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LABOR STANDARDS WEEK 11 the NLRC reversed the LA’s decision and considered the specified entries/transactions
ATTY. FALLAR, JR. as “service chargeable.” As the PPHI failed to prove that it paid or remitted the
required service charges,
The CA granted the PPHI’s petition. It affirmed the LA’s decision but ordered the
PPHI to pay the Union the amount of P80,063.88 as service charges that it found was
due under the circumstances. The CA declared that no service charges were due from
the specified entries/transactions; either these constituted “negotiated contracts” and
“special rates” that Section 68 of the CBA explicitly excludes from the coverage of
G.R. No. 177524, July 23, 2014
service charges, or they were cited bases that the Union failed to sufficiently prove.
ISSUE: Whether the Union may collect from the PPHI, under the terms of the CBA,
The Union is the collective bargaining agent of the rank-and-file employees of
its share of the service charges.
respondent Philippine Plaza Holdings, Inc. (PPHI).
PPHI and the Union executed the “Third Rank-and-File Collective Bargaining
Agreement as Amended” (CBA). The CBA provided, among others, for the collection,
No service charges were due from the specified entries/transactions; they either
by the PPHI, of a ten percent (10%) service charge on the sale of food, beverage,
fall within the CBA-excepted “Negotiated Contracts” and “Special Rates” or did not
transportation, laundry and rooms, except on negotiated contracts and special rates.
involve “a sale of food, beverage, etc.”
(Sec. 68, CBA)
Following the wordings of Section 68 of the CBA, three requisites must be present for
Union’s Service Charge Committee informed the Union President, through an audit
the provisions on service charges to operate: (1) the transaction from which service
report (1st audit report) of uncollected service charges of PHP 2,952,467.61.
charge is sought to be collected is a sale; (2) the sale transaction covers food,
beverage, transportation, laundry and rooms; and (3) the sale does not result from
Through a letter, the PPHI admitted liability for P80,063.88 out of the P2,952,467.61
negotiated contracts and/or at special rates.
that the Union claimed as uncollected service charges. The PPHI denied the rest of
the Union’s claims because: (1) they were exempted from the service charge being
Notably, the CBA does not specifically define the terms “negotiated contracts” and
revenues from “special promotions” (revenue from the Westin Gold Card sales) or
“special rates.” Nonetheless, the CBA likewise does not explicitly limit the use of
“negotiated contracts” (alleged revenue from the Maxi-Media contract); (2) the
these terms to specified transactions. Thus, as correctly declared by the CA, the term
revenues did not belong to the PPHI but to third-party suppliers; and (3) no revenue
“negotiated contracts” should be read as applying to all types of negotiated contracts
was realized from these transactions as they were actually expenses incurred for the
and not to “airlines contracts” only. This is in line with the basic rule of construction
benefit of executives or by way of good-will to clients and government officials.
that when the terms are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall prevail. (Verba legis)
the Union maintained its position on uncollected service charges so that a deadlock on
the issue ensued. The parties agreed to refer the matter to a third party for the solution.
The PPHI did not violate Article 96 of the Labor Code when they refused the
Union’s claim for service charges on the specified entries/transactions.
When the parties failed to reach an agreement, the Union, on May 3, 2001, filed before
the LA a complaint for non-payment of specified service charges. The Union
Art. 96. Service Charges.
additionally charged the PPHI with unfair labor practice (ULP) under Article 248 of
the Labor Code.
x x x In case the service charge is abolished, the share of the covered employees shall
be considered integrated in their wages.
LA dismissed the Union’s complaint for lack of merit. The LA declared that the Union
failed to show, by law, contract and practice, its entitlement to the payment of service
This last paragraph of Article 96 of the Labor Code presumes the practice of collecting
charges from the entries specified in its audit reports (specified entries/transactions).
service charges and the employer’s termination of this practice. When this happens,
Article 96 requires the employer to incorporate the amount that the employees had
been receiving as share of the collected service charges into their wages. In cases



where no service charges had previously been collected, Article 96 will not operate. Issue: (1) Whether or not NLRC committed grave abuse of discretion in holding that
petitioner failed to adduce conclusive evidence in support of its version of the incident,
In this case, the CA found that the PPHI had not in fact been collecting services charges considering the fact that the evidence on record ineluctably shows that private
on the specified entries/transactions that we pointed out as either falling under respondent was caught in flagrante delicto
“negotiated contracts” and/or “special rates” or did not involve a “sale of food, (2) Whether or not respondent NLRC committed grave abuse of discretion in not
beverage, etc.” Accordingly, Article 96 of the Labor Code finds no application in this reversing that portion of the decision of the Labor Arbiter ordering herein petitioner to
case. pay private respondent his share in the service charge which was collected during the
----------X X X---------- time he was not working in the hotel.

MARANAW HOTELS AND RESORT CORPORATION, (Owner of Century Held: (1) Maranaw Hotel’s theory that Damalerio was caught committing qualified
Park Sheraton Manila), petitioner, vs. NATIONAL LABOR RELATIONS theft in flagrante delicto lacks evidentiary support. During the investigation presided
COMMISSION and EDDIE DAMALERIO, respondents. over by the Labor Arbiter, Damalerio narrated a plausible and satisfactory explanation
G.R. No. 123880. February 23, 1999 for his behavior complained of. According to him, he was then cleaning the hotel room
of Glaser, and while in the process of placing inside the luggage the personal
Facts: Eddie Damalerio (Damalerio), a room attendant of the Century Park Sheraton belongings of Glaser scattered near the bed, the latter entered the room. Glaser did not
Hotel was seen by hotel guest Jamie Glaser (Glaser) with left hand inside the latter's bother to testify as all his things were intact.
suitcase. Confronted with what he was doing, Damalerio explained that he was trying
to tidy up the room. Not satisfied with the explanation of Damalerio, Glaser lodged a Although it was not completely proper for Damalerio to be touching the personal
written complaint with the shift-in-charge of security of the hotel. Glaser also reported belongings of a hotel guest while cleaning the hotel rooms, under the attendant facts
that Damalerio had previously asked from him souvenirs, cassettes, and other and circumstances, we believe that the dismissal of Damalerio was illegal. The
giveaways. investigation held by the hotel security people did not unearth enough evidence of
culpability. It bears repeating that subject hotel guest lost nothing.
Damalerio was given a Disciplinary Action Notice (DAN). The next day, an
administrative hearing was conducted on the matter. Although Maranaw Hotel may have reasons to doubt the honesty and trustworthiness
of Damalerio, as a result of what happened, absent sufficient proof of guilt, he
Damalerio denied the accusation against him, theorizing that when he found the room (Damalerio), who is a rank-and- file employee, cannot be legally dismissed.
of Glaser in disarray, he noticed some belongings of the hotel guest scattered around, Unsubstantiated suspicions and baseless conclusions by employers are not legal
that he thought of placing the same in his luggage. While doing so, Glaser arrived. justification for dismissing employees. The burden of proving the existence of a valid
When asked by the latter if something was wrong, he (Damalerio) said "I'm just and authorized cause of termination is on the employer. Any doubt should be resolved
cleaning your room," and Glaser remarked, "Good work," and then, the two of them in favor of the employee, in keeping with the principle of social justice enshrined in
chatted about Glaser's concert. the Constitution.

