CASE DIGEST FOR WAGE AND WAGE DISTORTION

ROSARIO A. GAA vs. THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES

CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of Manila, No. L-44169. December 3, 1985.*
Facts:
Europhil Industries filed an action for damages against Gaa, a building administrator, for having perpetrated certain
acts that Europhil Industries considered a trespass upon its rights, namely, cutting of its electricity, and removing its
name from the building directory and gate passes of its officials and employees. The court rendered judgment
against Gaa and a writ of garnishment was issued pursuant thereto, garnishing Gaa’s salary, commission and/or
remuneration.
Thereafter, Gaa filed a motion to lift said garnishment on the ground that her "salaries, commission and/or
remuneration" are exempted from execution under Article 1708 of the New Civil Code. Said Motion was denied as
well as its MR.
On a petition for certiorari before the CA, the latter dismissed the petition and held that petitioner is not a mere
laborer as contemplated under Article 1708 as the term laborer does not apply to one who holds a managerial or
supervisory position like that of petitioner, but only to those "laborers occupying the lower strata.
ART. 1708. The laborer' s wage shall not be subject to execution or attachment, except for
debts incurred for food, shelter, clothing and medical attendance."
Issue:
1. Is Gaa considered a laborer as to exempt his salary from garnishment under art. 1708?
2. Whether or not CA was correct in interpreting Article 1708 of the New Civil Code?

Ruling:
1. NO. It is beyond dispute that petitioner is not an ordinary or rank and file laborer but "a responsibly place
employee," of El Grande Hotel, responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel. Considering the importance of petitioner's function in El Grande
Hotel, it is undeniable that petitioner is occupying a position equivalent to that of a managerial or
supervisory position.
In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or physical labor, but
as commonly and customarily used and understood, it only applies to one engaged in some form of manual
or physical labor.
In Kline vs. Russel, 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon Hardware Co., supra, it was held that a
laborer, within the statute exempting from garnishment the wages of a "laborer," is one whose work
depends on mere physical power to perform ordinary manual labor, and not one engaged in services
consisting mainly of work requiring mental skill or business capacity, and involving the exercise of
intellectual faculties.

2. Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be
exempted from attachment and execution. The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week,
month, or season, while "salary" denotes a higher degree of employment, or a superior grade of services,
and implies a position of office: by contrast, the term "wages" indicates considerable pay for a lower and
less responsible character of employment, while "salary" is suggestive of a larger and more important
service.

The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co. (Tex. Sup.), 11 S.W. 344,
wherein it was said: " 'Wages' are the compensation given to a hired person for service, and the same is true
of 'salary'. The words seem to be synonymous, convertible terms, though we believe that use and general
acceptation have given to the word 'salary' a significance somewhat different from the word 'wages' in this:
 that the former is understood to relate to position of office, to be the compensation given for official or
other service, as distinguished from 'wages', the compensation for labor."

Therefore, CA was correct in ruling that Gaa’s salaries, commission and other remuneration due her from the El
Grande Hotel do not constitute wages due a laborer which, under Article 1708 of the Civil Code, are not
subject to execution or attachment.

Songco, et al. vs. National Labor Relations Commission

G.R. Nos. 50999-51000
(March 23, 1990)

FACTS: Zuelig filed an application for clearance to terminate the services of Songco, and others, on the ground of
retrenchment due to financial losses. During the hearing, the parties agreed that the sole issue to be resolved was the
basis of the separation pay due. The salesmen received monthly salaries of at least P400.00 and commission for
every sale they made.
The Collective Bargaining Agreements between Zuelig and the union of which Songco, et al. were members
contained the following provision: "Any employee who is separated from employment due to old age, sickness,
death or permanent lay-off, not due to the fault of said employee, shall receive from the company a retirement
gratuity in an amount equivalent to one (1) month's salary per year of service."
The Labor Arbiter ordered Zuelig to pay Songco et al., separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of service with the company.
The National Labor Relations Commission sustained the Arbiter.

ISSUE: Whether or not earned sales commissions and allowances should be included in the monthly salary of
Songco, et al. for the purpose of computing their separation pay.

RULING:
In the computation of backwages and separation pay, account must be taken not only of the basic salary of the
employee, but also of the transportation and emergency living allowances.
Even if the commissions were in the form of incentives or encouragement, so that the salesman would be inspired to
put a little more industry on jobs particularly assigned to them, still these commissions are direct remunerations for
services rendered which contributed to the increase of income of the employee. Commission is the recompense
compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work
of a salesman and the reason for such type of remuneration for services rendered demonstrate that commissions are
part of Songco, et al's wage or salary.
The Court takes judicial notice of the fact that some salesmen do not receive any basic salary, but depend on
commissions and allowances or commissions alone, although an employer-employee relationships exists.
If the opposite view is adopted, i.e., that commissions do not form part of the wage or salary, then in effect, we will
be saying that this kind of salesmen do not receive any salary and, therefore, not entitled to separation pay in the
event of discharge from employment. This narrow interpretation is not in accord with the liberal spirit of the labor
laws, and considering the purpose of separation pay which is, to alleviate the difficulties which confront a dismissed
employee thrown to the streets to face the harsh necessities of life.
In Soriano vs. NLRC (155 SCRA 124), we held that the commissions also claimed by the employee (override
commission plus net deposit incentive) are not properly includible in such base figure since such commissions must
be earned by actual market transactions attributable to the petitioner [salesman]. Since the commissions in the
present case were earned by actual transactions attributable to Song, et al., these should be included in their
separation pay. In the computation thereof, what should be taken into account is the average commission earned
during their last year of employment.

ALIPIO R. RUGA ET AL. VS. NLRC G.R. number: G.R. No. L-72654-61 Date: January 22, 1990 Petitioner:
Alipio R. Ruga, Jose Parma, Eladio Calderon, Laurente Bautu, Jaime Barbin, Nicanor Francisco, Philip
Cervantes and Eleuterio Barbin Respondent: National Labor Relations Commission and De Guzman Fishing
Enterprises and/or Arsenio de Guzman Ponente: Fernan, J.

Facts: The petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned
by the De Guzman Fishing Enterprises which is primarily in the fishing business with port and office at Camarines
Sur. On September 11, 1983, petitioners were told to proceed to the police station for investigation on the report that
they sold some of their fish-catch at midsea. The petitioners denied the charge claiming that the allegation was a
countermove because of the formation of their union. The complaint was dismissed because there were no witnesses
that would support the company’s allegation.

The petitioners, however, were not allowed to return to the fishing vessel to resume their work on that same day.
Each of the them filed a complaints for illegal dismissal and non-payment of 13th month pay, emergency cost-of-
living allowance and service incentive pay with the Ministry (now DOLE). The company denied the petitioners
being their employees, further contending that they were only engaged in a joint venture. The Labor Arbiter
rendered a joint decision dismissing all the complaint of the petitioners. Petitioners appealed the case to the NLRC
which affirmed the Labor Arbiter’s decision that a joint fishing venture and not employer-employee relationship
exist between the private respondent and the petitioners. Hence, this petition.

Issue: Whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are employees of
its owner-operator, De Guzman Fishing Enterprise, and if so, whether or not they were illegally dismissed from their
employment.

Held: The petitioners were illegally dismissed from their employment. In determining the existence of employer-
employee relationship, the elements that are generally considered are the following: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee with respect to the means and methods by which the work is to be accomplished. The
employment arises from contract of hire, express or implied. In the absence of hiring, no employer-employee
relationship could exist. Records show in the instant case that petitioners were directly hired by the general manager
of the company and its operations manager. Petitioner Alipio Ruga was hired on September 29, 1974 as
patron/captain of the fishing vessels; Eladio Calderon started as mechanic on April 16, 1968 until he was promoted
as chief engineer of the fishing vessel; Jose Pama was employed on September 29, 1974 as assistant engineer; Jaime
Barbin started as a pilot of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B
Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as
winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of
petitioners to perform work which is necessary or desirable in the usual business or trade of private respondent for a
period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor
Code as they were indeed engaged to perform activities usually necessary or desirable in the usual fishing business
or occupation of private respondent. The virtual dismissal of petitioners from their employment was characterized
by undue haste when less extreme measures consistent with the requirements of due process should have been first
exhausted. In that sense, the dismissal of petitioners was tainted with illegality.
Atok Big Wedge Mutual Benefit Association v Atok Big Wedge Mining Co. Inc.
GR No. L-7349
July 19, 1955

FACTS:
On September 4, 1950, a demand was submitted to petitioner by respondent union through its officers for various
concessions, among which were:
(a) An increase of P0.50 in wages;
(b) Commutation of sick and vacation leave if not enjoyed during the year;
(c) Various privileges, such as free medical care, medicine, and hospitalization;
(d) Right to a closed shop, check off etc.;
(e) No dismissal without prior just cause and with a prior investigation, etc.

Some of the demands were granted by petitioner and the others were rejected. Hearings were held in the Court of
Industrial Relations. After the hearing, the respondent court rendered a decision fixing the minimum wage for the
laborers at P3.20 without rice ration and 2.65 a day with rice ration, declaring that additional compensation
representing efficiency bonus should not be included as part of the wage, and making the award effective from
September 4, 1950 (the date of the presentation of the original demand, instead of from April 5, 1951, the date of the
amended demand).

