[G.R. No. 155059. April 29, 2005]
123880 February 23, 1999
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION vs. AMERICAN
WIRE AND CABLE CO., INC. and THE COURT OF APPEALS
Facts:
 American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of
wires and cables. There are two unions in this company, the American Wire and Cable
Monthly-Rated Employees Union (Monthly-Rated Union) and the American Wire and
Cable Daily-Rated Employees Union (Daily-Rated Union).
 An action was filed before the National Conciliation and Mediation Board (NCMB) of
the DOLE by the two unions alleging that respondent, without valid cause, suddenly and
unilaterally withdrew and denied certain benefits and entitlements which they have long
enjoyed (i.e. Service award, 35% Premium Pay, Christmas Party and Promotional
Increase);
 Voluntary Arbitrator declared that respondent company is not guilty of Art. 100 (Non-
Dimunition of Benefits), however directed respondent to grant service award to
deserving employees;
 Unions moved for reconsideration before CA, which affirmed VA’s decision.
Issue: Whether or not private respondent is guilty of violating Article 100 of the Labor Code when
the benefits/entitlements given to the members of petitioner union were withdrawn.
Ruling: NO. Based on the foregoing pronouncement, it is obvious that the benefits/entitlements
subjects of the instant case are all bonuses which were given by the private respondent out of its
generosity and munificence. The additional 35% premium pay for work done during selected days
of the Holy Week and Christmas season, the holding of Christmas parties with raffle, and the cash
incentives given together with the service awards are all in excess of what the law requires each
employer to give its employees. Since they are above what is strictly due to the members of
petitioner-union, the granting of the same was a management prerogative, which, whenever
management sees necessary, may be withdrawn, unless they have been made a part of the wage or
salary or compensation of the employees.
For a bonus to be enforceable, it must have been promised by the employer and expressly agreed
upon by the parties, or it must have had a fixed amount and had been a long and regular practice on
the part of the employer.
To be considered a regular practice, the giving of the bonus should have been done over a long
period of time, and must be shown to have been consistent and deliberate. Anent the Christmas
party and raffle of prizes, the same were merely sponsored by respondent out of generosity and that
the same is dependent on the financial performance of the company for a particular year. As to
additional 35% premium pay for work rendered during selected days of the Holy Week and
Christmas season, the same however did not ripen into a company practice on account of the fact
that it was only granted for two (2) years and with the express reservation from respondent
corporations owner that it cannot continue to rant the same in view of the company’s current
financial situation.
The benefits/entitlements in question were never subjects of any express agreement between the
parties. They were never incorporated in the Collective Bargaining Agreement (CBA). As observed
by the Voluntary Arbitrator, the records reveal that these benefits/entitlements have not been
subjects of any express agreement between the union and the company, and have not yet been
incorporated in the CBA. In fact, the petitioner has not denied having made proposals with the
private respondent for the service award and the additional 35% premium pay to be made part of
the CBA.
G.R. No.
MARANAW HOTELS AND RESORT CORPORATION V NLRC
Facts:
 Eddie Damalerio, a room attendant of the Century Park Sheraton Hotel, operated by
petitioner corporation, was cleaning hotel guest Jamie Glaser’s room when the
latter entered the room and saw Damalerio’s hand inside his suitcase. Confronted
with what he’s doing, Damalerio explained that he was trying to tidy up the room.
Unsatisfied, Glaser lodged a written complaint before he shift-in-charge of security
of the hotel and was later brought to the attention of the chief of security of hotel;
 Damalerio was given a Disciplinary Action Notice (DAN). The next day, an
administrative hearing was conducted on the matter. Thereafter, Damalerio
received a memorandum issued by the Floor Supervisor, bearing the approval of the
Executive Housekeeper, stating that he (Damalerio) was found to have committed
qualified theft in violation of House Rule No. 1, Section 3 of Hotel Rules and
Regulations. The same memorandum served as a notice of termination of his
employment.
 Damalerio filed with the Labor Arbiter a Complaint for illegal dismissal against the
petitioner.
 Labor Arbiter found that the dismissal was illegal and order the reinstatement of
Damalerio. Petitioner appealed to the NLRC, which modified the appealed decision
by giving petitioner the option of paying Damalerio a separation pay equivalent to
one (1) month pay for every year of service, instead of reinstating him.
 Petitioner moved for reconsideration but was denied.
Issue: W/N the dismissal was valid
Ruling: NO. Petitioner's theory that Damalerio was caught committing qualified theft
in flagrante delicto is anemic of evidentiary support. Records disclose petitioner's failure to
substantiate such imputation against him. It bears repeating that subject hotel guest lost
nothing. Albeit petitioner may have reasons to doubt the honesty and trustworthiness of
Damalerio, as a result of what happened, absent sufficient proof of guilt, he (Damalerio), who
is a rank-and-file employee, cannot be legally dismissed. Unsubstantiated suspicions and
baseless conclusions by employers are not legal justification for dismissing employees. The
burden of proving the existence of a valid and authorized cause of termination is on the
employer.  Any doubt should be resolved in favor of the employee, in keeping with the
principle of social justice enshrined in the Constitution. 
As regards the share of Damalerio in the service charges collected during the period of his
preventive suspension, the same form part of his earnings, and his dismissal having been
adjudged to be illegal, he is entitled not only to full backwages but also to other benefits,
including a just share in the service charges, to be computed from the start of his preventive
suspension until his reinstatement.
However, mindful of the animosity and strained relations between the parties, emanating
from this litigation, we uphold the ruling a quo that in lieu of reinstatement, separation pay
may be given to the private respondent, at the rate of one (1) month pay for every year of