Damalerio received a memorandum stating that he (Damalerio) was found to have (2) As regards the share of Damalerio in the service charges collected during the period
committed qualified theft in violation of House Rule No. 1, Section 3 of Hotel Rules of his preventive suspension, the same form part of his earnings, and his dismissal
and Regulations. The same memorandum served as a notice of termination of his having been adjudged to be illegal, he is entitled not only to full backwages but also
employment. to other benefits, including a just share in the service charges, to be computed from the
start of his preventive suspension until his reinstatement.
Damalerio filed a complaint with the Labor Arbiter for Illegal Dismissal. However, mindful of the animosity and strained relations between the parties,
emanating from this litigation, we uphold the ruling a quo that in lieu of reinstatement,
LA: dismissed the complaint and ordering the hotel to reinstate him to his former or separation pay may be given to the private respondent, at the rate of one (1) month pay
equivalent position without loss of seniority rights and with backwages from when he for every year of service. Should petitioner opt in favor of separation pay, the private
was preventively suspended up to actual reinstatement and other benefits, including respondent shall no longer be entitled to share in the service charges collected during
but not limited to his share in the charges and/or tips which he failed to receive, and his preventive suspension.
all other CBA benefits that have accrued since his dismissal.

NLRC: option of paying separation pay instead of reinstatement.



13TH MONTH PAY bonus under the CBA is an obligation created by the contract between the management
G.R. No. L-60337 August 21, 1987 and workers while the 13th month pay is mandated by the law (P. D. 851).
CORPORATION), petitioner, vs. THE NATIONAL LABOR RELATIONS The SC considered the seven-day bonus here demanded "to be in addition to the legal
COMMISSION and JOSE ARMAS, et al., respondents. requirement." Although unlike the Valenzuela CBA, which took effect after the
promulgation of Presidential Decree No. 851 in 1975, the subject agreement was
FACTS: Sometime in May, 1972, the petitioner and the Universal Corn Products entered into as early as 1972, that is no bar to the application of Valenzuela. What is
Workers Union entered into a collective bargaining agreement in which it was significant is the fact that, like the Valenzuela, agreement, the Christmas bonus
provided, among other things, that: The COMPANY agrees to grant all regular provided in the collective bargaining agreement accords a reward, in this case, for
workers within the bargaining unit with at least one (1) year of continuous service, a loyalty, to certain employees. This is evident from the stipulation granting the bonus
Christmas bonus equivalent to the regular wages for seven (7) working days, effective in question to workers "with at least one (1) year of continuous service." It is claimed,
December, 1972. The bonus shall be given to the workers on the second week of however, that as a consequence of the impasse between the parties beginning 1974
December. In the event that the service of a worker is not continuous due to factory through 1979, no collective bargaining agreement was in force during those
shutdown, machine breakdown or prolonged absences or leaves, the Christmas bonus intervening years. Hence, there is allegedly no basis for the money award granted by
shall be prorated in accordance with the length of services that worker concerned has the respondent labor body. But it is not disputed that under the 1972 collective
served during the year. The agreement had a duration of three years. On account bargaining agreement, [i]f no agreement and negotiations are continued, all the
however of differences between the parties with respect to certain economic issues, provisions of this Agreement shall remain in full force up to the time a new agreement
the collective bargaining agreement in question expired without being renewed. On is executed." The fact, therefore, that the new agreements are silent on the seven-day
June 1, 1979, the parties entered into an "addendum" stipulating certain wage bonus demanded should not preclude the private respondents' claims thereon. The
increases. Simultaneously, they entered into a collective bargaining agreement. Like 1972 agreement is basis enough for such claims for the whole writing is " "instinct
the "addendum," the new collective bargaining agreement did not refer to the with an obligation," imperfectly express."
"Christmas bonus" theretofore paid but dealt only with salary adjustments. According
to the petitioner, the new agreements deliberately excluded the grant of Christmas ----------X X X----------
bonus with the enactment of PD No. 851. It further claims that since 1975, it had been
paying its employees 13th-month pay pursuant to the Decree. For failure of the PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR
petitioner to pay the seven-day Christmas bonus for 1975 to 1978 inclusive, in RELATIONS COMMISSION and AIRLINE PILOTS ASSOCIATION OF THE
accordance with the 1972 CBA, the union went to the labor arbiter for relief. The labor PHILIPPINES (ALPAP), respondents (PAL v NLRC)
arbiter ruled that the payment of the 13th month pay precluded the payment of further G.R. No. 114280, July 26, 1996
Christmas bonus. The NLRC set aside the decision of the labor arbiter appealed from Francisco, J. (3rd Division)
and entered another one, "directing respondent company [now the petitioner] to pay Topic: 13th month pay (Wk 11)
the members concerned of complainants [sic] union their 7-day wage bonus in
accordance with the 1972 CBA from 1975 to 1978." The case is appealed to the SC. FACTS:
 Unfair labor practice was filed against Philippine Airlines, Inc. (PAL) by the
ISSUE: Whether or not the employees should receive their 13 th month pay pursuant Airline Pilots Association of the Philippines (ALPAP). Charging PAL of
to the aforesaid CBA. violating Presidential Decree No. 851, its IRR and Memorandum Order No.
28, for unlawfully refusing and failing to pay the pilots their thirteenth month
RULING: YES. The SC Cited the case of United CMC Textile Workers Union v. pay from 1988 to 1990.
Valenzuela which held that:... If the Christmas bonus was included in the 13th month  PAL denied any liability to ALPAP and maintained that it was NOT obliged
pay, then there would be no need for having a specific provision on Christmas bonus to give its pilots a thirteenth month pay under P.D. 851 as it was already
in the CBA. But it did not provide for a bonus in graduated amounts depending on the paying said employees the equivalent of a thirteenth month pay in the form
length of service of the employee. The intention is clear therefore that the bonus of a year-end bonus.
provided in the CBA was meant to be in addition to the legal requirement. Moreover,  PAL invokes that under Section 2 of P.D. 851 and its Implementing Rules
why exclude the payment of the 1978 Christmas bonus and pay only the 1979-1980 and Regulations, “employers already paying their employees a 13th month
bonus. The classification of the company's workers in the CBA according to their years pay or more in a calendar year or its equivalent at the time of this issuance,”
of service supports the allegation that the reason for the payment of bonus was to give are NOT covered by P.D. 851
bigger award to the senior employees-a purpose which is not found by P.D. 851. A  PAL also contends that there is no contractual obligation to pay the pilots any