Atok Company asked the Court for authority to stop operations & lay off employees and laborers, for the reason that
due to the heavy losses, increased taxes, high cost of materials, negligible quantity of ore deports, and the
enforcement of the Minimum Wage Law, the continued operation of the company and the consequent lay-off of
hundreds of laborers and employees.

The parties reached an agreement on October 29, 1952 after the SC decision which states agreement that the
following facilities heretofore given or actually being given by petitioner to its workers and laborers, and which
constitute as part of their wages, be valued as follows:

Rice ration P.55 per day

Housing facility 40 per day
All other facilities at least 85 per day

It is understood that the said amount of facilities valued at the above mentioned prices, may be charged in full or
partially by the Company against laborer or employee, as they may see fit pursuant to the exigencies of its
operation.

This was approved by the Court on December 26, 1952.

Later, another case was decided involving the 2 parties giving the employees minimum cash wage of 3.45 a day with
rice ration or 4.00 without rice ration.

ISSUES:

(1) Which of the two decisions would prevail? The agreement or the subsequent decision giving the
employees minimum case wage?, and;
WON the Agreement of October 29, 1952 from the minimum daily wage of P4 would be a waiver of the minimum
wage fixed by the law and hence null and void, since RA 602 sec. 20 provides that “no agreement or contract, oral
or written, to accept a lower wage or less than any other under this Act, shall be valid”.

(2) WON additional compensation should be paid by the Company to its workers for work rendered on Sundays and
holidays which should be based on the minimum wage of 4.00 and not on the cash portion which is 2.20. [Currently
the company pays additional compensation of 50% based on the 2.20 wage]

HELD:
(1) The Agreement subsists.

An agreement to deduct certain facilities received by the laborers from their employer is not a waiver of the
minimum wage fixed by the law. Wage includes the fair and reasonable value as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee (Sec 2 of RA
602).

Thus, the law permits the deduction of such facilities from the laborer’s minimum wage of P4, as long as their value
is “fair and reasonable”

(2) NO. The Company is correct.

Section 4 of the Commonwealth Act No. 444 (Eight Hour Labor Law) provides:
No person, firm, or corporations... shall compel an employee or laborer to work during Sundays and holidays, unless
he is paid an additional sum of at least 25% of his regular remuneration.
Thus, the Company even pays the laborers higher wage than the minimum. Thus, no law is violated.
OTHER NOTES:

DIFFERENCE BETWEEN A SUPPLEMENT and FACILITY

(1) Supplements, defined – extra remuneration or special privileges or benefits given to or received by the laborers
over and above their ordinary earnings or wages [vacation and holidays not worked; paid sick leave or maternity
leave; overtime rate in excess of what is required by law; sick, pension, retirement and death benefits; profit sharing;
family allowances; Christmas, war risk and cost of living bonuses or other bonuses other than those paid as a reward
for extra output or time spent on the job].

(2) Facilities, defined – items of expense necessary for laborer’s and his family’s existence and subsistence, so that
by express provision of the law, they form part of the wage and when furnished by the employer are deductible
therefrom since if they are not so furnished, the laborer would spend and pay for them just the same.

States Marine Corp. vs. Cebu Seamen’s Assc.

GR L 12444 February 28, 1963

Facts:

On September 12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No.
740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party respondent, the
petitioner Royal Line, Inc. The Union alleged that that after the Minimum Wage Law had taken effect, the
petitioners required their employees on board their vessels, to pay the sum of P.40 for every meal, while the masters
and officers were not required to pay their meals.
The petitioners’ shipping companies, answering, averred that in enacting Rep. Act No. 602 (Minimum Wage Law),
the Congress had in mind that the amount of P.40 per meal, furnished to employees should be deducted from the
daily wages.

Issue: WON meals are deductable from wages.

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

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

Facilities may be charged to or deducted from wages. Supplements, on the other hand, may not be so charged.
Thus, when meals are freely given to crew members of a vessel while they were on the high seas, not as part of their
wages but as a necessary matter in the maintenance of the health and efficiency of the crew personnel during the
voyage, the deductions made therefrom for the meals should be returned to them, and the operator of the coastwise
vessels affected should continue giving the same benefit.
Petition dismissed.

Norma Mabeza vs. NLRC, Peter Ng/Hotel Supreme

271 SCRA 670

Facts: Petitioner Norma Mabeza contends that on the first week of May 1991, she and her co-employees at the Hotel
Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the latter's compliance
with minimum wage and other labor standard provisions of law. Petitioner signed the affidavit but refused to go to the
City Prosecutor's Office to swear to the veracity and contents of the affidavit as instructed by management. The
affidavit was nevertheless submitted on the same day to the Regional Office of the Department of Labor and
Employment in Baguio City.

The affidavit was drawn by management for the sole purpose of refuting findings of the Labor Inspector of DOLE
apparently adverse to the private respondent. After she refused to proceed to the City Prosecutor's Office, petitioner
states that she was ordered by the hotel management to turn over the keys to her living quarters and to remove her
belongings from the hotel premises. According to her, respondent strongly chided her for refusing to proceed to the
City Prosecutor's Office to attest to the affidavit. She thereafter reluctantly filed a leave of absence from her job which
was denied by management. When she attempted to return to work on May 1991, the hotel's cashier informed her that
she should not report to work and, instead, continue with her unofficial leave of absence.

Consequently, three days after her attempt to return to work, petitioner filed a complaint for illegal dismissal before
the Arbitration Branch of the National Labor Relations Commission — CAR Baguio City. In addition to her complaint
for illegal dismissal, she alleged underpayment of wages, non-payment of holiday pay, service incentive leave pay,
13th month pay, night differential and other benefits.

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

Labor Arbiter dismissed the complaint. On April 1994, respondent NLRC promulgated its assailed Resolution
affirming the Labor Arbiter's decision.
Issue: Whether or not the employer has exerted pressure, in the form of restraint, interference or coercion, against his
employee's right to institute concerted action for better terms and conditions of employment constitutes unfair labor
practice.

Ruling: The Court ruled that there was unfair labor practice. Without doubt, the act of compelling employees to sign
an instrument indicating that the employer observed labor standards provisions of law when he might have not,
together with the act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes
unfair labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and conditions
of employment through concerted action. For refusing to cooperate with the private respondent's scheme, petitioner
was obviously held up as an example to all of the hotel's employees, that they could only cause trouble to management
at great personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of charges
against her was the warning that they would not only be deprived of their means of livelihood, but also possibly, their
personal liberty.

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

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

GR No. 58870 – December 18, 1987

Cebu Institute of Technology
vs
Ople as Minister of Labor and Employment, et al.
GR No. 68345 – December 18, 1987
Divine Word College of Legazpi
vs
Vicente Leogardo Jr as Deputy Minister of Labor and Employment, et al.

Facts:
The case centers on the interpretation of section 3(a) of Pres. Decree No. 451 which states, “That no increase in
tuition or other school fees or charges shall be approved unless sixty (60%) per centum of the proceeds is allocated
for increase in salaries or wages of the members of the faculty and all other employees of the school concerned, and
the balance for institutional development, student assistance and extension services, and return to investments.”

On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was promulgated, stating “Each private
School shall determine its rate of tuition and other school fees or charges. The rates and charges adopted by schools
pursuant to this provision shall be collectible, and their application or use authorized subject to rules and
regulations promulgated by the Ministry of Education, Culture and Sports.”

In a nutshell, the present controversy was precipitated by the claims of some school personnel for allowances and
other benefits and the refusal of the private schools concerned to pay said allowances and benefits on the ground that
said items should be deemed included in the salary increases they had paid out of the 60% portion of the proceeds
from tuition fee increases provided for in PD 451. They are assailing the rules and regulations promulgated by the
Ministry of Education, Culture, and Sports, which deviates from the provisions of such law. section 3 (a) of Pres.
Decree No. 451.
Petitioner: The line of reasoning of the petitioner appears to be based on the major premise that under said decree
and rules, 60% of the incremental proceeds from tuition fee increases may be applied to salaries, allowances and
other benefits of teachers and other school personnel. In support of this major premise, petitioner cites various
implementing rules and regulations of the then Minister of Education, Culture and Sports, to the effect that 60% of
the incremental proceeds may be applied to salaries, allowances and other benefits for members of the faculty and
other school personnel.

Respondents: The Solicitor General, on the other hand, argues in support of the Order of the public respondent that
Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary increases of teachers
and non- teaching supportive personnel of the school concerned, and that the Decree does not provide that said
salary increases would take the place of the COLA. Public respondents Deputy Minister of Labor and Employment
and Regional Director of the MOLE (Region V) likewise attack the validity of the Revised Implementing Rules and
Regulations of Pres. Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60% of
incremental proceeds from tuition fee hikes for retirement plan, faculty development and allowances. They argue
that said rules and regulations were invalid for having been promulgated in excess of the rule-making authority of
the then Minister of Education under Pres. Dec. No. 451 which mandates that the 60% of incremental proceeds from
tuition fee hikes should be allotted solely for salary increases.

Issues:
1. Whether or not the implementing rules and regulations promulgated by MECS pursuant to PD 451 is valid.
2. Whether or not the implementing rules and regulations promulgated by MECS pursuant to BP232 is valid.