service. Should petitioner opt in favor of separation pay, the private respondent shall no
longer be entitled to share in the service charges collected during his preventive suspension.
G.R. No. 160073
BARAYOGA vs. ASSET PRIVATIZATION TRUST
Ruling: NO. The duties and liabilities of BISUDECO, including its monetary liabilities to its
Facts: employees, were not all automatically assumed by APT as purchaser of the foreclosed properties at
 Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia the auction sale. Any assumption of liability must be specifically and categorically agreed upon.
Sugar Development Corporation (BISUDECO), a sugar plantation mill located in
Camarines Sur. No succession of employment rights and obligations can be said to have taken place between the
 Under Proclamation No. 50 - APT was created and mandated to take title to and two. Between the employees of BISUDECO and APT, there is no privity of contract that would
possession of, conserve, provisionally manage and dispose of non-performing assets of make the latter a substitute employer that should be burdened with the obligations of the
the Philippine government identified for privatization or disposition. corporation. To rule otherwise would result in unduly imposing upon APT an unwarranted
 Administrative Order No. 14 - identified certain assets of government institutions that assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of Transfer
were to be transferred to the National Government. between the national government and PNB.
 Among assets transferred was the financial claim of the PNB against BISUDECO in the
form of a secured loan; The liabilities of the previous owner to its employees are not enforceable against the buyer or
 By virtue of a trust agreement executed between National Government and APT, he transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in
latter was constituted as trustee over BISUDECO’s account with the PNB; bad faith. Thus, APT cannot be held responsible for the monetary claims of petitioners who had
been dismissed even before it actually took over BISUDECOs assets.
 Sometime later, BISUDECO contracted the services of Philippine Sugar Corp
(Philsucor) to take over the management of sugar plantation and milling operations til
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act
August 1992;
No. 6715, which reads:
 Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan
Article 110. Workers preference in case of bankruptcy.   In the event of bankruptcy or
with PNB, its mortgaged properties were foreclosed and subsequently sold in a public
liquidation of the employers business, his workers shall enjoy first preference as regards
auction to APT, as the sole bidder. APT was issued a Sheriffs Certificate of Sale.
their unpaid wages and other monetary claims  shall be paid in full before the claims of
 Union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction and the Government and other creditors may be paid.
underpayment of wages and other labor standard benefits plus damages;  
 APT’s Board of Trustees issued a resolution accepting the offer of Bicol-Agro-Industrial This Court has ruled in a long line of cases that under Articles 2241 and 2242 of the Civil Code, a
Cooperative to buy BISUDECO; subsequently, authorized the payment of separation mortgage credit is a special preferred credit that enjoys preference with respect to a
benefits to BISUDECO’s employees in the event of the company’s privatization. BAPCI specific/determinate property of the debtor. On the other hand, the workers preference under
then purchased assets of BISUDECO from APT and took over its sugar milling Article 110 of the Labor Code is an ordinary preferred credit. While this provision raises the
operations under Peafrancia Sugar Mill (Pensumil); workers money claim to first priority in the order of preference established under Article 2244 of
 Union filed a similar complaint, to be consolidated with earlier complaint. Subsequently the Civil Code, the claim has no preference over special preferred credits. 
filed an amended complaint, impleading as additional party APT and Pensumil.    
o In their Position Paper, the union alleged that when Philsucor initially took over Thus, the right of employees to be paid benefits due them from the properties of their employer
the operations of the company, it retained BISUDECOs existing personnel under cannot have any preference over the latters mortgage credit. In other words, being a mortgage
the same terms and conditions of employment. Nonetheless, at the start of the credit, APTs lien on BISUDECOs mortgaged assets is a special preferred lien that must be satisfied
season sometime in May 1991, Philsucor started recalling workers back to work,
first before the claims of the workers.
to the exception of the union members. Management told them that they will be re-
hired only if they resign from the union. Just the same, thereafter, the company
started to employ the services of outsiders under the pakyaw system. Furthermore, workers claims for unpaid wages and monetary benefits cannot be paid outside of a
bankruptcy or judicial liquidation proceedings against the employer. It is settled that the application
 BISUDECO, Pensumil and APT all interposed the defense of lack of employer-
of Article 110 of the Labor Code is contingent upon the institution of those proceedings, during
employee relationship. The NLRC affirmed APTs liability for petitioners money claims.
o While no employer-employee relationship existed between members of the
which all creditors are convened, their claims ascertained and inventoried, and their preferences
determined. Assured thereby is an orderly determination of the preference given to creditors claims;
petitioner union and APT, at the time of the employees illegal dismissal, the assets
of BISUDECO had been transferred to the national government through APT. and preserved in harmony is the legal scheme of classification, concurrence and preference of
Moreover, the NLRC held that APT should have treated petitioners claim as a lien credits in the Civil Code, the Insolvency Law, and the Labor Code.
on the assets of BISUDECO. The Commission opined that APT should have done
so, considering its awareness of the pending complaint of petitioners at the time
BISUDECO sold its assets to BAPCI, and APT started paying separation pay to
the workers.
 CA ruled that APT should not be held liable for petitioners’ money claims. As found by
the NLRC, APT was not the employer of petitioners, but was impleaded only for
possessing BISUDECOs mortgaged properties as trustee and, later, as the highest
bidder in the foreclosure sale of those assets.
 Hence, this petition.

