially, we are unable to discern any compelling reason
asserted that the petition was filed out of time. As petitioners justifying the Labor Arbiter's volte face from his 14 April 1992
admitted in their Notice to File Petition for Review decision reinstating petitioners to his diametrically opposed
on Certiorari that they received a copy of the resolution 27 July 1994 decision, when in both instances, he had before
(denying their motion for reconsideration) on 13 December him substantially the same evidence. Neither do we find the
1995, they had only until 29 December 1995 to file the petition. 29 March 1995 NLRC resolution to have sufficiently discussed
Having failed to do so, the NLRC thus already entered the facts so as to comply with the standard of substantial
judgment in private respondents' favor. evidence. For one thing, the NLRC confessed its reluctance to
In their Reply, petitioners averred that Mr. Navarro, a non- inquire into the veracity of the Labor Arbiter's factual
lawyer who filed the notice to file a petition for review on findings, staunchly declaring that it was "not about to
their behalf, mistook which reglementary period to apply. substitute [its] judgment on matters that are within the
Instead of using the "reasonable time" criterion province of the trier of facts." Yet, in the 21 July 1992 NLRC
for certiorari under Rule 65, he used the 15-day period for resolution, 8 it chastised the Labor Arbiter for his errors both
petitions for review on certiorari under Rule 45. They in judgment and procedure; for which reason it remanded the
hastened to add that such was a mere technicality which records of the case to the Labor Arbiter for compliance with
should not bar their petition from being decided on the merits the pronouncements therein.
in furtherance of substantial justice, especially considering What cannot escape from our attention is that the Labor
that respondents neither denied nor contradicted the facts and Arbiter did not heed the observations and pronouncements of
issues raised in the petition. the NLRC in its resolution of 21 July 1992, neither did he
In its Manifestation and Motion in Lieu of Comment, the understand the purpose of the remand of the records to him.
Office of the Solicitor General (OSG) sided with petitioners. In said resolution, the NLRC summarized the grounds for the
It pointed out that the Labor Arbiter, in finding that appeal to be:
petitioners abandoned their jobs, relied solely on the 1. that there is a prima facie evidence of
testimony of Security Guard Rolando Cairo that petitioners abuse of discretion and acts of gross
refused to work on 21 January 1991, resulting in the spoilage incompetence committed by the Labor
of cheese curls ready for repacking. However, the OSG Arbiter in rendering the decision.
argued, this refusal to report for work for a single day did not
constitute abandonment, which pertains to a clear, deliberate 2. that the Labor Arbiter in rendering the
and unjustified refusal to resume employment, and not mere decision committed serious errors in the
absence. In fact, the OSG stressed, two days after allegedly findings of facts.
abandoning their work, petitioners filed a complaint for, inter
alia, illegal lockout or illegal dismissal. Finally, the OSG After which, the NLRC observed and found:
questioned the lack of explanation on the part of Labor Complainant alleged that the Labor Arbiter
Arbiter Santos as to why he abandoned his original decision disregarded the testimonies of the 99
to reinstate petitioners. complainants who submitted their
In view of the stand of the OSG, we resolved to require the Consolidated Affidavit of Merit and
NLRC to file its own Comment. Position Paper which was adopted as direct
testimonies during the hearing and cross-
In its Comment, the NLRC invokes the general rule that examined by respondents' counsel.
factual findings of an administrative agency bind a reviewing
court and asserts that this case does not fall under the The Labor Arbiter, through his decision,
exceptions. The NLRC further argues that grave abuse of noted that ". . . complainant did not present
discretion may not be imputed to it, as it affirmed the factual any single witness while respondent
findings and legal conclusions of the Labor Arbiter only after presented four (4) witnesses in the persons
carefully reviewing, weighing and evaluating the evidence in of Gonzalo Kehyeng, Orlando Cairo, Evelyn

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 91


Kehyeng and Elvira Bulagan . . ." (Records, of the decision which could be carried out
p. 183), that ". . . complainant before the by way of execution.