Held:
1. No. The alleged implementing rules and regulations promulgated by the then MECS to the effect that allowances
and other benefits may be charged against the 60% portion of the proceeds of tuition fee increases provided for in
Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that these were issued ultra vires, and therefore not binding upon
this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the Decree and to the
imposition of limitations upon the approval of tuition fee increases, to wit:
SEC. 4. Rules and Regulations. — The Secretary of Education and Culture is hereby authorized, empowered and
directed to issue the requisite rules and regulations for the effective implementation of this Decree. He may, in
addition to the requirements and limitations provided for under Sections 2 and 3 hereof, impose other requirements
and limitations as he may deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which 60% of the proceeds of tuition
fee increases are allocated under Section 3(a) of the Decree.

Rules and regulations promulgated in accordance with the power conferred by law would have the force and effect
of law if the same are germane to the subjects of the legislation and if they conform with the standards prescribed by
the same law. Since the implementing rules and regulations cited by the private schools adds allowances and other
benefits to the items included in the allocation of 60% of the proceeds of tuition fee increases expressly provided for
by law, the same were issued in excess of the rule-making authority of said agency, and therefore without binding
effect upon the courts. At best the same may be treated as administrative interpretations of the law and as such, they
may be set aside by this Court in the final determination of what the law means.

2. Yes. The statutory grant of rule-making power to administrative agencies like the Secretary of Education is a
valid exception to the rule on non-delegation of legislative power provided two conditions concur, namely: 1) the
statute is complete in itself, setting forth the policy to be executed by the agency, and 2) said statute fixes a
standard to which the latter must conform.
Given the abovementioned policies and objectives, there are sufficient standards to guide the Minister of Education
in promulgating rules and regulations to implement the provisions of the Education Act of 1982, As in the Ericta and
Tablarin cases, there is sufficient compliance with the requirements of the non-delegation principle.
ISAE v. Quisumbing G.R. No. 128845, June 1, 2000

Fact: Private respondent, the School, hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty
member should be classified as a foreign-hire or a local hire. Should the answer to any of four tests queries point to
the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires salary rate twenty-five percent (25%) more than local-hires. The School justifies the
difference on two “significant economic disadvantages” foreign-hires have to endure, namely: (a) the “dislocation
factor” and (b) limited tenure. When negotiations for a new collective bargaining agreement were held on June
1995, petitioner International School Alliance of Educators, “a legitimate labor union and the collective bargaining
representative of all faculty members” of the School, contested the difference in salary rates between foreign and
local-hires. This issue eventually caused a deadlock between the parties. Petitioner filed a notice of strike.

The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the
DOLE to assume jurisdiction over the dispute. DOLE Acting Secretary, issued an Order resolving the parity and
representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied
petitioner’s motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief to the Supreme
Court.

Issue: Whether Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires is an
invalid and unreasonable classification and violates the Equal Protection Clause.

Held: Yes, Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. The foregoing
provisions impregnably institutionalize in this jurisdiction the long honored legal truism of “equal pay for equal
work.” Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries. This rule applies to the School, its “international character”
notwithstanding. The School contends that petitioner has not adduced evidence that local-hires perform work equal
to that of foreign-hires. The employer in this case has failed to show evidence that foreign-hires perform 25% more
efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they
perform under similar working conditions.

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

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

GR. No. L-9742

Oct. 27, 1955

FACTS:
The company used to pay to its drivers and conductors, who were assigned outside of the City limits, aside from
their regular salary, a certain percentage of their daily wage, as allowance for food. Upon the effectivity of the
Minimum Wage Law, however, that privilege was stopped by the company. The order of CIR to the company to
continue granting this privilege, was upheld by this Court.
The shipping company argue that the furnishing of meals to the crew before the effectivity of Rep. Act No. 602, is
of no moment, because such circumstance was already taken into consideration by Congress, when it stated that
“wage” includes the fair and reasonable value of boards customarily furnished by the employer to the employees.

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

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

Globe Mackay Cable and Radio Corp. vs NLRC, 163 SCRA 71; G.R. No. L-74156

(Labor Standards – COLA, payment of wage in unworked days)

Facts: Wage Order No. 6 increased the cost-of-living allowance (COLA) of non-agricultural workers in the private
sector.

Petitioner Corporation complied with said Order by paying its monthly-paid employees the mandated P3.00 per day
COLA. In its computation, Petitioner Corporation multiplied the P3.00 daily COLA by 22 days, which is the
number of working days in the company.

Respondent Union disagreed with the computation alleging that prior to the effectivity of the Wage Order, Petitioner
Corporation had been computing and paying the COLA on the basis of 30 days per month and that this constituted
an employer practice, which should not be unilaterally withdrawn.

The Labor Arbiter sustained the position of Petitioner Corporation by holding that the monthly COLA should be
computed on the basis of 22 days, since the evidence showed that there are only 22 days in a month for monthly-
paid employees in the company.

The NLRC reversed the Labor Arbiter on appeal, holding that Petitioner Corporation was guilty of illegal deductions
considering that COLA should be paid and computed on the basis of 30 days since workers paid on a monthly basis
are entitled to COLA on days “unworked”; and the full allowance enjoyed by Petitioner Corporation’s monthly-paid
employees before the CBA executed between the parties constituted voluntary employer practice, which cannot be
unilaterally withdrawn.
Issue: WON the computation and payment of COLA on the basis of 30 days per month constitute an employer
practice which should not be unilaterally withdrawn.

Held: No. Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 provides that “all covered
employees shall be entitled to their daily living allowance during the days that they are paid their basic wage, even if
unworked.” The primordial consideration for entitlement of COLA is that basic wage is being paid. The payment of
COLA is mandated only for the days that the employees are paid their basic wage, even if said days are unworked.
On the days that employees are not paid their basic wage, the payment of COLA is not mandated.

Moreover, Petitioner Corporation cannot be faulted for erroneous application of a doubtful or difficult question of
law. Since it is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of
benefit under Article 100 of the Labor Code may be said to have resulted by virtue of the correction.

G.R. No. 113856 September 7, 1998

SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS OF THE
PHILIPPINES (SMTFM-UWP) vs. NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G. DE
VERA and TOP FORM MANUFACTURING PHIL., INC.

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

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

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

On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter demanding that it should
“fulfill its pledge of sincerity to the union by granting an across-the-board wage increases (sic) to all employees
under the wage orders.” The union reiterated that it had agreed to “retain the old provision of CBA” on the strength
of private respondent’s “promise and assurance” of an across-the-board salary increase should the government
mandate salary increases. Several conferences between the parties notwithstanding, private respondent adamantly
maintained its position on the salary increases it had granted that were purportedly designed to avoid wage
distortion.
Consequently, the union filed a complaint with the NCR NLRC alleging that private respondent’s act of “reneging
on its undertaking/promise clearly constitutes act of unfair labor practice through bargaining in bad faith.” It charged
private respondent with acts of unfair labor practices or violation of Article 247 of the Labor Code, as amended,
specifically “bargaining in bad faith,” and prayed that it be awarded actual, moral and exemplary damages. In its
position paper, the union added that it was charging private respondent with “violation of Article 100 of the Labor
Code.”

Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and 02, it had avoided
“the existence of a wage distortion” that would arise from such implementation. It emphasized that only “after a
reasonable length of time from the implementation” of the wage orders “that the union surprisingly raised the
question that the company should have implemented said wage orders on an across-the-board basis.” It asserted that
there was no agreement to the effect that future wage increases mandated by the government should be implemented
on an across-the-board basis. Otherwise, that agreement would have been incorporated and expressly stipulated in
the CBA.

On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint for lack of merit.

petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution of April 29, 1993 9 dismissing
the appeal for lack of merit. Still dissatisfied, petitioner sought reconsideration which, however, was denied by the
NLRC in the Resolution dated January 17, 1994. Hence, the instant petition for certiorari

ISSUE:
whether or not an employer committed an unfair labor practice by bargaining in bad faith and discriminating against
its employees.

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

Traders Royal Bank vs NLRC, 189 SCRA 274; G. R. No. 88168, August 30, 1990

(Labor Standards – bonus, diminution of benefits)

Facts: Respondent union filed a letter-complaint against petitioner TRB for the diminution of benefits being enjoyed
by the employees since time immemorial, e.g. mid-year bonus, from 2 months gross pay to 2 months basic and year-
end bonus from 3 months gross to only 2 months.

Petitioner insisted that it had paid the employees holiday pay. The practice of giving them bonuses at year’s end,
would depend on how profitable the operation of the bank had been.

NLRC found TRB guilty of diminution of benefits due to the private respondents and ordered it to pay the said
employees’ claims for differentials in their holiday, mid-year, and year-end bonuses.
Issue: Whether or not bonuses are part of labor standards.

Held: No. A bonus is a “gratuity or act of liberality of the giver which the recipient has no right to demand as a
matter of right”. It is something given in addition to what is ordinarily received by or strictly due the recipient. The
granting of a bonus is basically a management prerogative which cannot be forced upon the employer “who may not
be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic
salaries or wages”.

UNIVERSAL CORN PRODUCERS V. NLRC

G.R. No. L-49774 February 24, 1981

SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner,
vs.
Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE WORKERS
UNION,respondents.
Actions sought to be redressed:
On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a complaint against
San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein, alleging failure or refusal of the latter to include
in the computation of 13th- month pay such items as sick, vacation or maternity leaves, premium for work done on
rest days and special holidays, including pay for regular holidays and night differentials.