Issue: W/N APT is liable for petitioners’ monetary claims G.R. No. 146530            January 17, 2005
PEDRO CHAVEZ vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME
PACKAGING, INC. and ALVIN LEE, Plant Manager
Facts:
 In 1984, respondent Supreme Packaging, Inc. engaged the services of petitioner Pedro
Chavez as truck driver. As such, Chavez was tasked to deliver the company’s products
from its factory in Bataan to its various customers in Metro Manila. The delivery trips
were made in accordance with the routing slips issued by SPI indicating the order, time
and urgency of delivery. Initially, Chavez was paid P350 per trip; then adjusted to P450;
and at the time of his dismissal P900 per trip;
 In 1992, Chavez expressed to Alvin Lee (plant manager) his desire to avail himself of
the benefits that the regular employees were receiving. Lee promised to extend these
benefits to Chavez but failed to do so;
 In 1995, Chavez filed a complaint for regularization with NLRC, however before the
case was heard, SPI terminated the services of Chavez. Thus, the filing of an amended
complaint for illegal dismissal, unfair labor practice and non-payment of OT pay, night
differential pay, 13th month pay, among others;
 SPI denied the existence of an employer-employee relationship averring that Chavez
was an independent contractor as evidenced by the contract of service. The respondents
insisted that the petitioner had the sole control over the means and methods by which his
work was accomplished. He paid the wages of his helpers and exercised control over
them. As such, the petitioner was not entitled to regularization because he was not an
employee of the respondent company. Likewise, it maintained that Chavez was not
dismissed, but the severance of the contractual relation was due to his violation of the
terms and conditions of their contract. Petitioner allegedly abandoned his job when he
filed a complaint for regularization, and allegedly failed to observe the minimum degree
of diligence in the proper maintenance of the truck he was using which was provided for
by the SPI.
 Labor Arbiter rendered its decision finding SPI guilty of illegal dismissal - declared that
the Chavez was a regular employee of the SPI as he was performing a service that was
necessary and desirable to the latter’s business. Moreover, it was noted that the Chavez
had discharged his duties as truck driver for the SPI for a continuous and uninterrupted
period of more than ten years.
 NLRC affirmed the decision of Labor Arbiter. SPI moved for reconsideration; NLRC
reversed its earlier decision - stated that the respondents did not exercise control over
the means and methods by which the petitioner accomplished his delivery services. It
upheld the validity of the contract of service as it pointed out that said contract was
silent as to the time by which the petitioner was to make the deliveries and that the
petitioner could hire his own helpers whose wages would be paid from his own account.
These factors indicated that the petitioner was an independent contractor, not an
employee of the respondent company.
 CA reversed NLRC’s decision and reinstated the decision of Labor Arbiter. Hence, this
petition.
Issue: (1) Whether there existed an employer-employee relationship between the SPI and
Chavez;
(2) Whether Chavez was validly dismissed
Ruling: (1) YES. Using the four-fold test, the SC found that all the elements are present. First.
Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party. Second. It cannot be denied that Chavez received compensation in
exchange for services rendered. That the petitioner was paid on a per trip basis is not significant.
This is merely a method of computing compensation and not a basis for determining the existence
or absence of employer-employee relationship. One may be paid on the basis of results or time
expended on the work, and may or may not acquire an employment status, depending on whether
the elements of an employer-employee relationship are present or not. In this case, it cannot be
gainsaid that the petitioner received compensation from the respondent company for the services
that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll. The payroll should show, among other things, the employee’s rate
of pay, deductions made, and the amount actually paid to the employee. Interestingly, the
respondents did not present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its presentation would be adverse
to their case.
Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged
the services of the petitioner as truck driver. They exercised this power by terminating the
petitioner’s services albeit in the guise of "severance of contractual relation" due allegedly to the
latter’s breach of his contractual obligation. Fourth. SPI’s right of control was manifested by the
fact that: The truck driven by petitioner belonged to the respondent; and Respondent determined
how, where, and when the petitioner would perform his task by issuing him routing slips, which
indicated the chronological order and priority of delivery.
(2) NO. To constitute abandonment, these two factors must concur: (a) the failure to report for
work or absence without valid or justifiable reason; and (b) a clear intention to sever employer-
employee relationship.
Obviously, the petitioner did not intend to sever his relationship with the respondent for at the time
that he allegedly abandoned his job, the petitioner just filed a complaint for regularization, which
was forthwith amended to one for illegal dismissal. The Supreme Court found that a charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal,
more so when it includes a prayer for reinstatement. Neither can the respondent’s claim that the
petitioner was guilty of gross negligence in the proper maintenance of the truck constitute a valid
and just cause for his dismissal.
Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them. The negligence, to warrant removal from service, should not merely be gross
but also habitual. The single and isolated act of the petitioner’s negligence in the proper
maintenance of the truck alleged by the respondents does not amount to "gross and habitual
neglect" warranting his dismissal. Therefore, for a lack of a valid and just cause in terminating
petitioner’s services, his dismissal is illegal, entitling the petitioner to reinstatement, without loss of
seniority rights and other privileges under Article 279 of the Labor Code. However, following the
strained relations doctrine, petitioner is entitled to an award of separation pay, in addition to his full
backwages, allowances and other benefits. The petition is granted and the decision of the Labor
Arbiter is reinstated.
Notes:
Wages are defined as "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 service rendered
or to be rendered."
G.R. No. 77959 January 9, 1989
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC vs. THE SECRETARY OF
LABOR AND EMPLOYMENT
Facts:
 In 1981, Petitioner Radio Communications of the Philippines, Inc. (RCPI) filed with the
National Wages Council (NWC) an application for exemption from the coverage of