thirteenth month pay in the absence of any provision in their CBA. that required by law,” was REJECTED. The ABSENCE of an express
 ALPAP argued that the payment of the year-end bonus CANNOT be equated provision in the CBA between PAL and ALPAP obligating the former to pay
with the thirteenth month pay since the payment of the former is conditional the members of the latter a thirteenth month pay is IMMATERIAL.
in character and not fixed in its amount, while that of the thirteenth month  It cannot be disputed that the tenor of P.D. 851 as amended by Memorandum
pay is mandatory in character and definite in its amount. Order No. 28 is MANDATORY in so providing that “ALL EMPLOYERS
 LA discarded PAL's contentions and took note of the fact that payment of the EMPLOYEES A THIRTEENTH MONTH PAY NOT LATER THAN
year-end bonus is conditional and uncertain. DECEMBER 24 OF EVERY YEAR.” Non-compliance with this mandate
 NLRC favoured LA’s decision. cannot be excused by the simple expedient of pointing to the absence of a
similar provision in the CBA for this would contravene the basic rule that an
ISSUE: WON PAL is liable to the members of ALPAP for non-payment of their existing law enters into and forms part of a valid contract without the need
thirteenth month pay. for the parties to expressly make reference to it. Notwithstanding therefore
 The Court held that although P.D. 851 as amended by Memorandum Order DEEMED INCORPORATED IN THE CBA.
No. 28 requires all employers to pay ALL their rank and file employees a  Except for the pilots belonging to ALPAP, all other employees of PAL who
thirteenth month pay, the rule is subject to certain exceptions. EXCLUDED are either members of FASAP or PALEA are enjoying both benefits of a
from the coverage are “employers ALREADY PAYING THEIR thirteenth month pay and a year-end bonus. There is no rational basis for
EMPLOYEES A THIRTEENTH MONTH PAY OR MORE IN A withholding from the members of ALPAP the benefit of a year-end bonus in
CALENDAR YEAR OR ITS EQUIVALENT at the time of the issuance of addition to the thirteenth month pay, while the same is being granted to the
the law.” other rank and file employees of PAL.
 Construing the term “ITS EQUIVALENT,” the same was defined as
INCLUSIVE of “Christmas bonus, mid-year bonus, profit-sharing payments ----------X X X----------
and other cash bonuses amounting to not less than 1/12th of the basic salary
but shall not include cash and stock dividend, cost of living allowances and Philippine Duplicators vs. NLRC (GR 110068 February 15, 1995)
all other allowances regularly enjoyed by the employee, as well as
nonmonetary benefit. Facts: Petitioner, Philippine Duplicators pays its salesmen a small fixed or guaranteed
 The term “BONUS” was in turn interpreted to mean: “[A] bonus is an amount wage. Some part of the salesmen’s wages or salaries composed of the sales or incentive
granted and paid to an employee for his industry and loyalty which commissions earned on actual sales of duplicating machines closed by them. Thus,
contributed to the success of the employer’s business and made possible the said sales commissions received for every duplicating machine sold constituted part
realization of profits. It is an act of generosity of the employer . . . It is also of the basic compensation or remuneration of the salesmen of the Philippine
granted by an enlightened employer to spur the employee to greater efforts Duplicators for doing their job.The Labor Arbiter directed Petitioner Duplicators to
for the success of the business and realization of bigger profits. pay 13th month pay to private respondent employees computed on the basis of their
 The year-end bonus being granted by PAL to the employees may be fixed wages plus sales commission.
considered as an EQUIVALENT of the thirteenth month pay considering the
SIMILARITY IN THE PURPOSE FOR GRANTING THE SAME. As Petitioner contends that their sales commission should not be included in the
advanced by ALPAP, the rationale for PAL’s grant of a year-end bonus was computation of the 13th month pay invoking the consolidated cases of Boie-Takeda
to give regard for the loyalty, dedication and hard work of the employee, as Chemicals, Inc. vs Hon. Dionisio dela Serna and Philippine Fuji Xerox Corp. vs Hon.
manifested by the PAL President’s letter addressed to employees of PAL. Crecencio Trajano, were the so-called commissions of medical representatives of
Boie-Takeda Chemicals and rank-and-file employees of Fuji Xerox Co. were not
 It appears that the rationale for the grant of the year-end bonus by PAL
included in the term “basic salary” in computing the 13th month pay.
coincides with the nature of the bonus which can be equated with the payment
of a thirteenth month pay.
Issue: Whether or not the commissions received by the salesmen were part of the
 However, the premise of PAL that, “the absence of a provision granting both
wages to be considered for their 13th month pay?
benefits to the members of ALPAP confirms that there was no intention on
the part of the PAL to extend additional benefits to the former over and above