National Labor Relations Commission must
prove with definiteness and clarity the It may be argued that the last paragraph of
offense charged. . . ." (Record, p. 183; that ". . the decision may be categorized as the
. complainant failed to specify under what dispositive portion thereof:
provision of the Labor Code particularly xxx xxx xxx
Art. 248 did respondents violate so as to
constitute unfair labor practice . . ." (Record, The undersigned Labor
p. 183); that "complainants failed to present Arbiter is not oblivious
any witness who may describe in what [to] the fact that
manner respondents have committed unfair respondents have violated
labor practice . . ." (Record, p. 185); that ". . . a cardinal rule in every
complainant a [sic] LCP failed to present establishment that a
anyone of the so called 99 complainants in payroll and other papers
order to testify who committed the threats evidencing hour[s] of
and intimidation . . ." (Record, p.185). work, payment, etc. shall
always be maintained and
Upon review of the minutes of the subjected to inspection
proceedings on record, however, it appears and visitation by
that complainant presented witnesses, personnel of the
namely BENIGNO NAVARRO, JR. (28 Department of Labor and
February 1991, RECORD, p. 91; 8 March Employment. As such
1991, RECORD, p. 92), who adopted its penalty, respondents
POSITION PAPER AND should not escape liability
CONSOLIDATED AFFIDAVIT as Exhibit for this technicality,
A and the annexes thereto as Exhibit B, B-1 hence, it is proper that all
to B-9, inclusive. Minutes of the proceedings the individual
on record show that complainant further complainants except those
presented other witnesses, namely: who resigned and
ERLINDA BASILIO (13 March 1991, executed quitclaim[s] and
RECORD, p. 93; LOURDES PANTILLO, release[s] prior to the
MARIFE PINLAC, LENI GARCIA (16 April filing of this complaint
1991, Record, p. 96, see back portion thereof; should be reinstated to
2 May 1991, Record, p. 102; 16 May 1991, their former position with
Record, p. 103; 11 June 1991, Record, p. 105). the admonition to
Formal offer of Documentary and respondents that any
Testimonial Evidence was made by the harassment, intimidation,
complainant on June 24, 1991 (Record, p.106- coercion or any form of
109). threat as a result of this
The Labor Arbiter must have overlooked the immediately executory
testimonies of some of the individual reinstatement shall be
complainants which are now on record. dealt with accordingly.
Other individual complainants should have SO ORDERED.
been summoned with the end in view of
receiving their testimonies. The It is Our considered view that even
complainants should [have been] afforded assuming arguendo that the respondents
the time and opportunity to fully failed to maintain their payroll and other
substantiate their claims against the papers evidencing hours of work, payment
respondents. Judgment should [have been] etc., such circumstance, standing alone, does
rendered only based on the conflicting not warrant the directive to reinstate
positions of the parties. The Labor Arbiter is complainants to their former positions. It is
called upon to consider and pass upon the [a] well settled rule that there must be a
issues of fact and law raised by the parties. finding of illegal dismissal before
reinstatement be mandated.
Toward this end, therefore, it is Our
considered view the case should be In this regard, the LABOR ARBITER is
remanded to the Labor Arbiter of origin for hereby directed to include in his
further proceedings. clarificatory decision, after receiving
evidence, considering and resolving the
Further, We take note that the decision does same, the requisite dispositive portion.9
not contain a dispositive portion or fallo.
Such being the case, it may be well said that Apparently, the Labor Arbiter perceived that if not for
the decision does not resolve the issues at petitioners, he would not have fallen victim to this stinging
hand. On another plane, there is no portion rebuke at the hands of the NLRC. Thus does it appear to us

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 92


that the Labor Arbiter, in concluding in his 27 July 1994 In De Ysasi III v. NLRC (supra), this
Decision that petitioners abandoned their work, was moved Honorable Court stressed that it is the clear,
by, at worst, spite, or at best, lackadaisically glossed over deliberate and unjustified refusal to resume
petitioner's evidence. On this score, we find the following employment and not mere absence that
observations of the OSG most persuasive: constitutes abandonment. The absence of
petitioner employees for one day on January
In finding that petitioner employees 21, 1991 as testified [to] by Security Guard
abandoned their work, the Labor Arbiter Orlando Cairo did not constitute
and the NLRC relied on the testimony of abandonment.