The Regional Office No. 10 ruled in favor of the union which ordered herein petitioner “to pay the difference of
whatever earnings and the amount actually received as 13th month pay excluding overtime premium and
emergency cost of living allowance.” The order of the Regional Office was affirmed by herein public respondent
Deputy Minester Inciong in behalf of the Minister of Labor.

Issue:

Whether or not payments for sick, vacation or maternity leaves, premium for work done on rest days and special
holidays, including pay for regular holidays and night differentials are included in the computation of 13th-month pay
under Presidential Decree 851

CONTENTIONS OF THE RESPONDENTS:

Public respondent's consistent stand on the matter since the effectivity of Presidential Decree 851 is that "payments
for sick leave, vacation leave, and maternity benefits, as well as salaries paid to employees for work performed on rest
days, special and regular holidays are included in the computation of the 13th-month pay.

On its part, private respondent cited innumerable past rulings, opinions and decisions rendered by then Acting Labor
Secretary Amado G. Inciong to the effect that, "in computing the mandatory bonus, the basis is the total gross basic
salary paid by the employer during the calendar year. Such gross basic salary includes: (1) regular salary or wage; (2)
payments for sick, vacation and maternity leaves; (3) premium for work performed on rest days or holidays: (4) holiday
pay for worked or unworked regular holiday; and (5) emergency allowance if given in the form of a wage adjustment."
CONTENTIONS OF HEREIN PETITIONER:

1.) Presidential Decree 851 speaks only of basic salary as basis for the determination of the 13th-month pay;
2.) Submits that payments for sick, vacation, or maternity leaves, night differential pay, as well as premium paid
for work performed on rest days, special and regular holidays do not form part of the basic salary;
3.) Concludes that the inclusion of those payments in the computation of the 13th-month pay is clearly not
sanctioned by Presidential Decree 851.

RULING OF THE COURT:

The Court finds petitioner's contention meritorious.

The Court cited the provisions of the law in dispute which are Section 1 of Presidential Decree 851 and Section 2 of
the Rules and Regulations.

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

Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed not
part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions
No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of the regular
basic salary of tile employee at the time of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the then
Labor Secretary Blas Ople, OVERTIME PAY, EARNINGS AND OTHER REMUNERATIONS ARE
EXCLUDED AS PART OF THE BASIC SALARY AND IN THE COMPUTATION OF THE 13TH-MONTH
PAY.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions No. 174, and
profit sharing payments indicate the intention to strip basic salary of other payments which are properly considered as
"fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which are
not considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any
and all additions which may be in the form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic
in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which
defines basic salary to include all remunerations or earnings paid by an employer to an employee, this cloud is
dissipated in the later and more controlling Supplementary Rules and Regulations which categorically, exclude from
the definition of basic salary earnings and other remunerations paid by employer to an employee. A cursory perusal
of the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.
The all-embracing phrase "earnings and other remuneration" which are deemed not part of the basic salary includes
within its meaning payments for sick, vacation, or maternity leaves. Maternity premium for works performed on rest
days and special holidays pays for regular holidays and night differentials. As such they are deemed not part of the
basic salary and shall not be considered in the computation of the 13th-month they, were not so excluded, it is hard to
find any "earnings and other remunerations" expressly excluded in the computation of the 13th-month pay. Then the
exclusionary provision would prove to be Idle and with no purpose.
According to the Court, the conclusion finds basis in Section 87 and Section 93 of the Labor Code.

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

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

Philippine Duplicators vs. NLRC

GR 110068 February 15, 1995

Facts: Private respondent union, for and on behalf of its member-salesmen, asked petitioner corporation for
payment of 13th month pay computed on the basis of the salesmen’s fixed or guaranteed wages plus commissions.

Petitioner corporation refused the union’s request, but stated it would respect an opinion from the MOLE. On 17
November 1987, acting upon a request for opinion submitted by respondent union, Director Augusto G. Sanchez of
the Bureau of Working Conditions, MOLE, rendered an opinion to respondent union declaring applicable the
provisions of Explanatory Bulletin No. 86-12, Item No. 5 (a):
. . . . Since the salesmen of Philippine Duplicators are receiving a fixed basic wage plus commission on sales and not
purely on commission basis, they are entitled to receive 13th month pay provided they worked at least one (1) month
during the calendar year. May we add at this point that in computing such 13th month pay, the total commissions of
said salesmen for the calendar year shall be divided by twelve (12). (Emphasis supplied)

Notwithstanding Director Sanchez’ opinion or ruling, petitioner refused to pay the claims of its salesmen for 13th
month pay computed on the basis of both fixed wage plus sales commissions.

Issue: WON sales commission is included in the coverage of basic salary for purposes of computing 13th month
pay.
Held:

1. Decision (1993)
In the first place, Article 97 (f) of the Labor Code defines the term “wage” (which is equivalent to “salary,” as used
in P.D. No. 851 and Memorandum Order No. 28) in the following terms:
(f) “Wage“ paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the
fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. “Fair and reasonable value” shall not include any profit to the employer
or to any person affiliated with the employer. (Emphasis supplied)

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

2. Resolution (1995)
In Boie-Takeda the so-called commissions “paid to or received by medical representatives of Boie-Takeda
Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.,” were excluded from the term “basic
salary” because these were paid to the medical representatives and rank-and-file employees as “productivity
bonuses.” The Second Division characterized these payments as additional monetary benefits not properly included
in the term “basic salary” in computing their 13th month pay. As a rule a bonus is an amount granted and paid to an
employee for his industry loyalty which contributed to the success of the employer’s business and made possible the
realization of profits. It is an act of generosityof the employer for which the employee ought to be thankful and
grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits. From the legal point of view a bonus is not and mandable and enforceable
obligation. It is so when It is made part of the wage or salary or compensation.

2nd MR dismissed.

Boie-Takeda Chemicals, Inc. vs. de la Serna

228 SCRA 329, Dec. 10, 1993

Facts: P.D. No. 851 provides for the Thirteen-Month Pay Law. Under Sec. 1 of said law, “all employers are required
to pay all their employees receiving basic salary of not more than P 1,000.00 a month, regardless of the nature of the
employment, and such should be paid on December 24 of every year.” The Rules and Regulations Implementing P.D.
851 contained provisions defining “13-month pay” and “basic salary” and the employers exempted from giving it and
to whom it is made applicable. Supplementary Rules and Regulations Implementing P.D. 851 were subsequently
issued by Minister Ople which inter alia set items of compensation not included in the computation of 13-month pay.
(overtime pay, earnings and other remunerations which are not part of basic salary shall not be included in the
computation of 13-month pay). Pres. Corazon Aquino promulgated on August 13, 1985 M.O. No. 28, containing a
single provision that modifies P.D. 851 by removing the salary ceiling of P 1,000.00 a month. More than a year later,
Revised Guidelines on the Implementation of the 13-month pay law was promulgated by the then Labor Secretary
Franklin Drilon, among other things, defined particularly what remunerative items were and were not included in the
concept of 13-month pay, and specifically dealt with employees who are paid a fixed or guaranteed wage plus
commission or commissions were included in the computation of 13th month pay)

A routine inspection was conducted in the premises of petitioner. Finding that petitioner had not been
including the commissions earned by its medical representatives in the computation of their 1-month pay, a Notice of
Inspection Result was served on petitioner to effect restitution or correction of “the underpayment of 13-month pay
for the years, 1986 to 1988 of Medical representatives. Petitioner wrote the Labor Department contesting the Notice
of Inspection Results, and expressing the view that the commission paid to its medical representatives are not to be
included in the computation of the 13-moth pay since the law and its implementing rules speak of REGULAR or
BASIC salary and therefore exclude all remunerations which are not part of the REGULAR salary. Regional Dir.
Luna Piezas issued an order for the payment of underpaid 13-month pay for the years 1986, 1987 and 1988. A motion
for reconsideration was filed and the then Acting labor Secretary Dionisio de la Serna affirmed the order with
modification that the sales commission earned of medical representatives before August 13, 1989 (effectivity date of
MO 28 and its implementing guidelines) shall be excluded in the computation of the 13-month pay.

Similar routine inspection was conducted in the premises of Phil. Fuji Xerox where it was found there was
underpayment of 13th month pay since commissions were not included. In their almost identically-worded petitioner,
petitioners, through common counsel, attribute grave abuse of discretion to respondent labor officials Hon. Dionisio
dela Serna and Undersecretary Cresenciano B. Trajano.

ISSUE: Whether or not commissions are included in the computation of 13-month pay
HELD: NO. Contrary to respondent’s contention, M.O No. 28 did not repeal, supersede or abrogate P.D. 851. As may
be gleaned from the language of MO No. 28, it merely “modified” Section 1 of the decree by removing the P 1,000.00
salary ceiling. The concept of 13th Month pay as envisioned, defined and implemented under P.D. 851 remained
unaltered, and while entitlement to said benefit was no longer limited to employees receiving a monthly basic salary
of not more than P 1,000.00 said benefit was, and still is, to be computed on the basic salary of the employee-recipient
as provided under P.D. 851. Thus, the interpretation given to the term “basic salary” was defined in PD 851 applies
equally to “basic salary” under M.O. No. 28. The term “basic salary” is to be understood in its common, generally
accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such additional payments as bonuses
and overtime. In remunerative schemes consists of a fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the “basic salary” for this is what the employee receives for a standard work period.
Commissions are given for extra efforts exerted in consummating sales of other related transactions. They are, as such,
additional pay, which the SC has made clear do not from part of the “basic salary.”