Held: Yes. These commission which are an integral part of the basic salary structure with JPL, and cannot charge JPL with illegal dismissal. The claims for 13th month pay
of the Philippine Duplicator’s employees-salesmen, are not overtime payments, nor and service incentive leave pay was also denied since private respondents were paid
profit-sharing payments nor any other fringe benefit. Thus, salesmen’s commissions way above the applicable minimum wage during their employment.
comprising a pre-determined percent of the selling price of the goods were properly
included in the term “basic salary” for purposes of computing the 13thmonth pay. NLRC: agreed with the LA that the private respondents were not illegally dismissed
but granted the latter separation pay, service incentive leave pay and 13th month pay.
Commissions of medical representatives of Boie-Takeda Chemicals and rank-and-file
employees of Fuji Xerox Co. were not included in the term “basic salary” because CA: Dismissed the petition and affirmed in toto the NLRC resolution. While
these were paid as “productivity bonuses” which is not included in the computation of conceding that there was no illegal dismissal, it justified the award of separation pay
13th month pay. on the grounds of equity and social justice.

Productivity bonuses are generally tied to the productivity or profit generation of the Notwithstanding the absence of a contractual agreement on the grant of 13th month
employer corporation. Productivity bonuses are not directly dependent on the extent pay, compliance with the same is mandatory under the law. Moreover, JPL failed to
an individual employee exerts himself. It is something extra for which no specific show that it was exempt from paying service incentive leave pay.
additional services are rendered by any particular employee and hence, not legally Hence this petition.
demandable, absent a contractual undertaking to pay it.
ISSUE: WON the private respondents should be entitled to 13th month pay, separation
While Sales commission are intimately related to or directly proportional to the extent pay and service incentive leave pay.
or energy of an employee’s endeavours. Commissions are paid upon the specific
results achieved by a salesman-employee. It is a percentage of the sales closed by a HELD: As to 13th month pay, and Service Incentive Leave pay, YES; as to separation
salesman and operates as an integral part of such salesman’s basic pay. pay, NO.

----------X X X---------- Separation pay:

The common denominator of the instances where payment of separation pay is
JPL v. CA G.R. No. 151966 warranted is that the employee was dismissed by the employer. In the instant case,
July 8, 2005 there was no dismissal to speak of. Private respondents were simply not dismissed at
all, whether legally or illegally. What they received from JPL was not a notice of
FACTS: JPL Marketing and Promotions is a domestic corporation engaged in the termination of employment, but a memo informing them of the termination of CMCs
business of recruitment and placement of workers. On the other hand, private contract with JPL. More importantly, they were advised that they were to be
respondents Noel Gonzales, Ramon Abesa III and Faustino Aninipot were employed reassigned. At that time, there was no severance of employment to speak of.
by JPL as merchandisers on separate dates and assigned at different establishments in
Naga City and Daet, Camarines Norte as attendants to the display of California 13th month pay:
Marketing Corporation (CMC), one of petitioners clients. Presidential Decree No. 851, as amended, requires an employer to pay its rank and
file employees a 13th month pay not later than 24 December of every year. However,
On 13 August 1996, JPL notified private respondents that CMC would stop its direct employers not paying their employees a 13th month pay or its equivalent are not
merchandising activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 covered by said law. The term its equivalent was defined by the laws implementing
August 1996. They were advised to wait for further notice as they would be transferred guidelines as including Christmas bonus, mid-year bonus, cash bonuses and other
to other clients. However, on 17 October 1996, private respondents Abesa and payment amounting to not less than 1/12 of the basic salary but shall not include cash
Gonzales filed before NLRC complaints for illegal dismissal, praying for separation and stock dividends, cost-of-living-allowances and all other allowances regularly
pay, 13th month pay, service incentive leave pay and payment for moral damages. enjoyed by the employee, as well as non-monetary benefits.
Aninipot filed a similar case thereafter.
Service Incentive leave pay:
LA: dismissed the case for lack of merit. Gonzales and Abesa applied with and were service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
employed by the store where they were originally assigned by JPL even before the benefit of 5 days with pay, enjoyed by an employee who has rendered at least one year
lapse of the 6-month period given by law to JPL to provide private respondents a new of service. Unless specifically excepted, all establishments are required to grant service
assignment. Thus, they may be considered to have unilaterally severed their relation incentive leave to their employees. The term at least one year of service shall mean