Wage Order No. 1, which was opposed by respondent United RCPI Communications
Labor Association (URCPICLA-FUR), a labor organization affiliated with the
Federation of Unions of Rizal;
 NWC disapproved said application and ordered RCPI to pay its covered employees the
mandatory living allowance of P2.00 daily, which was affirmed by Office of the
President.
 Before the case was elevated in SC, the Union filed a motion for the issuance of a writ of
execution, asserting therein its claim of 15% of the total backpay due to all its members
as “union service fee” for having successfully prosecuted the latter's claim for payment
of wages, among others. Subsequently, filed a motion raising the claim to 20% of the
total backpay;
 RCPI opposed the said motion, asserting, among others, that there is no legal basis for
respondent-union to claim a union service fee. An alias writ of execution was issued.
Subsequently, however, without the knowledge and consent of respondent-union,
petitioner entered into a compromise agreement with Buklod ng Manggagawa sa RCPI-
NFL as the new bargaining agent of oppositors RCPI employees. Consequently, the
parties to the compromise agreement filed for the dismissal of the case on the ground
that the decision of the National Wages Council had been novated by the compromise
agreement which re-defined the rights and obligations of the parties. Opposing to the
said motion, respondent-union presented a resolution passed and approved by the
legislative board of respondent-union, entitling respondent-union 15% of the total
backpay as union service fee.
 Public respondent Regional Director ordered the award to respondent-union 15% of the
total backpay as its union service fee and directed petitioner to deposit said amount with
the cashier of the Regional Office for proper disposition. However, despite said order,
petitioner paid in full the employees without deducting the union service fee of 15%,
prompting the respondent-union to file a petition for the garnishment of petitioner’s
funds in its depository banks to effect remittance of the 15% union service fee. The NCR
officer-in-charge granted the petition and ordered the petitioner and its employees jointly
and severally liable for the payment of the 15% union service fee. It likewise ordered the
garnishment of petitioner’s bank account to enforce said claim.
 On appeal, public respondent Secretary of Labor modified the decision of the NCR
officer-in-charge and held petitioner solely liable to respondent-union for 10% of the
total backpay as union service fee.
 Hence, this petition.
Issue: Whether the public respondents acted with grave abuse of discretion amounting to lack of
jurisdiction in holding the RCPI solely liable for "union service fee' to respondent URCPICLA-
FUR.
Ruling: NO. While it is true that the original decision of said NWC; did not expressly provide for
payment of attorney's fees, that particular aspect or deficiency is deemed to have been supplied, if
not modified pro tanto, by the compromise agreement subsequently executed between the parties.
A cursory perusal of said agreement shows an unqualified admission by petitioner that "from the
aforesaid total amount due every employee, 10% thereof shall be considered as attorney's
fee, although, as hereinafter discussed, it sought to withhold it from respondent union. Considering,
however, that respondent union was categorically found by the Labor Secretary to have been
responsible for the successful prosecution of the case to its ultimate conclusion in behalf of its
member, employees of herein petitioner, its right to fees for services rendered, or what it termed as
"union service fee," is indubitable.
The further pretension of petitioner that respondent-union is not entitled to attorney's fee or union
service fee because it is not a member of the Bar is both untenable and in disregard of the
liberalized scheme and theory of representation for labor adopted in the Labor Code. The
appearance of labor federations and local unions as counsel in labor proceedings has been given
legal sanction and we need only cite Art. 222 (now Art. 228) of the Labor Code which allows non-
lawyers to represent their organization or members thereof.
Finally, petitioner cannot invoke the lack of an individual written authorization from the employees
as a shield for its fraudulent refusal to pay the service fee of respondent-union. Prior to the payment
made to its employees, petitioner was ordered by the Regional Director to deduct the 15%
attorney's fee from the total amount due its employees and to deposit the same for proper
disposition. Petitioner failed to do so allegedly because of the absence of individual written
authorizations. The lack thereof was remedied and supplied by the execution of the compromise
agreement whereby the employees, expressly approved the 10% deduction and held petitioner free
from any claim, suit or complaint arising from the deduction thereof. When petitioner was
thereafter again ordered to pay the 10% fees to respondent-union, it no longer had any legal basis
or subterfuge for refusing to pay the latter.
We agree that Article 222 of the Labor Code requiring an individual written authorization as a
prerequisite to wage deductions seeks to protect the employee against unwarranted practices that
would diminish his compensation without his knowledge and consent. However, for all intents and
purposes, the deductions required of the RCPI and the employees do not run counter to the express
mandate of the law since the same are not unwarranted or without their knowledge and consent.
Also, the deductions for the union service fee in question are authorized by law and do not require
individual check-off authorizations. 
Notes:
Petitioner filed a petition for certiorari contending that the public respondents acted with grave
abuse of discretion amounting to lack of jurisdiction when they imposed an additional obligation
in the form of attorney’s fees which was not contemplated in the decision of the National Wages
Council. Petitioner also contend that respondent-union is not entitled to attorney’s fee or union
service fee as it is not a member of the Bar. Lastly, petitioner invoke the lack of an individual
written authorization from its employees, which is required by Article 222 (now Art. 113) of the
Labor Code, as basis for its refusal to pay respondent-union its union service fee.
Citing Cristobal vs. ECC (103 SCRA 339), it ruled that the defaulting employer remains liable for
attorney's fees because it compelled the complainant to employ the services of counsel by unjustly
refusing to recognize the validity of the claim. Attorney's fee due the employees is, thus, chargeable
against the petitioner. Furthermore, the Secretary of Labor also found that it was respondent-union who
was responsible for the successful prosecution of the case to its ultimate conclusion in behalf of its
members.
MANILA ELECTRIC V BENAMIRA
JULY 14, 2005 GR 145271   The agreement even explicitly provided that [n]othing herein contained shall be understood to
 