Security Guard Rolando Cairo that on
January 21, 1991, petitioners refused to In his first decision, Labor Arbiter Santos
work. As a result of their failure to work, the expressly directed the reinstatement of the
cheese curls ready for repacking on said date petitioner employees and admonished the
were spoiled. private respondents that "any harassment,
intimidation, coercion or any form of threat
The failure to work for one day, which as a result of this immediately executory
resulted in the spoilage of cheese curls does reinstatement shall be dealt with
not amount to abandonment of work. In fact accordingly.
two (2) days after the reported abandonment
of work or on January 23, 1991, petitioners In his second decision, Labor Arbiter Santos
filed a complaint for, among others, unfair did not state why he was abandoning his
labor practice, illegal lockout and/or illegal previous decision directing the
dismissal. In several cases, this Honorable reinstatement of petitioner employees.
Court held that "one could not possibly
abandon his work and shortly thereafter By directing in his first decision the
vigorously pursue his complaint for illegal reinstatement of petitioner employees, the
dismissal (De Ysasi III v. NLRC, 231 SCRA Labor Arbiter impliedly held that they did
173; Ranara v. NLRC, 212 SCRA 631; not abandon their work but were not
Dagupan Bus Co. v. NLRC, 191 SCRA 328; allowed to work without just cause.
Atlas Consolidated Mining and That petitioner employees are "pakyao" or
Development Corp. v. NLRC, 190 SCRA 505; piece workers does not imply that they are
Hua Bee Shirt Factory v. NLRC, 186 SCRA not regular employees entitled to
586; Mabaylan v. NLRC, 203 SCRA 570 and reinstatement. Private respondent Empire
Flexo Manufacturing v. NLRC, 135 SCRA Food Products, Inc. is a food and fruit
145). In Atlas Consolidated, supra, this processing company. In Tabas v. California
Honorable Court explicitly stated: Manufacturing Co., Inc. (169 SCRA 497), this
It would be illogical for Honorable Court held that the work of
Caballo, to abandon his merchandisers of processed food, who
work and then coordinate with grocery stores and other
immediately file an action outlets for the sale of the processed food is
seeking for his necessary in the day-to-day operation[s] of
reinstatement. We can not the company. With more reason, the work of
believe that Caballo, who processed food repackers is necessary in the
had worked for Atlas for day-to-day operation[s] of respondent
two years and ten months, Empire Food Products. 10
would simply walk away It may likewise be stressed that the burden of proving the
from his job unmindful of existence of just cause for dismissing an employee, such as
the consequence of his abandonment, rests on the employer, 11 a burden private
act. i.e. the forfeiture of his respondents failed to discharge.
accrued employment
benefits. In opting to Private respondents, moreover, in considering petitioners'
finally to [sic] contest the employment to have been terminated by abandonment,
legality of his dismissal violated their rights to security of tenure and constitutional
instead of just claiming his right to due process in not even serving them with a written
separation pay and other notice of such termination. 12 Section 2, Rule XIV, Book V of
benefits, which he actually the Omnibus Rules Implementing the Labor Code provides:
did but which proved to
be futile after all, ably Sec. 2. Notice of Dismissal — Any employer
supports his sincere who seeks to dismiss a worker shall furnish
intention to return to him a written notice stating the particular
work, thus negating Atlas' acts or omission constituting the grounds
stand that he had for his dismissal. In cases of abandonment
abandoned his job. of work, the notice shall be served at the
worker's last known address.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 93


Petitioners are therefore entitled to reinstatement with full In addition, the Revised Guidelines on the Implementation of
back wages pursuant to Article 279 of the Labor Code, as the 13th Month Pay Law, in view of the modifications to P.D.
amended by R.A. No. 6715. Nevertheless, the records disclose No. 851 19 by Memorandum Order No. 28, clearly exclude the
that taking into account the number of employees involved, employer of piece rate workers from those exempted from
the length of time that has lapsed since their dismissal, and paying 13th month pay, to wit:
the perceptible resentment and enmity between petitioners
and private respondents which necessarily strained their 2. EXEMPTED EMPLOYERS
relationship, reinstatement would be impractical and hardly The following employers are still not covered by P.D. No.