service within 12 months, whether continuous or broken reckoned from the date the to a year-end payment of P573,000.00 on the basis of the company policy of granting
employee started working. The Court has held in several instances that service yearly lump sum payments to petitioner during all the years of service and that
incentive leave is clearly demandable after one year of service. respondent firm had failed to give petitioner the same benefit for the year 1999 without
any explanation. On appeal by respondent firm to the NLRC, the ruling was reversed
Computation of 13th month pay and Service Incentive Leave pay: and the amount was reduced from the amount of P12,681.00 awarded by the Labor
Computation for the 13th month pay should properly begin from the first day of Arbiter as payment for the reimbursement claims, the NLRC lowered the same
employment, the service incentive leave pay should start a year after commencement to P2,301.00 representing the amount which remained unpaid. With regards the issues
of service, for it is only then that the employee is entitled to said benefit. On the other on the lump sum payments and cash equivalent of the leave credits, the NLRC affirmed
hand, the computation for both benefits should only be up to 15 August 1996, or the the findings of the Labor Arbiter. The Court of Appeals upon appeal further reduced
last day that private respondents worked for JPL. To extend the period to the date of the amount to be reimbursed (1) P2,301.00 representing private respondent’s
finality of the NLRC resolution would negate the absence of illegal dismissal, or to be reimbursement claims; (2) P9,802.83 representing the underpayment of the cash
more precise, the want of dismissal in this case. Besides, it would be unfair to require equivalent of private respondents unused leave credits; (3) P10,000.00 attorney’s
JPL to pay private respondents the said benefits beyond 15 August 1996 when they fees.
did not render any service to JPL beyond that date.
Issue: Whether or not petitioner was entitled to the lump sum amount (bonus)
G.R. No. 168654 Held: No. While the amount was drawn from the annual net income of the firm, the
ZAYBER JOHN B. PROTACIO - versus - LAYA MANANGHAYA & distribution thereof to non-partners or employees of the firm was not, strictly speaking,
CO. and/or MARIO T. MANANGHAYA a profit-sharing arrangement between petitioner and respondent firm contrary to the
Court of Appeals finding. The payment thereof to non-partners of the firm like herein
Facts: Petitioner was hired by defendant firm as Tax Manager on 01 April 1996. He petitioner was discretionary on the part of the chairman and managing partner coming
was subsequently promoted to the position of Senior Tax Manager. On 01 October from their authority to fix the compensation of any employee based on a share in the
1997, petitioner was again promoted to the position of Tax Principal. On 1999 partnerships net income. The distribution being merely discretionary, the year-end
however, he resigned from the firm and sent a letter demanding immediately his lump sum payment may properly be considered as a year-end bonus or incentive.
13th month pay, the cash commutation of his leave credits and the issuance of his 1999 Contrary to petitioner’s claim, the granting of the year-end lump sum amount was
Certificate of Income Tax Withheld on Compensation. Petitioner sent to respondent precisely dependent on the firms net income; hence, the same was payable only after
firm two more demand letters for the payment of his reimbursement claims under pain the firm’s annual net income and cash position were determined.
of the legal action.
By definition, a bonus is a gratuity or act of liberality of the giver. It is something given
Defendant failed to comply with the request resulting to the filing of a suit against in addition to what is ordinarily received by or strictly due the recipient. A bonus is
them by Protacio. Respondent firm denied it had intentionally delayed the processing granted and paid to an employee for his industry and loyalty which contributed to the
of petitioners claims but alleged that the abrupt departure of petitioner and three other success of the employer’s business and made possible the realization of profits.
members of the firms Tax Division had created problems in the determination of Generally, a bonus is not a demandable and enforceable obligation. It is so only when
petitioner’s various accountabilities, which could be finished only by going over it is made part of the wage or salary or compensation. When considered as part of the
voluminous documents. Respondents further averred that they had been taken aback compensation and therefore demandable and enforceable, the amount is usually fixed.
upon learning about the labor case filed by petitioner when all along they had done If the amount would be a contingent one dependent upon the realization of the profits,
their best to facilitate the processing of his claims. While the case is being heard, the bonus is also not demandable and enforceable.
defendant paid 1) P71,250.00, representing petitioners 13th month pay;
(2) P54,824.18, as payments for the cash equivalent of petitioners leave credits and In the instant case, petitioners claim that the year-end lump sum represented the
reimbursement claims; and (3) P10,762.57, for the refund of petitioner’s taxes balance of his total compensation package is incorrect. The fact remains that the
withheld on his vacation leave credits. Petitioners copies of his withholding tax amounts paid to petitioner on the two occasions varied and were always dependent
certificates were sent to him along with the check payments. Petitioner acknowledged upon the firm’s financial position.
the receipt of the 13th month pay but disputed the computation of the cash value of his
vacation leave credits and reimbursement claims. Moreover, in Philippine Duplicators, Inc. v. NLRC, the Court held that if the bonus is
paid only if profits are realized or a certain amount of productivity achieved, it cannot
The Labor Arbiter favored Protacio saying that the lump sum payment of as entitled be considered part of wages. If the desired goal of production is not obtained, of the



amount of actual work accomplished, the bonus does not accrue. Only when the NLRC charging petitioner with diminution of benefits, non-compliance with Wage
employer promises and agrees to give without any conditions imposed for its payment, Order No. 6 and non-payment of holiday pay, including damages.
such as success of business or greater production or output, does the bonus become
part of the wage. On the alleged non-payment of legal holiday pay, RESPONDENTS ARGUE THAT:
Producers Bank of the Philippines has been providing since 1971 when it started its
Petitioners assertion that he was responsible for generating revenues amounting to operation, a mid-year bonus equivalent to an employee's one-month basic pay and a
more than P7 million remains a mere allegation in his pleadings. The records are Christmas bonus equivalent to an employee's one whole month basic pay plus
absolutely bereft of any supporting evidence to substantiate the allegation. allowance.
When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously
The granting of a bonus is basically a management prerogative which cannot be forced being given as part of the Christmas bonus was applied as compliance to it (P.D. 851).
upon the employer who may not be obliged to assume the onerous burden of granting From 1981 up to 1983, the bank continued giving one month basic pay as mid-year
bonuses or other benefits aside from the employees basic salaries or wages. bonus, one month basic pay as 13th month pay but the Christmas bonus was no
Respondents had consistently maintained from the start that petitioner was not entitled longer based on the allowance but on the basic pay of the employees
to the bonus as a matter of right. The payment of the year-end lump sum bonus based
upon the firms productivity or the individual performance of its employees was well In 1984, the bank was placed under conservatorship, hence it only gave a 1/2 month
within respondent firms prerogative. Thus, respondent firm was also justified in basic pay as compliance of the 13th month pay and none for the Christmas bonus
declining to give the bonus to petitioner on account of the latters unsatisfactory Private respondent argues that the mid-year and Christmas bonuses, by reason of
performance. their having been given for thirteen consecutive years, have ripened into a vested
right and, as such, can no longer be unilaterally withdrawn by petitioner without
Petitioner failed to present evidence refuting respondents allegation and proof that they violating Article 100 of Presidential Decree No. 4429 which prohibits the diminution
received a number of complaints from clients about petitioners poor services. For or elimination of benefits already being enjoyed by the employees.
purposes of determining whether or not petitioner was entitled to the year-end lump
sum bonus, respondents were not legally obliged to raise the issue of substandard On the other hand, PETITIONER ASSERTS THAT it cannot be compelled to pay
performance with petitioner, unlike what the Labor Arbiter had suggested. Of course, the alleged bonus differentials due to
if what was in question was petitioners continued employment vis--vis the allegations 1. its depressed financial condition
of unsatisfactory performance, then respondent firm was required under the law to give 2. sustained losses in the millions of pesos from 1984 to 1988, and
petitioner due process to explain his side before instituting any disciplinary measure. 3. that the collective bargaining agreement of the parties does not provide for
However, in the instant case, the granting of the year-end lump sum bonus was the payment of any mid-year or Christmas bonus:
discretionary and conditional, thus, petitioner may not question the basis for the a. “Acts of Grace. Any other benefits or privileges which are not
granting of a mere privilege. expressly provided in this Agreement, even if now accorded or
hereafter accorded to the employees, shall be deemed purely acts of
WHEREFORE, the instant petition for review on certiorari is PARTLY grace dependent upon the sole judgment and discretion of the BANK
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 85038 to grant, modify or withdraw”
is AFFIRMED with the MODIFICATION that respondents are liable for the Labor Arbiter: Dismissed said complaint
underpayment of the cash equivalent of petitioners leave credits in the amount NLRC: Reversed Labor Arbiter except for damages
of P39,855.80. SO ORDERED. MR denied, hence this petition