A security service agreement was entered into by between respondent Armed Security &
Detective Agency, Inc., (ASDAI) as the AGENCY and MERALCO as the COMPANY.
Respondents were absorbed by ASDAI and retained at MERALCO.
 
Less than a month later, the individual respondents filed a complaint for unpaid monetary
benefits against ASDAI and MERALCO.
 
Thereafter, a security service agreement between respondent Advance Forces Security &
Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous
security service agreement with ASDAI.[7]  ASDAI. As for the rest of the individual respondents, they retained their post only as hold-
 
The individual respondents alleged that: MERALCO and ASDAI never paid their overtime
pay, service incentive leave pay, premium pay for Sundays and Holidays, P50.00 monthly
uniform allowance and underpaid their 13th month pay.
 
ASDAI denied in general terms any liability claiming that there is nothing due them in
connection with their services. MERALCO also denied liability on the ground of lack of
employer-employee relationship with individual respondents. AFSISI asserted that it is not
liable for illegal dismissal since it did not absorb or hire the individual respondents, the latter
were merely hold-over guards from ASDAI…
 
Labor Arbiter held that ASDAI and MERALCO are jointly and solidarity liable to the
monetary claims and dismissing the complaint against AFSISI. Individual respondents
insisted that AFSISI is the party liable for their illegal dismissal and should be the party
directed to reinstate them.
 
NLRC affirmed in toto the decision of the Labor Arbiter. NLRC denied motion filed by
respondents. On appeal, the CA rendered a decision finding MERALCO as the employer of
the respondents, using the 4-fold test.
 
ISSUE: Who is the employer of private respondents, hence is liable to pay the mentioned
monetary benefits?
  
RULING: Individual respondents never alleged that MERALCO was their employer. They
have always advanced the theory that AFSISI is their employer, hence are bound by their
submissions and should not be permitted to change their theory. A change of theory on appeal
is objectionable because it is contrary to the rules of fair play, justice and due process. Thus,
the CA should not have considered the new theory offered by the individual respondents in
their memorandum.
 
The terms and conditions embodied in the agreement between MERALCO and ASDAI
expressly recognized ASDAI as the employer of individual respondents; it was ASDAI which
(a) selected, engaged or hired and discharged the security guards; (b) assigned them to
MERALCO according to the number agreed upon; (c) provided the uniform, firearms and
ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the security guards;
(d) paid them salaries or wages; and, (e) disciplined and supervised them or principally
controlled their conduct.
make the security guards under this Agreement, employees of the COMPANY. Moreover,
individual respondents failed to show that MERALCO controlled their performance, hence no
power of control.
 
The individual respondents cannot be considered as regular employees of the MERALCO for,
security services are not directly related to its principal business.
The individual respondents failed to present any evidence to confirm that AFSISI absorbed
them into its workforce. Thus, respondent Benamira was not retained in his post at
MERALCO due to the termination of the security service agreement of MERALCO with
over guards until the security guards of AFSISI took over.
Nonetheless, because ASDAI simply stopped giving the individual respondents any
assignment and their inactivity clearly persisted beyond the six-month period allowed by
Article 286[31] of the Labor Code, the individual respondents were, in effect, constructively
dismissed by ASDAI from employment, hence, they should be reinstated.
 
When MERALCO contracted for security services with ASDAI, it became an indirect
employer of individual respondents pursuant to Article 107 of the Labor Code. When ASDAI
as contractor failed to pay the individual respondents, MERALCO as principal becomes
jointly and severally liable for the individual respondents wages, under Articles 106 and 109
of the Labor Code.
 
ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed
the indirect employer of the individual respondents for the purpose of paying their wages in
the event of failure of ASDAI to pay them.
 
However, the solidary liability of MERALCO with that of ASDAI does not preclude the
application of Article 1217 of the Civil Code on the right of reimbursement from his co-
debtor by the one who paid.
 