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

PACIWU-TUCP vs NLRC
G.R. No. 107994, August 14, 1995

FACTS:

Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the exclusive bargaining agent of
the rank and file employees of respondent Vallacar Transit, Inc. PACIWU instituted a complaint with NLRC for
payment of 13th month pay in behalf of the drivers and conductors of Vallacar’s Visayan operation on the ground that
although said drivers and conductors are compensated on a "purely commission" basis as described in their Collective
Bargaining Agreement (CBA), they are automatically entitled to the basic minimum pay mandated by law should said
commission be less than their basic minimum for eight (8) hours work.

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

Labor Arbiter: Dismissed the complaint.

NLRC: Likewise dismissed the appeal.

ISSUE: W/N the bus drivers and conductors of Vallacar Transit, Inc. are entitled to 13 th month pay.

HELD: YES.

*LEGAL BASES:
Memorandum Order No. 28 which provided as follows:

xxx xxx xxx

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

● MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a) of the said issuance read:

xxx xxx xxx

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

xxx xxx xxx

From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a fixed or
guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th
month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a
commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage.

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

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

Makati Haberdashery vs NLRC

G.R. No. 83380-81 – 15 November 1989
Penned by Justice Fernan

Nature: Petition for certiorari to review the decision of the NLRC which affirmed the decision of the Labor Arbiter
who jointly heard and decided two cases filed by the Union in behalf of the private respondents

MAIN FACTS:

• Individual complainants are working for Makati Haberdashery Inc as tailors, seamstress, sewers, basters, and
“plantsadoras” and are paid on a piece-rate basis (except two petitioners who are paid on a monthly basis)

• In addition, they are given a daily allowance of P 3.00 provided they report before 9:30 a.m. everyday.

•Work schedule: 9:30-6 or 7 p.m., Mondays to Saturdays and even on Sundays and holidays during peak periods.
• The Sandigan ng Manggagawang Pilipino filed a complaint for underpayment of the basic wages, underpayment of
living allowance, nonpayment of overtime work, nonpayment of holiday pay, and other money claims.

• The Labor Arbiter rendered judgment in favor of complainants which the NLRC affirmed but limited back wages to
one year.

• Petitioner urged that the NLRC erred in concluding that an employer-employee relationship existed between the
petitioner and the workers.

Issue:

1. WON employees paid on piece-rate basis are entitled to service incentive pay?
2. WON there is an Employer-Employee Relationship?

Held:

1. NO, fall under exceptions set forth in the implementing rules (this will be reexamined under Article 101).

2. Yes, evident in a Memorandum issued by the Assistant Manager.

Ratio:

1. As to the service incentive leave pay: as piece-rate workers being paid at a fixed amount for performing work
irrespective of time consumed in the performance thereof, they fall under the exceptions stated in Sec1(d), Rule V,
IRR, Book III, Labor Code.

Service Incentive Leave

SECTION 1. Coverage. — This rule shall apply to all employees except:
(d) Field personnel and other employees whose performance is unsupervised by the employer including those who are
engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof;

2. Employer-Employee Relationship

There is such relationship because in the application of the four-fold test, it was found that petitioners had control over
the respondents not only as to the result but also as to the means and method by which the same is to be accomplished.
Such control is proven by a memorandum which enumerates procedures and instructions regarding job orders,
alterations, and their behavior inside the shop issued by the Assistant Manager which reads in part:

"Effective immediately, new procedures shall be followed:

a. To follow instruction and orders from the undersigned…
b. Before accepting the job orders, tailors must check the materials, job orders, due dates, and other things
to maximize efficiency…
c. Effective immediately all job orders, must be finished one day before the due date. This can be done by
proper scheduling of job order and if you will cooperate with your supervisors. xxxx
d. If there is any problem regarding supervisors or co-tailor inside our shop, consult with me at once to
settle the problem. Fighting inside the shop is strictly prohibited. Any tailor violating this memorandum
will be subject to disciplinary action.”

WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988 and that of the
Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by Pelobello and Zapata for illegal
dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases. Award of
service incentive leave pay to private respondents is deleted. SO ORDERED.
_____________________________________________________________________________
OTHER FACTS: (there are only two main issues, just in case this is going to be asked)
•While the first case was pending decision, Pelobello left an open package containing a jusi barong tagalong with
salesman Rivera. He was caught and confronted about this and he explained that this was ordered by Zapata, also a
worker, for his (personal) customer. Zapata allegedly admitted that he copied the design of the company but later
denied ownership of the same.

•They were made to explain why no action should be taken against them for accepting a job order which is prejudicial
and in direct competition with the business. However they did not submit and went on AWOL until the period given
for them to explain expired hence the dismissal.

•Illegal dismissal complaint on the second case filed before the Labor Arbiter Diosana (THIS IS THE 3 rd ISSUE
IN THE FULL CASE).

•LA declared petitioners guilty of illegal dismissal and ordered to reinstate Pelobello and Zapata and found petitioners
violating decrees of Cost-Of-Living Allowance (COLA), service incentive and 13th month pay. Commission analyst
was directed to compute the monetary awards which retroacts to three years prior to filing of case.

_____________________________________________________________________________
Other issues discussed:
•Minimum Wage

Held: No dispute that entitled to minimum wage but court dismissed case for lack of sufficient evidence to support
claim that there was in fact underpayment which was ruled by the LAand which the private respondents did not appeal
to in the NLRC nor in the SC. Well-settled is the rule that “an appellee who has not himself appealed cannot obtain
from the appellate court any affirmative relief other than the ones granted in the decision of the court below”.

•COLA (Cost-Of-Living Allowance)

Held: Entitled. They are regular employees. IRR of Wage No. 1, 2, and 5 provide that “all workers in the private
sector, regardless of their position, designation of status, and irrespective of the method by which their wages are paid”
are entitled to such allowance.

•13th Month pay

Held: Entitled under Sec. 3(e) of the IRR of PD 851 which is an exception to the exception of such provision which
states that employers whose workers are paid on piece-rate basis in which are covered by such issuance in so far as
such workers are concerned.

•Illegal dismissal

Held: Dismissed for justifiable ground based on Article 283 (a)and (c). Inimical to the interest of the
employer. Not dismissed just because of union activities.
______________________________________________________________________________

G.R. No. 123938 May 21, 1998

Labor Congress of the Philippines vs. NLRC

Ponente: J. Davide, Jr.

Doctrine:
Application of LC Article 286(n) in determination of status of piece workers as regular workers versus LC Article 86
definition

Facts:
The 99 persons (Ana Marie Ocampo, Mary Intal, et al) as private petitioners in the proceeding (represented by the
Labor Congress of the Phils.) were rank-and-file employees of private respondent Empire Food Products (a food and
fruit processing company), hired on various dates.

Ocampo et al filed against Empire an NLRC complaint for payment of money claims and for violation of labor
standards laws. Alongside this they also filed a petition for direct certification for the Labor Congress to be their
bargaining representative. On Oct. 23, 1990, petitioners represented by LCP, and private respondents Gonzalo and
Evelyn Kehyeng (Kehyeng spouses) entered into a Memorandum of Agreement, recognizing the following:

● Status of LCP as sole and exclusive Bargaining Agent and Representative for all rank and file employees of
the Empire Food Products regarding "wages, hours of work, and other terms and conditions of employment";
● With regard to the NLRC complaint, all parties agree to resolve the issues during the Collective Bargaining
Agreement;
● Proper adjustment of wages, withdrawal of case from the Calendar of NLRC, non-interference or any ULP
act, etc.

On Oct. 24, 1990, the Mediator Arbiter approved the memorandum and certified LCP as the sole and exclusive
bargaining agent for the rank-and-file employees of Empire.

On November 1990, LCP President Navarro submitted to Empire a proposal for collective bargaining. However, on
January 1991, the private petitioners Ana Marie et al filed a complaint for:
● Unfair Labor Practices via Illegal Lockout and Dismissal;
● Union-Busting through harassment, threats and interference to the right for self-organization;
● Violation of the Oct. 23, 1990 memorandum
● Underpayment of wages
● Actual, moral and exemplary damages

Labor Arbiter (Part 1):

● Absolved Empire for ULP, union busting, violation of the memorandum of agreement, underpayment of
wages and denied petitioners' prayer for actual, moral and exemplary damages.
● Denied prayer for actual, moral and exemplary damages
● Directed reinstatement of complainants, due to the fact that Empire did not keep its payroll records as per
requirement of the DOLE. Admonition to Empire given as well re: further harassment and intimidation.

NLRC (Part 1):

● Remanded case to Labor Arbiter for further proceedings due to overlooking “…the testimonies of some of
the individual complainants which are now on record”.