----------X X X---------- RELEVANT ISSUES:

1. WON the bonus is a demandable and enforceable obligation? NO, granting of a
G.R. No. 100701 March 28, 2001 bonus is basically a management prerogative which cannot be forced upon the
PRODUCERS BANK OF THE PHILIPPINES, petitioner, employer who may not be obliged to assume the onerous burden of granting
vs. NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS bonuses or other benefits aside from the employee's basic salaries or wages,
BANK EMPLOYEES ASSOCIATION, respondents. especially so if it is incapable of doing so.
TOPIC: Bonus/Gratuity
2. Whether it is justified to diminish or not to pay the 13 th month pay because
FACTS: A complaint was filed by private respondent with the Arbitration Branch of petitioner is not covered by PD 851 since the mid-year and Christmas bonuses it



has been giving its employees exceeds the basic salary for one month? YES, term "equivalent" shall be construed to include Christmas bonus, mid-year bonus, cash
employers are already paying their employees a 13 th month pay or its bonuses and other payments amounting to not less than 1/12 of the basic salary.
equivalent hence, are not covered by the law.
The intention of the law was to grant some relief - not to all workers - but only to those
RULING: not actually paid a 13th month salary or what amounts to it, by whatever name called.
1. A bonus is an amount granted and paid to an employee for his industry and loyalty It was not envisioned that a double burden would be imposed on the employer already
which contributed to the success of the employer's business and made possible the paying his employees a 13th month pay or its equivalent whether out of pure generosity
realization of profits. It is an act of generosity granted by an enlightened employer or on the basis of a binding agreement. To impose upon an employer already giving
to spur the employee to greater efforts for the success of the business and his employees the equivalent of a 13th month pay would be to penalize him for his
realization of bigger profits. liberality and in all probability, the employer would react by withdrawing the bonuses
The granting of a bonus is a management prerogative, something given in addition to or resist further voluntary grants for fear that if and when a law is passed giving the
what is ordinarily received by or strictly due the recipient. Thus, a bonus is not a same benefits, his prior concessions might not be given due credit.
demandable and enforceable obligation, except when it is made part of the wage, salary In the case at bar, even assuming the truth of private respondent's claims as contained
or compensation of the employee. in its position paper or Memorandum regarding the payments received by its members
in the form of 13th month pay, mid-year bonus and Christmas bonus, it is noted that,
However, an employer cannot be forced to distribute bonuses which it can no for each and every year involved, the total amount given by petitioner would still
longer afford to pay. To hold otherwise would be to penalize the employer for his exceed, or at least be equal to, one month basic salary and thus, may be considered
past generosity. as an "equivalent" of the 13th month pay mandated by PD 851.

The matter of giving them bonuses over and above their lawful salaries and allowances DISPOSITIVE:
is entirely dependent on the profits, if any, realized by the Bank from its operations NLRC decision set aside except for damages.
during the past year. (Traders Royal Bank v. NLRC)
----------X X X----------
By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient
has no right to demand as a matter of right. It is something given in addition to what KAMAYA POINT HOTEL, PETITIONER, VS. NATIONAL LABOR
is ordinarily received by or strictly due the recipient. The granting of a bonus is RELATIONS COMMISSION, FEDERATION OF FREE WORKERS AND
basically a management prerogative which cannot be forced upon the employer who MEMIA QUIAMBAO, RESPONDENTS.
may not be obliged to assume the onerous burden of granting bonuses or other benefits G.R. No. 75289, August 31, 1989
aside from the employee's basic salaries or wages, especially so if it is incapable of
doing so. (Manila Banking Corporation v. NLRC) FACTS:
Respondent Memia Quiambao with thirty others who are members of private
IN THIS CASE, it was established by the labor arbiter and the NLRC and admitted by respondent Federation of Free Workers (FFW) were employed by petitioner as hotel
both parties that petitioner was placed under conservatorship by the Monetary Board. crew. On the basis of the profitability of the company's business operations,
The Monetary Board may place a bank under the control of a conservator when it finds management granted a 14th month pay to its employees starting in 1979. In January
that the bank is continuously unable or unwilling to maintain a condition of solvency 1982, operations ceased to give way to the hotel's conversion into a training center for
or liquidity. In such a depressed financial condition, petitioner cannot be legally Libyan scholars. However, due to technical and financing problems, the Libyans pre-
compelled to continue paying the same amount of bonuses to its employees. terminated the program on July 7, 1982, leaving petitioner without any business, aside
2. PD 851, which was issued by President Marcos on 16 December 1975, requires from the fact that it was not paid for the use of the hotel premises and in addition had
all employers to pay their employees receiving a basic salary of not more than P to undertake repairs of the premises damaged by the Libyan students. All in all
1,000 a month regardless of the nature of the employment, a 13 th month pay, not petitioner allegedly suffered losses amounting to P2-million.
later than December 24 of every year.
Although petitioner reopened the hotel premises to the public, it was not able to pick-
However, employers already paying their employees a 13 th month pay or its up its lost patronage. In a couple of months it effected a retrenchment program until
equivalent are not covered by the law. finally on January 7, 1984, it totally closed its business.