WHEREFORE, petition is GRANTED with the MODIFICATION that the payment shall be
without prejudice to MERALCOs right of reimbursement from ASDAI. SO ORDERED.
*Added discussion: ASDAI and AFSISI are not labor-only contractors. There is labor only
contract when the person acting as contractor is considered merely as an agent or
intermediary of the principal who is responsible to the workers in the same manner and to the
same extent as if they had been directly employed by him. On the other hand, job
(independent) contracting is present if the following conditions are met: (a) the contractor
carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of
the work except to the result thereof; and (b) the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials
which are necessary in the conduct of his business. [29]
Given the above distinction and the provisions of the security service agreements entered into
by petitioner with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were
engaged in job contracting.
NASIPIT LUMBER COMPANY vs. NATIONAL WAGES AND PRODUCTIVITY
COMMISSION
[G.R. No. 128296. September 8, 2003]
The Regional Tripartite Wages and Productivity Board (RTWPB) of Region X issued a
Wage Order mandating a P7.00 increase in the minimum daily wage of all workers and
employees in the private sector in Region X receiving a daily wage of not more than P130.00
per day and an additional P10.00 allowance per day.
Subsequently Petitioners filed their separate application for exemption from the Wage
Order claiming they are distressed establishments whose paid-up capital has been impaired by
at least twenty-five percent. After finding that the petitioners indeed sustained financial
losses, the RTWPB, granted petitioners a full exemption from compliance with the said Wage
Order for a period of one year.
Thereafter, Petitioners citing the continuous business decline in the wood processing
industry filed a consolidated petition for extension of their full exemption from compliance
with Wage Order for another year.
However, the RTWPB denied petitioners consolidated application for extension of
exemption. Petitioners then interposed an appeal to the NWPC however it also denied the
appeal for lack of merit ratiocinating that:
Section 7 of the NWPC Revised Guidelines on Exemption, which is the applicable rule on
this matter, provides for the duration and extent of exemption that can be granted to a
qualified applicant establishment, to wit: Establishments shall be granted full exemption of
one (1) year from effectivity of the Order for all categories of exemption.
RULING: Article 121 of the Labor Code, as amended by RA 6727, partly provides that the
Commission shall have the following powers and functions:
(c) To prescribe rules and guidelines for the determination of appropriate minimum wage and
productivity measures at the regional, provincial or industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance with prescribed guidelines and national
development plans;
Interpreting the above provision, this Court, in another case held:
The foregoing clearly grants the NWPC, the power to prescribe the rules and guidelines for
the determination of minimum wage and productivity measures. x x x, the NWPC has the
power not only to prescribe guidelines to govern wage orders, but also to issue exemptions
therefrom, x x x. In short, the NWPC lays down the guidelines which the RTWPB
implements.
In affirming the RTWPBs Resolution denying petitioners application for extension for
another year of their full exemption from compliance with Wage Order No. RX-03, the
NWPC did not act with grave abuse of discretion. On the contrary, it merely applied its own
Guideline No. 01, Series of 1992 limiting the duration of exemption to only one (1) year. It is
noteworthy that the RTWPB, for its part, implemented to the letter the said Guideline.
WHEREFORE, the petition is hereby DISMISSED. SO ORDERED.

As set forth by the aforecited rule, the maximum period of exemption that can be accorded to
a qualified applicant is only for one (1) year from the effectivity of the Wage Order.  This is a
non-extendable one year period of exemption. The rationale behind is to afford protection to
workers who may be unfairly affected by the deleterious effect of a prolonged exemption
which is not in accord with the very purpose of the issuance of a Wage Order.

In another consolidated motion for reconsideration, the NWPC remained steadfast with its
Decision and denied petitioners motion.
Petitioners contend they are entitled to an extension for another year of their full exemption
as distressed establishments on the basis of paragraph 4, Section 3 of the Wage Order which
expressly provides: (D)istressed establishments, as defined by the Board upon due and
proper application with the Board, may also be exempted either partly or fully for a period of
one year renewable for another year provided the conditions still persist and warrant the
exemption, provided further that they qualify under the implementing guidelines issued by the
Board.
Petitioners claim that the NWPC exceeded its jurisdiction (1) in deleting the phrase
renewable for another year provided the conditions still persist of the Wage Order; (2) in
overriding the clear intention of the RTWPB to extend the exemption of distressed
establishments; and (3) limiting the duration of exemption to one (1) year, contrary to
Republic Act No. 6727.[4]
ISSUE: Did the NWPC exceed its jurisdiction?
G.R. No. 111474 August 22, 1994
FIVE J TAXI and/or JUAN S. ARMAMENTO vs. NLRC
Private respondents Maldigan and Sabsalon were hired by the petitioners as taxi drivers.
Aside from the daily "boundary" of P700.00 for air-conditioned taxi or P450.00 for non-air-
conditioned taxi, they were also required to pay P20.00 for car washing, and to further make a
P15.00 deposit to answer for any deficiency in their "boundary," for every actual working
day.
Maldigan failed to report for work for unknown reasons. Later, petitioners learned that he was
working for "Mine of Gold" Taxi Company. With respect to Sabsalon, he was held up by his
passenger who took all his money and stabbed him.
Sabsalon was re-admitted by petitioners after recuperating under the same terms and
conditions, but he drove only every other day. However, on several occasions, he failed to
report for work during his schedule. He failed to remit his "boundary". Also, he abandoned
his taxicab in Makati without fuel refill worth P300.00. Despite repeated requests of
petitioners for him to report for work, he adamantly refused. Afterwards it was revealed that
he was driving a taxi for "Bulaklak Company."
Maldigan requested petitioners for the reimbursement of his daily cash deposits for 2 years,
but petitioners told him that nothing was left of his deposits as these were not even enough to
cover the amount spent for the repairs of the taxi he was driving. This was allegedly the
practice adopted by petitioners to recoup the expenses incurred in the repair of their taxicab
units.
When Maldigan insisted on his deposits, petitioners terminated his services. Sabsalon, on his
part, claimed that his termination from employment was effected when he refused to pay for
car washing.
his "boundary." Also, when private respondents stopped working for petitioners, the alleged
purpose for which petitioners required such unauthorized deposits no longer existed. In other
case, any balance due to private respondents after proper accounting must be returned to them
with legal interest.
However, the foregoing accounting shows that from 1987-1991, Sabsalon was able to
withdraw his deposits through vales or he incurred shortages, such that he is even indebted to
petitioners in the amount of P3,448.00. With respect to Maldigan's deposits, nothing was
mentioned questioning the same even in the present petition. We accordingly agree with the
recommendation of the Solicitor General that since the evidence shows that he had not
withdrawn the same, he should be reimbursed the amount of his accumulated cash deposits. 5
On the matter of the car wash payments, consequently, private respondents are not entitled to
the refund of the P20.00 car wash payments they made. It will be noted that there was nothing
to prevent private respondents from cleaning the taxi units themselves, if they wanted to save
their P20.00. Also, as the Solicitor General correctly noted, car washing after a tour of duty is
a practice in the taxi industry, and is, in fact, dictated by fair play.
On the last issue of attorney's fees, pertinent laws states that non-lawyers may appear before
the NLRC or any labor arbiter only (1) if they represent themselves, or (2) if they represent
their organization or the members thereof. While it may be true that private respondents were
represented by an authorized person, he was a non-lawyer who did not fall in either of the
foregoing categories. Hence, by clear mandate of the law, he is not entitled to attorney's fees.
WHEREFORE, the questioned judgment NLRC is hereby MODIFIED by directing payment
by petitioners of the refund for Maldigan's deposits, plus legal interest thereon from the date
of finality of this resolution up to the date of actual payment thereof. SO ORDERED.