Labor Arbiter (Part 2):

● Complainants failed to present with definiteness and clarity the particular act or acts constitutive of unfair
labor practice.
● Declaration of ULP connotes a finding of prima facie evidence of probability that a criminal offense may
have been committed so as to warrant the filing of a criminal information before the regular court.
● As regards the issue of harassment, threats and interference with the rights of employees to self-organization
which is actually an ingredient of unfair labor practice, complainants failed to specify what type of threats or
intimidation was committed and who committed the same.

NLRC (Part 2):

● Affirmed LA decision Part 2.

Petitioners:
 ● The fact that they are piece workers does not imply that they are not regular employees entitled for
reinstatement.
● LA and NLRC decisions were not supported by substantial evidence;
● Abandonment of work was not proved by substantial evidence;
● Much credit given to the Kehyeng spouses’ self-serving arguments.

Respondents:
● Ana Marie, et al were piece workers hence they are exempt from labor standards benefits

Issues:
1. [RELEVANT] WON the petitioners are entitled to labor standard benefits, considering their status as piece
rate workers.
2. WON the actions of Ana Marie, et al constituted abandonment of work.

Held:
1. YES, petitioners are entitled to labor standards benefits, namely, holiday pay, premium pay, 13 th month pay
and service incentive leave.
2. NO, failure to appear to work did not constitute abandonment,

Ratio:
Supreme Court decision cites that Ana Marie, et al, despite being “pakyao” or piece workers does not imply that they
are not regular employees entitled to reinstatement. Applying the two-fold test from LC Article 286(n) [Art. 280 (old)],
the SC found that the supposedly piece workers had three factors in their favor:
a) The nature of the tasks of Ana Marie, et al of repacking snack food items was NECESSARY and
DESIRABLE in the usual business of Empire Foods, which is a food and fruit processing company.
According to Tabas vs California Manufacturing, merchandisers of processed food who coordinates for sales
of processed food was a necessity and was desirable for the day-to-day operations of a food processing
company. With more reason would the job of food packers be necessary for the day-to-day operations of a
food processing plant.
b) Ana Marie et al worked throughout the year, with their employment being independent from a specific project
or season.
c) The length of time that petitioners fulfilled the requirement of Article 286(n).

Therefore, the SC considered the employees as regular employees despite their status as piece workers, according
them benefits such as holiday pay, premium pay, 13 th month pay and service incentive leave.

The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as nighttime pay,
holiday pay, service incentive leave and 13th month pay, inter alia, "field personnel and other employees whose time
and performance is unsupervised by the employer, including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof." However, petitioners as piece-rate workers do not fall within this group. Not only did the
employees labor under the control of Empire, the employees also worked throughout the year to fulfil their quota as
“basis for compensation”.

Further, in Section 8 (b), Rule IV, Book III, piece workers are specifically mentioned as being entitled to holiday pay.

Sec. 8. Holiday pay of certain employees.

(b) Where a covered employee is paid by results or output, such as payment on piece work, his holiday
pay shall not be less than his average daily earnings for the last seven (7) actual working days preceding the
regular holiday: Provided, however, that in no case shall the holiday pay be less than the applicable statutory
minimum wage rate.

In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the modifications
to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the employer of piece rate workers from those
exempted from paying 13th month pay, to wit:
 2. EXEMPTED EMPLOYERS - The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission, boundary or task basis, and those
who are paid a fixed amount for performing specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the
employer shall grant the required 13th month pay to such workers.

However, the Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the
piece-rate category as those who are paid a standard amount for every piece or unit of work produced that is more or
less regularly replicated, without regard to the time spent in producing the same.

They should also be paid for overtime pay, even though Sec. 2(e), Rule I, Book III of the Implementing Rules states
that:
“…workers who are paid by results including those who are paid on piece-work, takay, pakiao, or task basis,
if their output rates are in accordance with the standards prescribed under Sec. 8, Rule VII, Book III, of these
regulations, or where such rates have been fixed by the Secretary of Labor in accordance with the aforesaid
section, are not entitled to receive overtime pay.”

In this case, Empire Foods did not allege that they adhered
to
the
standards
set forth
in
 Sec. 8, Rule VII,
Book III, nor
with
the
rates
prescribed
by
the
Secretary
of
Labor. Therefore, even though they are
piece workers, they are entitled to overtime pay

With regard to the issue of abandonment of work, the SC cited the Office of Solicitor General’s observations:
In finding that petitioner employees abandoned their work, the Labor Arbiter and the NLRC relied on the
testimony of Security Guard Rolando Cairo that on January 21, 1991, petitioners refused to work. As a result
of their failure to work, the cheese curls ready for repacking on said date were spoiled…

… The failure to work for one day, which resulted in the spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the reported abandonment of work or on January 23, 1991,
petitioners filed a complaint for, among others, unfair labor practice, illegal lockout and/or illegal dismissal.

Furthermore, the SC stressed that the burden of proving the existence of just cause for dismissing an employee, such
as abandonment, rests on the employer. According to the SC, Empire Foods failed to discharge this burden as basis
for dismissing the employees.

Also, the SC considered that, in terminating the employees for abandonment of work, Empire failed to serve to the
employees a written notice of termination (as required by the Two-Notice rule and Section 2, Rule XIV, Book V of
the Omnibus Rules), violating the employees’ right to security of tenure and the constitutional right to due process.

Made by:
John Michael Vida

HONDA PHILS., INC., petitioner,

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

FACTS: the case stems from the Collective Bargaining Agreement (CBA) forged between petitioner Honda and
respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union) which contained the following
provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.
Section 6. 14th Month Pay

The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th Month Pay.

Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial assistance to
covered employees in December of each year, of not less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for the fourth and
fifth years of their CBA. When the talks between the parties bogged down, respondent union filed a Notice of Strike
on the ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. [To cut the story short,
Secretary assumed jurisdiction; second notice of strike; Sec. again assumed jurisdiction]

The management of Honda subsequently issued a memorandum announcing its new computation of the 13th and
14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike shall be considered
unworked days for purposes of computing said benefits. As per the company’s new formula, the amount equivalent
to 1/12 of the employees’ basic salary shall be deducted from these bonuses, with a commitment however that in the
event that the strike is declared legal, Honda shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letter. Honda sought the opinion of the
Bureau of Working Conditions (BWC) on the issue. BWC agreed with the pro-rata payment of the 13th month pay
as proposed by Honda.

The matter was brought before the Grievance Machinery in accordance with the parties’ existing CBA but when the
issue remained unresolved, it was submitted for voluntary arbitration, the latter invalidated Honda’s computation.
Motion for Partial Reconsideration by Honda denied. CA dismissed for lack of merit. Hence, this petition for
review.

ISSUE: WON the pro-rated computation of the 13th month pay and the other bonuses in question is valid and
lawful.

HELD: The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining
unit.8 As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs, public order or public
policy.9 Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and
compliance therewith is mandated by the express policy of the law.

In some instances, however, the provisions of a CBA may become contentious, as in this case.
We agree with the findings of the arbitrator that the assailed CBA provisions are far from being unequivocal. A
cursory reading of the provisions will show that they did not state categorically whether the computation of the
13th month pay, 14th month pay and the financial assistance would be based on one full month’s basic salary of the
employees, or pro-rated based on the compensation actually received. The arbitrator thus properly resolved the
ambiguity in favor of labor as mandated by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the
arbitrator’s finding and added that the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker.

Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16, 1987, the
salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided that the minimum 13th month
pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee
within a calendar year. The guidelines pertinently provides:

The “basic salary” of an employee for the purpose of computing the 13th month pay shall include
all remunerations or earnings paid by his employer for services rendered but does not include allowances and
monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the
cash equivalent of unused vacation and sick leave credits, overtime premium, night differential and holiday
pay, and cost-of-living allowances.

For employees receiving regular wage, we have interpreted “basic salary” to mean, not the amount actually
received by an employee, but 1/12 of their standard monthly wage multiplied by their length of service within a
given calendar year.
The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or separation from
work. As the rules state, under these circumstances, an employee is entitled to a pay in proportion to the length of
time he worked during the year, reckoned from the time he started working during the calendar year.

Considering the foregoing, the computation of the 13th month pay should be based on the length of service and not
on the actual wage earned by the worker. In the present case, there being no gap in the service of the workers
during the calendar year in question, the computation of the 13th month pay should not be pro-rated but should
be given in full.

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-rating
scheme was to be implemented in the company. That a full month payment of the 13th month pay is the
established practice at Honda is further bolstered by the affidavits executed by Feliteo Bautista and Edgardo
Cruzada. Both attested that when they were absent from work due to motorcycle accidents, and after they have
exhausted all their leave credits and were no longer receiving their monthly salary from Honda, they still received
the full amount of their 13th month, 14th month and financial assistance pay.

This, we rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the
employer without violating Art. 100 of the Labor Code.
Petition Denied.

JPL MARKETING PROMOTIONS v. NATIONAL LABOR RELATIONS COMMISSION, NOEL

GONZALES, RAMON ABESA III and FAUSTINO ANINIPOT,

G.R. No. 151966/July 8, 2005/Tinga, J.:

FACTS: JPL Marketing and Promotions (hereinafter referred to as “JPL”) is a domestic corporation engaged in the
business of recruitment and placement of workers. On the other hand, private respondents Noel Gonzales, Ramon
Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate dates and assigned at different
establishments in Naga City and Daet, Camarines Norte as attendants to the display of California Marketing
Corporation (CMC), one of petitioner’s clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising activity in
the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996. They were advised to wait for further
notice as they would be transferred to other clients. However, on 17 October 1996, private respondents Abesa and
Gonzales filed before the NLRC complaints for illegal dismissal, praying for separation pay, 13th month pay,
service incentive leave pay and payment for moral damages. Aninipot filed a similar case thereafter.