Under the Revised Guidelines on the Implementation of the 13 th-Month Pay Law, the private respondent Federation of Free Workers (FFW), a legitimate labor organization,



filed with the Ministry of Labor and Employment, Bataan Provincial Office, Bataan Lepanto Ceramics Inc. vs Lepanto Ceramics Employees Association
Export Processing Zone, Mariveles, Bataan, a complaint against petitioner for illegal G.R. no. 180866 March 2, 2010
suspension, violation of the CBA and non-payment of the 14th month pay.
Facts: In 1998, Lepanto Ceramics, Inc. is engaged in buying and selling ceramic tiles
After the hearing, Executive Labor Arbiter Francisco M. Jose, Jr. rendered a decision and similar products and is giving 3,000 bonus to employees who are members of
in favor of the respondents ordering the respondent Kamaya Point Hotel to pay the Lepanto Ceramics Employees Association, a legitimate labor organization.
14th month pay for 1982 of all its rank and file employees and the monetary equivalent
of the benefits as provided for in its CBA. 1999, CBA: Grants Christmas package/bonus for members of R. The Christmas bonus
was one of the enumerated “existing benefit, practice of traditional rights” which “shall
On appeal, NLRC in its decision set aside the award of monetary benefits under the remain in full force and effect.”
CBA but affirmed the grant of the 14th month pay.
Section 8. – All other existing benefits, practice of traditional rights consisting of
ISSUE: WON Respondents are entitled to their claim of 14th Month Pay in Christmas Gift package/bonus, reimbursement of transportation expenses in case of
accordance with Art. 100 of the Labor Code. breakdown of service vehicle and medical services and safety devices by virtue of
company policies by the UNION and employees shall remain in full force and effect.
HELD: NO. Article 100 of the Labor Code states:
"Prohibition against elimination or diminution of benefits. - Nothing in this Book shall Section 1. EFFECTIVITY. This agreement shall become effective on September 1,
be construed to eliminate or in any way diminish supplements, or other employee 1999 and shall remain in full force and effect without change for a period of four (4)
benefits being enjoyed at the time of promulgation of this Code." years or up to August 31, 2004 except as to the representation aspect, which shall be
effective for a period of five (5) years. It shall bind each and every employee in the
We find it difficult to comprehend why the NLRC and the Labor Arbiter, despite their bargaining unit including the present and future officers of the Union.
admission that the 14th month pay has no contractual or legal basis, still chose to rule
in favor of private respondents. It is patently obvious that Article 100 is clearly 1999, 2000 and 2001, the bonus was not in cash. Instead, company gave each of the
without applicability. members of the association aTile Redemption Certificates equivalent to P3,000.00.
The bonus for the year 2002 is the root of the present dispute. The company gave a
Moreover, there is no law that mandates the payment of the 14th month pay. This is year-end cash benefit of P600 and offered a cash advance to interested employees
emphasized in the grant of exemption under Presidential Decree 851 (13th Month Pay equivalent to one (1) month salary payable in one year. The members of the asociation
Law) which states: "Employers already paying their employees a 13th month pay or objected and argued that this was in violation of the CBA it executed with the
its equivalent are not covered by this Decree." Necessarily then, only the 13th month company.
pay is mandated. Having enjoyed the additional income in the form of the 13th month
pay, private respondents' insistence on the 14th month pay for 1982 is already an Settlement, mediation failed. In voluntary arbitration, members of the association
unwarranted expansion of the liberality of the law. noted that in a speech during the Christmas celebration, one of the company’s top
executives assured the employees of said bonus. However, the Human Resources
Also contractually, as gleaned from the collective bargaining agreement between Development Manager informed them that the traditional bonus would not be given as
management and the union, there is no stipulation as to such extra the company’s earnings were intended for the payment of its bank loans.
remuneration. Evidently, this omission is an acknowledgement that such benefit is
entirely contingent or dependent on the profitability of the company's operations. Lepanto Ceramics Inc’s arguments:
1. Extra compensation was based on available resources for a given year and the
Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, workers are not entitled to a bonus if the company does not make profits.
gratuitous in nature. The granting of the 14th month pay is a management prerogative 2. Company incurred net losses for the years 2001 and 2002 totaling to P1.5 billion;
which cannot be forced upon the employer. It is something given in addition to what and since 1999, when the CBA was signed, the company’s accumulated losses
is ordinarily received by or strictly due the recipient. It is a gratuity to which the amounted to over P2.7 billion.
recipient has no right to make a demand. 3. Grant of a one (1) month salary cash advance was not meant to take the place of a
bonus but was meant to show the company’s sincere desire to help its employees
----------X X X---------- despite its precarious financial condition.
4. CBA provision on a “Christmas gift/bonus” refers to alternative benefits.



5. Even if CBA contained an unconditional obligation to grant the bonus, the present G.R. No. 185665
difficult economic times had already legally released it therefrom pursuant to Article EASTERN TELECOMMUNICATIONS PHILIPPINES, INC vs EASTERN
1267 of the Civil Code. TELECOMS EMPLOYEES UNION,