Private respondents filed a complaint with the NLRC charging petitioners with illegal
dismissal and illegal deductions. That complaint was dismissed by the Labor Arbiter.

Respondent NLRC concurred with the LA but modified the decision by ordering petitioners
to pay the awards stated at the beginning of this resolution – hindi naman ito na-ispecify
beshy pero yung sa reimbursement ata ng deposit at car wash. Petitioners' motion for
reconsideration was denied by the NLRC.

ISSUE: Was there illegal deductions?

RULING: Respondent NLRC held that the P15.00 daily deposits made by respondents to
defray any shortage in their "boundary" is covered by the general prohibition in Article 114 of
the Labor Code against requiring employees to make deposits, and that there is no showing
that the Secretary of Labor has recognized the same as a "practice" in the taxi industry.

It can be deduced that Art. 114 provides the rule on deposits for loss or damage to tools,
materials or equipments supplied by the employer. Clearly, the same does not apply to or
permit deposits to defray any deficiency which the taxi driver may incur in the remittance of
BANKARD EMPLOYEES UNION-WORKERS V NLRC
G.R. No. 140689           February 17, 2004
Bankard, Inc. classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and
Level V. 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, and Levels II, III and IV by nine hundred pesos. Accordingly, the salaries of employees who
fell below the new minimum rates were also adjusted to reach such rates under their levels.
Bankard Employees Union-WATU (petitioner), pressed for the increase in the salary of its old,
regular employees. Bankard alleged 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.
Petitioner filed two Notices of Strike, however, both were averted. The dispute was certified by the
Secretary of Labor and Employment for compulsory arbitration. NLRC and CA both dismissed the
case for lack of merit.
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: "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.4
Prubankers case 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.
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.6
Petitioner maintains that for purposes of wage distortion, the classification is based on the newly
hired and the old, in each and every level, and not between and among the different levels or ranks
in the salary structure.
NLRC, through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as
follows: To determine the existence of wage distortion, the "historical" classification of the
employees prior to the wage increase must be established. Likewise, it must be shown that as
between the different classification of employees, there exists a "historical" gap or difference.
The classification preferred by petitioner is belied by the wage structure of private respondent as
shown in the new salary scale. (CHART DELETED) Thus the employees of private respondent
have been "historically" classified into levels and not on the basis of their length of service. Put
differently, the entry of new employees to the company ipso facto place[s] them under any of the
levels mentioned in the new salary scale which private respondent adopted retroactive [to] April 1,
1993. Petitioner cannot make a contrary classification of private respondent’s employees without
encroaching upon recognized management prerogative of formulating a  wage structure, in this
case, one based on level.7 
There is no hierarchy of positions between the newly hired and regular employees of Bankard,
hence, the first element of wage distortion provided in Prubankers  is wanting.
While seniority may be a factor in determining the wages of employees, it cannot be made
the sole basis in cases where the nature of their work differs.
Whether or not a new additional scheme of classification of employees for compensation purposes
should be established by the Company is properly a matter of management judgment and
discretion, and ultimately, perhaps, a subject matter for bargaining negotiations between
employer and employees. It is assuredly something that falls outside the concept of "wage
distortion."11 
This Court finds that the third element provided in Prubankers  is also wanting. Even assuming that
there is a decrease in the wage gap between the pay of the old employees and the newly hired
employees, to Our mind said gap is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in the salary rates between the employee
group. As already stated, the classification under the wage structure is based on the rank of
an employee, not on seniority. For this reason, wage distortion does not appear to exist.12 
Petitioner cannot legally obligate Bankard to correct the alleged "wage distortion" as the increase
in the wages and salaries of the newly-hired was not due to a prescribed law or wage order.
The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of
wage adjustments, then the language of the law should have been broad, not restrictive as it is
currently phrased.
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.
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. Moreover,
Bankard’s right to increase its hiring rate…is embodied under the parties’ CBA.
WHEREFORE, the present petition is hereby DENIED. SO ORDERED.
ACE NAVIGATION V CA
[G.R. No. 140364. August 15, 2000]
In June 1994, Ace Navigation Co., Inc. (Ace Nav) recruited private respondent Orlando
Alonsagay to work as a bartender on board the vessel M/V "Orient Express" owned by
its principal, Conning Shipping Ltd. (Conning). Under their POEA approved contract
of employment, Orlando shall receive a monthly basic salary of four hundred fifty U.S.
dollars (U.S. $450.00), flat rate, including overtime pay for 12 hours of work daily plus
tips of two U.S. dollars (U.S. $2.00) per passenger per day. He, was also entitled to 2.5
days of vacation leave with pay each month. The contract was to last for one (1) year.
After the expiration of the contract on June 13, 1995, Orlando returned to the
Philippines and demanded from Ace Nav his vacation leave pay. Ace Nav did not pay
him immediately. It told him that he should have been paid prior to his disembarkation
and repatriation to the Philippines. Moreover, Conning did not remit any amount for his
vacation leave pay.
Orlando filed a complaint[3] before the labor arbiter for vacation leave pay of $450.00
and unpaid tips amounting to $36,000.00. [4] Labor Arbiter ordered Ace Nav and
Conning to pay jointly and severally Orlando his vacation leave pay of US$450.00. The
claim for tips of Orlando was dismissed for lack of merit. [5]
Orlando appealed to the NLRC, it ordered Ace Nav and Conning to pay the unpaid tips
in addition to his vacation leave pay. Hence this appeal.
ISSUE: Whether petitioners are liable to pay the tips to Orlando.
The actuations of Orlando during his employment also show that he was aware his
monthly salary is only US$450.00, no more no less. He did not raise any complaint
about the non-payment of his tips during the entire duration of his employment. He
only asked for the payment of tips when he filed this case before the labor arbiter. This
shows that the alleged non-payment of tips was a mere afterthought to bloat up his
claim. The records of the case do not show that Orlando was deprived of any monthly
salary. It will now be unjust to impose a burden on the employer who performed the
contract in good faith.
Furthermore, it is presumed that the parties were aware of the plain, ordinary and
common meaning of the word "tip." As a bartender, Orlando can not feign ignorance on
the practice of tipping and that tips are normally paid by customers and not by the
employer.
It is also absurd that petitioners intended to give Orlando a salary higher than that of the
ship captain. (Captains are paid 3,000 us monthly, if Orlando will be granted his
petition, he will be paid 3,450.00) It will be against common sense for an employer to
give a lower ranked employee a higher compensation than an employee who holds the
highest position in an enterprise.
However, Orlando should be paid his vacation leave pay. Petitioners denied this
liability by raising the defense that the usual practice is that vacation leave pay is given
before repatriation. But as the labor arbiter correctly observed, petitioners did not
present any evidence to prove that they already paid the amount. The burden of proving
payment was not discharged by the petitioners.