promotive of the best interests of the parties. In lieu of 851:
reinstatement then, separation pay at the rate of one month for
every year of service, with d. Employers of those who are paid on purely commission,
a fraction of at least six (6) months of service considered as one boundary or task basis, and those who are paid a fixed
(1) year, is in order. 13 amount for performing specific work, irrespective of the time
consumed in the performance thereof, except where the
That being said, the amount of back wages to which each workers are paid on piece-rate basis in which case the
petitioner is entitled, however, cannot be fully settled at this employer shall grant the required 13th month pay to such
time. Petitioners, as piece-rate workers having been paid by workers. (emphasis supplied)
the piece, 14 there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this The Revised Guidelines as well as the Rules and
issue is best left to the National Labor Relations Commission. Regulations identify those workers who fall under
the piece-rate category as those who are paid a
As to the other benefits, namely, holiday pay, premium pay, standard amount for every piece or unit of work
13th month pay and service incentive leave which the labor produced that is more or less regularly replicated,
arbiter failed to rule on but which petitioners prayed for in without regard to the time spent in producing the
their complaint, 15 we hold that petitioners are so entitled to same. 20
these benefits. Three (3) factors lead us to conclude that
petitioners, although piece-rate workers, were regular As to overtime pay, the rules, however, are different.
employees of private respondents. First, as to the nature of According to Sec. 2(e), Rule I, Book III of the Implementing
petitioners' tasks, their job of repacking snack food was Rules, workers who are paid by results including those who
necessary or desirable in the usual business of private are paid on piece-work, takay,pakiao, or task basis, if their
respondents, who were engaged in the manufacture and output rates are in accordance with the standards prescribed
selling of such food products; second, petitioners worked for under Sec. 8, Rule VII, Book III, of these regulations, or where
private respondents throughout the year, their employment such rates have been fixed by the Secretary of Labor in
not having been dependent on a specific project or season; and accordance with the aforesaid section, are not entitled to
third, the length of time 16 that petitioners worked for private receive overtime pay. Here, private respondents did not allege
respondents. Thus, while petitioners' mode of compensation adherence to the standards set forth in Sec. 8 nor with the rates
was on a "per piece basis," the status and nature of their prescribed by the Secretary of Labor. As such, petitioners are
employment was that of regular employees. beyond the ambit of exempted persons and are therefore
entitled to overtime pay. Once more, the National Labor
The Rules Implementing the Labor Code exclude certain Relations Commission would be in a better position to
employees from receiving benefits such as nighttime pay, determine the exact amounts owed petitioners, if any.
holiday pay, service incentive leave 17 and 13th month
pay, 18 inter alia, "field personnel and other employees whose As to the claim that private respondents violated petitioners'
time and performance is unsupervised by the employer, right to self-organization, the evidence on record does not
including those who are engaged on task or contract basis, support this claim. Petitioners relied almost entirely on
purely commission basis, or those who are paid a fixed documentary evidence which, per se, did not prove any
amount for performing work irrespective of the time wrongdoing on private respondents' part. For example,
consumed in the performance thereof." Plainly, petitioners as petitioners presented their complaint 21 to prove the violation
piece-rate workers do not fall within this group. As mentioned of labor laws committed by private respondents. The
earlier, not only did petitioners labor under the control of complaint, however, is merely "the pleading alleging the
private respondents as their employer, likewise did plaintiff's cause or causes of action." 22 Its contents are merely
petitioners toil throughout the year with the fulfillment of allegations, the verity of which shall have to be proved during
their quota as supposed basis for compensation. Further, in the trial. They likewise offered their Consolidated Affidavit
Section 8 (b), Rule IV, Book III which we quote hereunder, of Merit and Position Paper 23 which, like the offer of their
piece workers are specifically mentioned as being entitled to Complaint, was a tautological exercise, and did not help nor
holiday pay. prove their cause. In like manner, the petition for certification
election 24 and the subsequent order of certification 25 merely
Sec. 8. Holiday pay of certain employees. — proved that petitioners sought and acquired the status of
(b) Where a covered employee is paid by results or output, bargaining agent for all rank-and-file employees. Finally, the
such as payment on piece work, his holiday pay shall not existence of the memorandum of agreement 26 offered to
be less than his average daily earnings for the last seven substantiate private respondents' non-compliance therewith,
(7) actual working days preceding the regular did not prove either compliance or non-compliance, absent
holiday: Provided, however, that in no case shall the evidence of concrete, overt acts in contravention of the
holiday pay be less than the applicable statutory provisions of the memorandum.