Voluntary arbitrator, CA, and now SC all rule for members of the association. FACTS: Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in
the business of providing telecommunications facilities, particularly leasing
Issue: Whether or not the company is required to pay its employees Christmas Bonus? international date lines or circuits, regular landlines, internet and data services,
– Yes employing approximately 400 employees. Eastern Telecoms Employees Union
(ETEU) is the certified exclusive bargaining agent of the company’s rank and file
Held: A “bonus” is a gratuity or act of liberality. It is given in addition to what is employees with a strong following of 147 regular members. The labor dispute was a
ordinarily received by or strictly due the recipient. It is granted to an employee for his spin-off of the company’s plan to defer payment of the 2003 14 th, 15th and 16th month
industry and loyalty which contributed to the success of the employer’s business and bonuses sometime in April 2004. The company’s main ground in postponing the
made possible the realization of profits. It helps to spur the employee to greater efforts. payment of bonuses is due to allege continuing deterioration of company’s financial
position which started in the year 2000. However, ETPI while postponing payment of
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be bonuses sometime in April 2004, such payment would also be subject to availability
enforceable, it must have been promised by the employer and expressly agreed upon of funds.The union strongly opposed the deferment in payment of the bonuses by filing
by the parties. Given that the bonus in this case is integrated in the CBA, it is now a a preventive mediation complaint with the NCMB on July 3, 2003, the purpose of
demandable obligation. By its incorporation in the CBA, the Christmas bonus due is which complaint is to determine the date when the bonus should be paid. In the
more than just an act of generosity but a contractual obligation. In labor law the CBA conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses
is the law between the parties and they are obliged to comply with its provisions. would only be made in April 2004 to which date of payment, the union agreed. Thus,
considering the agreement forged between the parties, the said agreement was reduced
CBA reveals that the same provides for the “Christmas gift package/bonus” without to a Memorandum of Agreement. The union requested that the President of the
qualification. Terse and clear, the said provision did not state that the bonus depends company should be made a signatory to the agreement, however, the latter refused to
on the petitioner’s financial standing. sign. In addition to such a refusal, the company made a sudden turnaround in its
position by declaring that they will no longer pay the bonuses until the issue is resolved
It is noteworthy that in 1998 and 1999 Financial Statements, Lepanto Ceramics took through compulsory arbitration. Thus, ETEU filed a Notice of Strike on the ground of
note that “the 1997 financial crisis in the Asian region adversely affected the Philippine unfair labor practice for failure of ETPI to pay the bonuses in gross violation of the
economy.” It is clear that the company was aware of the imminence and possibility of economic provision of the existing CBA. The NLRC issued its Resolution dismissing
business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net ETEUs complaint and held that ETPI could not be forced to pay the union members
loss of 14M. Yet it gave a 3k bonus. the 14th, 15th and 16thmonth bonuses for the year 2003 and the 14 th month bonus for
the year 2004 inasmuch as the payment of these additional benefits was basically a
All given, business losses are a feeble ground to repudiate obligation under CBA. The management prerogative, being an act of generosity and munificence on the part of the
rule is settled that any benefit and supplement enjoyed by employees cannot be company and contingent upon the realization of profits. The NLRC pronounced that
reduced, diminished, discontinued or eliminated by the employer. The principle of ETPI may not be obliged to pay these extra compensations in view of the substantial
non-diminution of benefits is founded on the constitutional mandate to protect the decline in its financial condition. Likewise, the NLRC found that ETPI was not guilty
rights of workers and to promote their welfare and to afford labor full protection. of the ULP charge elaborating that no sufficient and substantial evidence was adduced
to attribute malice to the company for its refusal to pay the subject bonuses. ETEU
The Court is fully aware that implementation to the letter of the subject CBA provision filed a petition for certiorari before the CA ascribing grave abuse of discretion on the
may further deplete company resources. Company’s remedy though lies not in the NLRC for disregarding its evidence which allegedly would prove that the subject
Court’s invalidation of the provision but in the parties’ clarification of the same in bonuses were part of the union members wages, salaries or compensations. In addition,
subsequent CBA negotiations. ETEU asserted that the NLRC committed grave abuse of discretion when it ruled that
ETPI is not contractually bound to give said bonuses to the union members. The CA,
----------X X X---------- however, sustained the NLRC finding that the allegation of ULP was devoid of merit.

ISSUE: Whether or not petitioner ETPI is liable to pay 14 th, 15th and 16th month
bonuses for the year 2003 and 14th month bonus for the year 2004 to the members of



respondent union

RULING: YES. From a legal point of view, 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. The grant
of a bonus is basically a management prerogative which cannot be forced upon the
employer who may not be obliged to assume the onerous burden of granting bonuses
or other benefits aside from the employees basic salaries or wages. A bonus, however,
becomes a demandable or enforceable obligation when it is made part of the wage or
salary or compensation of the employee. Particularly instructive is the ruling of the
Court in Metro Transit Organization, Inc. v. National Labor Relations
Commission, where it was written:

Whether or not a bonus forms part of wages depends upon the circumstances and
conditions for its payment. If it is additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if
it is paid only if profits are realized or if a certain level of productivity is achieved, it
cannot be considered part of the wage. Where it is not payable to all but only to some
employees and only when their labor becomes more efficient or more productive, it is
only an inducement for efficiency, a prize therefore, not a part of the wage.

It is indubitable that ETPI and ETEU agreed on the inclusion of a provision for the
grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement, as
well as in the CBA Side Agreement. A reading of the above provision reveals that the
same provides for the giving of 14th, 15th and 16th month bonuses without
qualification. The wording of the provision does not allow any other interpretation.
There were no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when there are
profits earned by the company. Terse and clear, the said provision does not state that
the subject bonuses shall be made to depend on the ETPIs financial standing or that
their payment was contingent upon the realization of profits. Neither does it state that
if the company derives no profits, no bonuses are to be given to the employees. In fine,
the payment of these bonuses was not related to the profitability of business
operations. The Court finds no merit in ETPIs contention that the bonus provision
confirms the grant of the subject bonuses only on a single instance because if this is
so, the parties should have included such limitation in the agreement. Nowhere in the
Side Agreement does it say that the subject bonuses shall be conferred once during the
year the Side Agreement was signed. ETPI appears to be well aware of its deteriorating
financial condition when it entered into the 2001-2004 CBA Side Agreement with
ETEU and obliged itself to pay bonuses to the members of ETEU. Besides, as held
in Central Bank of the Philippines v. Court of Appeals, mere pecuniary inability to
fulfill an engagement does not discharge a contractual obligation. Contracts, once
perfected, are binding between the contracting parties. Obligations arising therefrom
have the force of law and should be complied with in good faith. ETPI cannot renege
from the obligation it has freely assumed when it signed the 2001-2004 CBA Side