It must be noted that private respondents were not given their 13th month pay and service incentive leave pay while
they were under the employ of JPL. Instead, JPL provided salaries which were over and above the minimum wage.

ISSUE: Whether or not the 13th month pay and service incentive leave pay should be computed from the start of
employment up to the finality of the NLRC resolution.
RULING: Service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit of five (5)
days with pay, enjoyed by an employee who has rendered at least one year of service. Unless specifically excepted,
all establishments are required to grant service incentive leave to their employees. The term “at least one year of
service” shall mean service within twelve (12) months, whether continuous or broken reckoned from the date the
employee started working. The Court has held in several instances that “service incentive leave is clearly
demandable after one year of service.”

While computation for the 13th month pay should properly begin from the first day of employment, the service
incentive leave pay should start a year after commencement of service, for it is only then that the employee is
entitled to said benefit. On the other hand, the computation for both benefits should only be up to 15 August 1996,
or the last day that private respondents worked for JPL. To extend the period to the date of finality of the NLRC
resolution would negate the absence of illegal dismissal, or to be more precise, the want of dismissal in this
case. Besides, it would be unfair to require JPL to pay private respondents the said benefits beyond 15 August 1996
when they did not render any service to JPL beyond that date. These benefits are given by law on the basis of the
service actually rendered by the employee, and in the particular case of the service incentive leave, is granted as a
motivation for the employee to stay longer with the employer. There is no cause for granting said incentive to one
who has already terminated his relationship with the employer.

HEAVYLIFT MANILA v CA

Facts

On February 23, 1999, petitioner Heavylift, informed respondent Ma. Dottie Galay (Galay),
Heavylift Insurance and Provisions Assistant, of her low performance rating and the negative feedback
from her team members regarding her work attitude. The letter also notified her that she was
being relieved of her other functions except the development of the new Access program.

Subsequently, on August 16, 1999, Galay was terminated for alleged loss of confidence.
Thereafter, she filed with the Labor Arbiter a complaint for illegal dismissal and nonpayment of service
incentive leave and 13th month pay against petitioners.

Before the labor arbiter, Heavylift alleged that Galay had an attitude problem and did not get
along with her co‐employees for which she was constantly warned to improve. Moreover, Galay’s
attitude resulted to the decline in the company’s efficiency and productivity.

The Labor Arbiter found that Galay was illegally terminated for Heavylift’s failure to prove that
she violated any company regulation, and for failure to give the proper notice as required by law.

Heavylift appealed to the NLRC which denied the appeal and the subsequent motion for
reconsideration for lack of merit and affirmed the decision of the Labor Arbiter.

Heavylift elevated the case by certiorari to the Court of Appeals. But, due to procedural lapses,
the petition was dismissed.

Hence, this petition.

Issue
Whether or not Ms.Galay’s attitude problem was a valid cause for her dismissal

Ruling

Petition DENIED.
 (The Court considers “attitude problem” as a situation analogous to loss of trust and confidence
and thus a valid ground for termination, however due to Heavylift’s failure to show sufficiently clear and
convincing evidence to justify Galay’s termination and to comply with the twin requirement of notice and
hearing, the Court resolved to deny the petition and declared that Galay was illegally dismissed.)

An employee’s attitude problem is a valid ground for his termination. It is a situation analogous
to loss of trust and confidence for an employee who cannot get along with his co‐employees is
detrimental to the company for he can upset and strain the working environment. Without the
necessary teamwork and synergy, the organization cannot function well. Thus, management has
the prerogative to take the necessary action to correct the situation and protect its organization. To
be a valid ground for termination, however, it must be duly proved by the employer. Similarly,
compliance with the twin requirement of notice and hearing must also be proven by the employer.

In the present case, the Court is not convinced that petitioners have shown sufficiently clear and
convincing evidence to justify Galay’s termination. The burden of proof is not on the employee but on
the employer who must affirmatively show adequate evidence that the dismissal was for justifiable
cause.

Neither does the February 23, 1999 letter constitute the required notice. The letter did not inform
her of the specific acts complained of and their corresponding penalty. The law requires the employer
to give the worker to be dismissed two written notices before terminating his employment, namely, (1)
a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought;
and (2) the subsequent notice which informs the employee of the employer’s decision to
dismiss him. Additionally, the letter never gave respondent Galay an opportunity to explain herself,hence den
ying her due process.

Thus, the Court finds that Galay was illegally dismissed because Heavylift failed to show
adequately that a valid cause for terminating respondent exists, and because they failed to comply with
the twin requirement of notice and hearing.

WAGE DISTORTION

EMPLOYERS CONFEDERATION OF THE PHILIPPINES vs. NATIONAL WAGES AND

PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES
G.R. No. 96169 September 24, 1991
FACTS: ECOP questioned the validity of the wage order issued by the RTWPB, increasing the minimum wage by
P17.00/day in NCR. The Board issued Wage Order No. NCR-01-A amending Wage Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all workers and employees in the private sector
in the National Capital Region already receiving wages above the statutory minimum wage rates up
to one hundred and twenty-five pesos (P125.00) per day shall also receive an increase of seventeen
pesos (P17.00) per day.
The wage order was made applicable to all workers and employees in the private sector, including those who are paid
above the statutory wage rate. The NWPC dismissed ECOP’s petition. Hence the matter was elevated to the Supreme
Court. ECOP assails the board's grant of an "across-the-board" wage increase to workers already being paid more than
existing minimum wage rates (up to P125. 00 a day) as an alleged excess of authority, and alleges that under the
Republic Act No. 6727, the boards may only prescribe "minimum wages," not determine "salary ceilings." ECOP
likewise claims that Republic Act No. 6727 is meant to promote collective bargaining as the primary mode of settling
wages, and in its opinion, the boards can not preempt collective bargaining agreements by establishing ceilings. ECOP
prays for the nullification of Wage Order No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.
The Solicitor General commented that the RTWPB may fix minimum wages according to the salary method, while
ECOP insisted that the RTWPB may do so only by adjusting floor wages. ECOP insists, in its reply, that wage is a
legislative function, and Republic Act No. 6727 delegated to the regional boards no more "than the power to grant
minimum wage adjustments" 7 and "in the absence of clear statutory authority," 8 the boards may no more than adjust
"floor wages."
ISSUE: Whether or not the wage order is valid.
RULING: The Court is inclined to agree with the Government. In the National Wages and Productivity Commission's
Order of November 6, 1990, the Commission noted that the determination of wages has generally involved two
methods, the "floor-wage" method and the "salary-ceiling" method. As quoted by the Supreme Court, “Historically,
legislation involving the adjustment of the minimum wage made use of two methods. The first method involves the
fixing of determinate amount that would be added to the prevailing statutory minimum wage. The other involves "the
salary-ceiling method" whereby the wage adjustment is applied to employees receiving a certain denominated salary
ceiling.”
The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an across-the-board
hike, performed an unlawful act of legislation. It is true that wage-fixing, like rate constitutes an act Congress; 13 it is
also true, however, that Congress may delegate the power to fix rates 14 provided that, as in all delegations cases,
Congress leaves sufficient standards. As this Court has indicated, it is impressed that the above-quoted standards are
sufficient, and in the light of the floor-wage method's failure, the Court believes that the Commission correctly upheld
the Regional Board of the National Capital Region.
It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to rationalize wages,
that is, by having permanent boards to decide wages rather than leaving wage determination to Congress year after
year and law after law. The Court is not of course saying that the Act is an effort of Congress to pass the buck, or
worse, to abdicate its duty, but simply, to leave the question of wages to the expertise of experts. As Justice Cruz
observed, "[w]ith the proliferation of specialized activities and their attendant peculiar problems, the national
legislature has found it more necessary to entrust to administrative agencies the power of subordinate legislation' as it
is caned." 23
The concept of "minimum wage" is, however, a different thing, and certainly, it means more than setting a floor wage
to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies the effort of the State, as Republic
Act No. 6727 expresses it, "to promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through industry dispersal; and to allow business
and industry reasonable returns on investment, expansion and growth," 25 and as the Constitution expresses it, to affirm
"labor as a primary social economic force." 26 As the Court indicated, the statute would have no need for a board if
the question were simply "how much". The State is concerned, in addition, that wages are not distributed unevenly,
and more important, that social justice is subserved.
Wherefore petition is denied.

Bankard Employees Union vs. NLRC

G.R. No.140689
February 17, 2004

Facts: Bankard, Inc. classifies its employees by levels: Level I, Level II, Level III, Level IV, and Level V. On May
1993, its Board of Directors approved a New Salary Scale, made retroactive to April 1, 1993, for the purpose of
making its hiring rate competitive in the industry’s labor market. The New Salary Scale increased the hiring rates of
new employees, to wit: Levels I and V by one thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred
pesos (P900.00). Accordingly, the salaries of employees who fell below the new minimum rates were also adjusted to
reach such rates under their levels.