minimum wage rate.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 94


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 month's 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.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 95


Forms of Payment On June 29, 1990, herein private respondent Pedro and Fredelito
Juanatas, father and son, filed a claim for unpaid
wages/commissions, separation pay and damages against JJ's
Art. 102. Forms of payment. No employer shall pay the wages
Trucking and/or Dr. Bernardo Jimenez. Said respondents, as
of an employee by means of promissory notes, vouchers,
complainants therein, alleged that in December, 1987, they were
coupons, tokens, tickets, chits, or any object other than legal
hired by herein petitioner Bernardo Jimenez as
tender, even when expressly requested by the employee.
driver/mechanic and helper, respectively, in his trucking firm,
JJ Trucking. They were assigned to a ten-wheeler truck to haul
Payment of wages by check or money order shall be allowed soft drinks of Coca-Cola Bottling Company and paid on
when such manner of payment is customary on the date of commission basis, initially fixed at 17% but later increased to
effectivity of this Code, or is necessary because of special 20% in 1988.
circumstances as specified in appropriate regulations to be
Private respondents further alleged that for the years 1988 and
issued by the Secretary of Labor and Employment or as
1989 they received only a partial commission of P84,000.00 from
stipulated in a collective bargaining agreement.
petitioners' total gross income of almost P1,000,000.00 for the
said two years. Consequently, with their commission for that
period being computed at 20% of said income, there was an
unpaid balance to them of P106,211.86; that until March, 1990
BOOK III - RULE VIII when their services were illegally terminated, they were further
Payment of Wages entitled to P15,050.309 which, excluding the partial payment of
SECTION 1. Manner of wage payment. — As a general rule, P7,000.00, added up to a grand total of P114,261.86 due and
wages shall be paid in legal tender and the use of tokens, payable to them; and that petitioners' refusal to pay their
promissory notes, vouchers, coupons, or any other form alleged aforestated commission was a ploy to unjustly terminate them.
to represent legal tender is absolutely prohibited even when Disputing the complaint, petitioners contend that respondent
expressly requested by the employee. Fredelito Juanatas was not an employee of the firm but was
merely a helper of his father Pedro; that all commissions for 1988
and 1989, as well as those up to March, 1990, were duly paid;
SECTION 2. Payment by check. — Payment of wages by bank
and that the truck driven by respondent Pedro Juanatas was
checks, postal checks or money orders is allowed where such
sold to one Winston Flores in 1991 and, therefore, private
manner of wage payment is customary on the date of the
respondents were not illegally dismissed. 2
effectivity of the Code, where it is so stipulated in a collective
After hearings duly conducted, and with the submission of the
agreement, or where all of the following conditions are met:
parties' position/supporting papers, Labor Arbiter Rogue B. de
(a) There is a bank or other facility for encashment within a Guzman rendered a decision dated March 9, 1993, with this
radius of one (1) kilometer from the workplace; decretal portion:
(b) The employer or any of his agents or representatives does WHEREFORE, decision is hereby issued
not receive any pecuniary benefit directly or indirectly from the ordering respondents JJ's Trucking and/or
arrangement; Dr. Bernardo Jimenez to pay jointly and
(c) The employees are given reasonable time during banking severally complainant Pedro Juanatas a
hours to withdraw their wages from the bank which time shall separation pay of FIFTEEN THOUSAND
be considered as compensable hours worked if done during FIFTY (P15,050.00) PESOS, plus attorney's fee
working hours; and equivalent to ten percent (10%) of the award.
(d) The payment by check is with the written consent of the The complaint of Fredelito Juanatas is hereby
employees concerned if there is no collective agreement dismissed for lack of merit. 3
authorizing the payment of wages by bank checks. On appeal filed by private respondents, the NLRC modified the
decision of the labor arbiter and disposed as follows:
PREMISES CONSIDERED, the Decision of
G.R. No. 116960 April 2, 1996
March 9, 1993 is hereby MODIFIED, to wit:
BERNARDO JIMENEZ and JOSE JIMENEZ, as 1. Complainant Fredelito Juanatas is hereby
Operators of JJ's TRUCKING, petitioners, declared respondents' employee and shares
vs. in (the) commission and separation pay
NATIONAL LABOR RELATIONS COMMISSION, awarded to complainant Pedro Juanatas, his
father.
PEDRO JUANATAS and FREDELITO
2. Respondent JJ's Trucking and Dr. Bernardo
JUANATAS, respondents.
Jimenez are jointly and severally liable to pay
complainants their unpaid commissions in
REGALADO, J.:p the total amount of Eighty Four Thousand
This petition for certiorari seeks the annulment of the decision of Three Hundred Eighty Seven Pesos and
respondent National Labor Relations Commission (NLRC), 05/100 (P84,387.05).
dated May 27, 1994, as well as its resolution, dated August 8, 3. The award of attorney's fees is reduced
1994, denying petitioners's motion for reconsideration,1 which accordingly to eight thousand four hundred
assailed decision affirmed with modifications the adverse thirty eight pesos and 70/100 (P8,438.70).
decision of the labor arbiter against herein petitioners. 4. The other findings stand affirmed. 4

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 96


Petitioners' motion for reconsideration having been denied properly accomplished, is undated and unsigned, and is thus
thereafter in public respondent's resolution dated August 8, uncertain as to its origin and authenticity. 16
1994,5 petitioners have come to us in this recourse, raising for The positive testimony of a creditor may be sufficient of it self
resolution the issues as to whether or not respondent NLRC to show non-payment, even when met by indefinite testimony
committed grave abuse of discretion in ruling (a) that private of the debtor. Similarly, the testimony of the debtor may also be
respondents were not paid their commissions in full, and (b) sufficient to show payment, but, where his testimony is
that respondent Fredelito Juanatas was an employee of JJ's contradicted by the other party or by a disinterested witness, the
Trucking. issue may be determined against the debtor since he has the
The review of labor cases elevated to us on certiorari is confined burden of proof. The testimony of the debtor creating merely an
to questions of jurisdiction or grave abuse of discretion.6 As a inference of payment will not be regarded as conclusive on that
rule, this Court does not review supposed errors in the decision issue. 17
of the NLRC which raise factual issues, because factual findings Hence, for failure to present evidence to prove payment,
of agencies exercising quasi-judicial functions are accorded not petitioners defaulted in their defense and in effect admitted the
only respect but even finality,7 aside from the consideration that allegations of private respondents.
the Court is essentially not a trier of facts. However, in the case With respect to the second issue, however, we agree with
at bar, a review of the records thereof with an assessment of the petitioners that the NLRC erred in holding that the son,
facts is necessary since the factual findings of the NLRC and the Fredelito, was an employee of petitioners.
labor arbiter are at odds with each other. 8
We have consistently ruled that in determining the existence of
On the first issue, we find no reason to disturb the findings of an employer-employee relationship, the elements that are
respondent NLRC that the entire amount of commissions was generally considered are the following: (1) the selection and
not paid, this by reason of the evident failure of herein engagement of the employee; (2) the Payment of wages; (3) the
petitioners to present evidence that fullpayment thereof has power of dismissal; and (4) the power to control the employee's
been made. It is a basic rule in evidence that each party must conduct, 18 with the control test assuming primacy in the overall
prove his affirmative allegation. Since the burden of evidence consideration.
lies with the party who asserts an affirmative allegation, the
In the case at bar, the aforementioned elements are not present.
plaintiff or complainant has to prove his affirmative allegations
The agreement was between petitioner JJ's Trucking and
in the complaint and the defendant or respondent has to prove
respondent Pedro Juanatas. The hiring of a helper was
the affirmative allegations in his affirmative defenses and
discretionary on the part of Pedro. Under their contract, should
counterclaim. Considering that petitioners herein assert that the
he employ a helper, he would be responsible for the latter's
disputed commissions have been paid, they have the bounden
compensation. With or without a helper, respondent Pedro
duty to prove that fact.