This made Bankard Employees Union-WATU (petitioner), the duly certified exclusive bargaining agent of the regular
rank and file employees of Bankard, to request for the increase in the salary of its old, regular employees. Bankard
insisted that there was no obligation on the part of the management to grant to all its employees the same increase in
an across-the-board manner.

Petioner filed a notice of strike. The strike was averted when the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration. NLRC finding no wage distortion dismissed the case for lack of merit.
Petitioner’s motion for reconsideration of the dismissal of the case was denied.

Issue: Whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates of
new employees without increasing the salary rates of old employees resulted in wage distortion within the
contemplation of Article 124 of the Labor Code.

Ruling: The Court will not interfere in the management prerogative of the petitioner. The employees are not precluded
to negotiate through the provisions of the CBA.

Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others, Article 124 of
the Labor Code), the term "wage distortion" was explicitly defined as... a situation where an increase in prescribed
wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary
rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied
in such wage structure based on skills, length of service, or other logical bases of differentiation.

In the case of Prubankers Association v. Prudential Bank and Trust Company, it laid down the four elements of wage
distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates; (2) A significant change in
the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one; (3) The elimination
of the distinction between the two levels; and (4) The existence of the distortion in the same region of the country.

Normally, a company has a wage structure or method of determining the wages of its employees. In a problem dealing
with "wage distortion," the basic assumption is that there exists a grouping or classification of employees that
establishes distinctions among them on some relevant or legitimate bases. Involved in the classification of employees
are various factors such as the degrees of responsibility, the skills and knowledge required, the complexity of the job,
or other logical basis of differentiation. The differing wage rate for each of the existing classes of employees reflects
this classification.

Put differently, the entry of new employees to the company ipso facto places them under any of the levels mentioned
in the new salary scale which private respondent adopted retroactive to April 1, 1993. While seniority may be a factor
in determining the wages of employees, it cannot be made the sole basis in cases where the nature of their work
differs.

Moreover, for purposes of determining the existence of wage distortion, employees cannot create their own
independent classification and use it as a basis to demand an across-the-board increase in salary.

The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage adjustments,
then the language of the law should have been broad, not restrictive as it is currently phrased:

Article 124. Standards/Criteria for Minimum Wage Fixing. Where the application of any prescribed wage increase by
virtue of a law or Wage Order issued by any Regional Board results in distortions of the wage structure within an
establishment, the employer and the union shall negotiate to correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration.
Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in CHAPTER V on "WAGE
STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION" which principally deals with the fixing of
minimum wage. Article 124 should thus be construed and correlated in relation to minimum wage fixing, the intention
of the law being that in the event of an increase in minimum wage, the distinctions embodied in the wage structure
based on skills, length of service, or other logical bases of differentiation will be preserved.

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary and unilateral
increases by the employer in fixing hiring rates which is inherently a business judgment prerogative, then the hands
of the employer would be completely tied even in cases where an increase in wages of a particular group is justified
due to a re-evaluation of the high productivity of a particular group, or as in the present case, the need to increase the
competitiveness of Bankard’s hiring rate. An employer would be discouraged from adjusting the salary rates of a
particular group of employees for fear that it would result to a demand by all employees for a similar increase,
especially if the financial conditions of the business cannot address an across-the-board increase.

Wage distortion is a factual and economic condition that may be brought about by different causes. The mere factual
existence of wage distortion does not, however, ipso facto result to an obligation to rectify it, absent a law or other
source of obligation which requires its rectification.

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V.

BALINANG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and
TRUST COMPANY, respondents.

Facts:

On 25 May 1989, the Metropolitan Bank & Trust Company entered into a collective bargaining agreement with the
Metropolitan Bank & Trust Company Employees Union MBTCEU, granting a monthly P900 wage increase
effective 01 January 1989. With the exclusion of the probationary employees.

Republic Act 6727 was enacted "an act to rationalize wage policy determination be establishing the mechanism and
proper standards thereof, . . . fixing new wage rates, providing wage incentives for industrial dispersal to the
countryside, and for other purposes," took effect which provides for the agricultural or non-agricultural employees
salary, be increased by twenty-five pesos (P25) per day, . . .: Provided, That those already receiving above the
minimum wage rates up to one hundred pesos(P100.00) shall shall also receive an increase of twenty-five pesos
(P25.00) per day, . . .

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its probationary
employees and to those who had been promoted to regular or permanent status before 01 July 1989 but whose daily
rate was P100 and below. The bank refused to give the same increase to its regular employees who were receiving
more than P100 per day and recipients of the P900 CBA increase.

Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the employees into
(a) the probationary employees as of 30 June 1989 and regular employees receiving P100 or less a day who had
been promoted to permanent or regular status before 01 July 1989, and (b) the regular employees as of 01 July 1989,
whose pay was over P100 a day, and that, between the two groups, there emerged a substantially reduced salary gap.
The Union sought from the bank the correction of the alleged distortion in pay by granting 750 increase in regular
employees with above 100 pay and reciepient of 900 CBA increase. To avoid strike the bank petitioned the secretary
of Labor to assume jurisdiction, then assigned to Labor Arbiter for arbitration.

The Labor arbiter sided with the Union, that such salary increase resulted in the severe contraction of an intentional
quantitative difference in wage between employee groups. The bank appealed to the NLRC, and the NLRC reversed
the decision of the Labor Arbiter in favour of Metrobank and Trust Company.

Issue:

Whether there has been a wage distortion, and a need to grant the increase 750 to regular employees receiving above
100 peso per day.

Ruling:

There has been a wage distortion. However it is not conductive to grant the increase of P750 to regular employees
receiving above 100 peso per day.

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the elimination or severe
contradiction of intentional quantitative differences in wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length
of service, or other logical bases of differentiation.

The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when, as a result of an
increase in the prescribed wage rate, an "elimination or severe contraction of intentional quantitative differences in
wage or salary rates" would occur "between and among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of service, or other logical bases
of differentiation." In mandating an adjustment, the law did not require that there be an elimination or total
abrogation of quantitative wage or salary differences; a severe contraction thereof is enough.

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the standard considered by
the regional Tripartite Wages and Productivity Commission for the correction of pay scale structures in cases of
wage distortion, 15 to well be the appropriate measure to balance the respective contentions of the parties in this
instance. We also view it as being just and equitable.

Minimum Wage = % x Prescribed = Distortion

—————— Increased Adjustment
Actual Salary

G.R. No. 127718 March 2, 2000

NATIONAL FEDERATION OF LABOR, et.al., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (5th Division), PATALON COCONUT ESTATE and/or
CHARLIE REITH as General Manager and SUSIE GALLE REITH, as owner, respondents.
FACTS: Petitioners are bona fide members of the National Federation of Labor (NFL), a legitimate labor
organization duly registered with the Department of Labor and Employment. They were employed by private
respondents Charlie Reith and Susie Galle Reith, general manager and owner, respectively, of the 354-hectare
Patalon Coconut Estate located at Patalon, Zamboanga City. Patalon Coconut Estate was engaged in growing
agricultural products and in raising livestock.

In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law (CARL), which mandated the compulsory acquisition of all covered agricultural lands for distribution
to qualified farmer beneficiaries under the so-called Comprehensive Agrarian Reform Programme (CARP).
Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to the Patalon Estate Agrarian Reform
Association (PEARA), a cooperative accredited by the Department of Agrarian Reform (DAR), of which petitioners
are members and co-owners.

As a result of this acquisition, private respondents shut down the operation of the Patalon Coconut Estate and
the employment of the petitioners was severed on July 31, 1994. Petitioners did not receive any separation
pay.

Subsequently, the cooperative took over the estate. Being beneficiaries of the Patalon Coconut Estate pursuant to the
CARP, the petitioners became part-owners of the land.

Petitioners, thereafter, filed individual complaints before the Regional Arbitration Branch (RAB) of the National
Labor Relations Commission (NLRC) in Zamboanga City, praying for their reinstatement with full backwages on
the ground that they were illegally dismissed.

RAB dismissed the complaints for lack of merit. However, ordered respondents thru [sic] its owner-manager or its
duly authorized representative to pay complainants’ separation pay in view of the latter’s cessation of operations or
forced sale, and for 13th month differential pay.

NLRC on appeal, set aside the decision of RAB ordering respondents to pay separation pay and 13th month
differentials stating that, the severance of employer-employee relationship between the parties came about
INVOLUNTARILY, as a result of an act of the State. MR Denied. Hence, this petition.

ISSUE: whether or not an employer that was compelled to cease its operation because of the compulsory acquisition
by the government of its land for purposes of agrarian reform, is liable to pay separation pay to its affected
employees

HELD: NO

Petitioners contend that they are entitled to separation pay citing Article 283 of the Labor Code

It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and reduction of
personnel.1âwphi1 The peculiar circumstances in the case at bar, however, involves neither the closure of an
establishment nor a reduction of personnel as contemplated under the aforesaid article. When the Patalon
Coconut Estate was closed because a large portion of the estate was acquired by DAR pursuant to CARP, the
ownership of that large portion of the estate was precisely transferred to PEARA and ultimately to the petitioners as
members thereof and as agrarian lot beneficiaries. Hence, Article 283 of the Labor Code is not applicable to the case
at bench.
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the benefit of the employees.

Capital and management sectors must also be protected under a regime of justice and the rule of law.

PETITION DENIED.