Juanatas was entitled to the same percentage of commission.
As a general rule, one who pleads payment has the burden of Respondent Fredelito Juanatas was hired by his father, Pedro,
proving it.9 Even where the plaintiff must allege non-payment, and the compensation he received was paid by his father out of
the general rule is that the burden rests on the defendant to the latter's commission. Further, Fredelito was not subject to the
prove payment, rather than on the plaintiff to prove non- control and supervision of and dismissal by petitioners but of
payment.10 The debtor has the burden of showing with legal and by his father.
certainty that the obligation has been discharged by payment. 11
Even the Solicitor General, in his comment, agreed with the
When the existence of a debt is fully established by the evidence finding of the labor arbiter that Fredelito was not an employee
contained in the record, the burden of proving that it has been of petitioners, to wit:
extinguished by payment devolves upon the debtor who offers
Public respondent committed grave abuse of
such a defense to the claim of the creditor. 12 Where the debtor
discretion in holding that said private
introduces some evidence of payment, the burden of going
respondent is an employee of JJ's Trucking on
forward with the evidence — as distinct from the general
the ground that, citing Article 281 of the
burden of proof — shifts to the creditor, who is then under a
Labor Code, "Fredelito's functions as helper
duty of producing some evidence to show non-payment. 13
was (sic) necessary and desirable to
In the instant case, the right of respondent Pedro Juanatas to be respondent's trucking business".
paid a commission equivalent to 17%, later increased to 20%, of
In the first place, Article 281 of the Labor
the gross income is not disputed by petitioners. Although
Code does not refer to the basic factors that
private respondents admit receipt of partial payment,
must underlie every existing employer-
petitioners still have to present proof of full payment. Where the
employee relationship, the absence of any of
defendant sued for a debt admits that the debt was originally
which will negate such existence. It refers
owed, and pleads payment in whole or in part, it is incumbent
instead to the qualifications of "(A)n
upon him to prove such payment. That a plaintiff admits that
employee who is allowed to work after a
some payments have been made does not change the burden of
probationary period" and who, as a
proof. The defendant still has the burden of establishing
consequence, "shall be considered a regular
payments beyond those admitted by plaintiff. 14
employee." Secondly, the test in determining
The testimony of petitioners which merely denied the claim of the existence of an employee-employer
private respondents, unsupported by documentary evidence, is relationship is not the necessity and/or
not sufficient to establish payment. Although petitioners desirability of one's functions in relation to an
submitted a notebook showing the alleged vales of private employer's business, but "(1) the selection and
respondents for the year 1990, 15 the same is inadmissible and engagement of the employee; (2) the payment
cannot be given probative value considering that it is not
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 97
of wages; (3) the power of dismissal; and (4)
the power to control the employee's conduct.
The latter is the most important element"
(Singer Sewing Machine Company vs. Drilon,
193 SCRA 270, 275; Deferia vs. NLRC, 194
SCRA 531, 525; Ecal vs. NLRC, 224, 228, Hijos
De F. Escano, Inc vs. NLRC, 224 SCRA 781,
785). The aforequoted pertinent findings of
the Labor Arbiter indicate (that) the foregoing
requirements do not exist between petitioner
and private respondent Fredelito Juanatas.
Thus, the labor arbiter stated that respondent
Fredelito Juanatas was never hired by
petitioners. Instead the former's services were
availed of by respondent Pedro Juanatas his
father, who, at the same time, supervised and
controlled his work and paid his
commissions. Respondent NLRC's ruling did
not traverse these findings of the labor
arbiter. 19
WHEREFORE, the judgment of respondent National Labor
Relations Commission is hereby AFFIRMED, with the
MODIFICATION that paragraph 1 thereof, declaring Fredelito
Juanatas an employee of petitioners and entitled to share in the
award for commission and separation pay, is hereby DELETED.
SO ORDERED.

LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 98


Time of Payment (c) Under any other analogous circumstances; Provided, That
the time spent by the employees in collecting their wages shall
be considered as compensable hours worked;
Art. 103. Time of payment. Wages shall be paid at least once
every two (2) weeks or twice a month at intervals not exceeding (d) No employer shall pay his employees in any bar, night or
sixteen (16) days. If on account of force majeure or day club, drinking establishment, massage clinic, dance hall, or
circumstances beyond the employer’s control, payment of other similar places or in places where games are played with
wages on or within the time herein provided cannot be made, stakes of money or things representing money except in the case
the employer shall pay the wages immediately after such force of persons employed in said places.
majeure or circumstances have ceased. No employer shall make
payment with less frequency than once a month.
Republic Act No. 6727 June 9, 1989
The payment of wages of employees engaged to perform a task
which cannot be completed in two (2) weeks shall be subject to
AN ACT TO RATIONALIZE WAGE POLICY
the following conditions, in the absence of a collective DETERMINATION BY ESTABLISHING THE
bargaining agreement or arbitration award: MECHANISM AND PROPER STANDARDS THEREFOR,
AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND
1. That payments are made at intervals not exceeding INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126
sixteen (16) days, in proportion to the amount of work AND 127 INTO, PRESIDENTIAL DECREE NO. 442, AS
completed; AMENDED, OTHERWISE KNOWN AS THE LABOR CODE
OF THE PHILIPPINES, FIXING NEW WAGE RATES,
2. That final settlement is made upon completion of the PROVIDING WAGE INCENTIVES FOR INDUSTRIAL
work DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER
PURPOSES

BOOK III – RULE VIII IRR


Section 7. Upon written permission of the majority of the
employees or workers concerned, all private establishments,
SECTION 3. Time of payment. — companies, businesses, and other entities with twenty five (25)
(a) Wages shall be paid not less than once every two (2) weeks or more employees and located within one (1) kilometer radius
or twice a month at intervals not exceeding sixteen (16) days, to a commercial, savings or rural bank shall pay the wages and
unless payment cannot be made with such regularity due to other benefits of their employees through any of said banks and
force majeure or circumstances beyond the employer's control within the period of payment of wages fixed by Presidential
in which case the employer shall pay the wages immediately Decree No. 442, as amended, otherwise known as the Labor
after such force majeure or circumstances have ceased. Code of the Philippines.
(b) In case of payment of wages by results involving work which Exceptions to Direct Payment
cannot be finished in two (2) weeks, payment shall be made at
Art. 105. Direct payment of wages. Wages shall be paid directly
intervals not exceeding sixteen days in proportion to the
to the workers to whom they are due, except:
amount of work completed. Final settlement shall be made
immediately upon completion of the work. a. In cases of force majeure rendering such payment
impossible or under other special circumstances to be
determined by the Secretary of Labor and Employment
Place of Payment in appropriate regulations, in which case, the worker
Art. 104. Place of payment. Payment of wages shall be made at may be paid through another person under written
or near the place of undertaking, except as otherwise provided authority given by the worker for the purpose; or
by such regulations as the Secretary of Labor and Employment
may prescribe under conditions to ensure greater protection of b. Where the worker has died, in which case, the
wages. employer may pay the wages of the deceased worker
to the heirs of the latter without the necessity of
BOOK III – RULE VIII IRR intestate proceedings. The claimants, if they are all of
SECTION 4. Place of payment. — As a general rule, the place age, shall execute an affidavit attesting to their
of payment shall be at or near the place of undertaking. Payment relationship to the deceased and the fact that they are
in a place other than the work place shall be permissible only his heirs, to the exclusion of all other persons. If any of
under the following circumstances: the heirs is a minor, the affidavit shall be executed on
his behalf by his natural guardian or next-of-kin. The
(a) When payment cannot be effected at or near the place of
affidavit shall be presented to the employer who shall
work by reason of the deterioration of peace and order
make payment through the Secretary of Labor and
conditions, or by reason of actual or impending emergencies
Employment or his representative. The representative
caused by fire, flood, epidemic or other calamity rendering
of the Secretary of Labor and Employment shall act as
payment thereat impossible;
referee in dividing the amount paid among the heirs.
(b) When the employer provides free transportation to the The payment of wages under this Article shall absolve
employees back and forth; and the employer of any further liability with respect to the
amount paid.
LABOR STANDARDS | FINAL EXAMINATION | PALMA GIL | 99