RULING: The word [tip] has several meanings, with origins more or less obscure, IN VIEW WHEREOF, the decision of the labor arbiter is reinstated. SO ORDERED.
connected with "tap" and with "top." In the sense of a sum of money given for good
service, other languages are more specific, e.g., Fr. pourboire, for drink. It is suggested
that [the word] is formed from the practice, in early 18th c. London coffeehouses, of
having a box in which persons in a hurry would drop a small coin, to gain immediate
attention. The box was labelled To Insure Promptness; then just with the initials T.I.P.
[22]
– INTERESTING TO BESHY
Tipping is done to get the attention and secure the immediate services of a waiter,
porter or others for their services. Since a tip is considered a pure gift out of
benevolence or friendship, it cannot be demanded from the customer. Whether or not
tips will be given is dependent on the will and generosity of the giver. Although a
customer may give a tip as a consideration for services rendered, its value still depends
on the giver. They are given in addition to the compensation by the employer. A
gratuity given by an employer in order to inspire the employee to exert more effort in
his work is more appropriately called a bonus.
The NLRC and the Court of Appeals held that petitioners were liable to pay tips to
Orlando because of the contract of employment.
We disagree. The contract of employment between petitioners and Orlando is
categorical that the monthly salary of Orlando is US$450.00 flat rate. This already
included his overtime pay which is integrated in his 12 hours of work. The words "plus
tips of US$2.00 per passenger per day" were written at the line for overtime. Since
payment for overtime was included in the monthly salary of Orlando, the supposed tips
mentioned in the contract should be deemed included thereat.
G.R. No. 92174 December 10, 1993
BOIE-TAKEDA CHEMICALS, INC vs. Acting Secretary of DOLE
CONSOLIDATED WITH G.R. No. L-102552 PHILIPPINE FUJI XEROX CORP.
A routine inspection was conducted in the premises of petitioner Boie-Takeda by Labor and
Development Officer. Finding that Boie-Takeda had not been including the commissions
earned by its medical representatives in the computation of their 13th month pay, Boie-
Takeda was required within ten calendar days to effect restitution of "the underpayment of
13th month pay for the year(s) 1986, 1987 and 1988 of Med Rep in the total amount of
P558,810.89."
Boie-Takeda expressing to the Labor Department his view "that the commission paid to our
medical representatives are not to be included in the computation of the 13th month pay . . .
(since the) law and its implementing rules speak of REGULAR or BASIC salary and
therefore exclude all other remunerations which are not part of the REGULAR salary."
Regional Director directed Boie-Takeda to appear before his Office, however, and despite
due notice, no one appeared for Boie-Takeda, and the matter had perforce to be resolved on
the basis of the evidence at hand which directed Boie-Takeda to pay the amount of
P558,810.89 representing underpayment of 13th month pay.
A motion for reconsideration was seasonably filed by Boie-Takeda, treated as an appeal. The
Acting Labor Secretary, affirmed the Order with modification that the commissions earned by
Boie-Takeda's medical representatives before the effectivity date of Memorandum Order No.
28 and its Implementing Guidelines, shall be excluded in the computation of their 13th month
pay.  common, generally-accepted meaning, i.e., as a rate of pay for a standard work period
Hence the petition docketed as G.R. No. 92174. (RE G.R. No. 102552) Same lang naman
ang facts ng case na ito beshy.
ISSUE: What items or items of employee remuneration should go into the computation of
thirteenth month pay is the basic issue presented in these consolidated petitions.
Petitioners maintain that under P.D. 851, the 13th month pay is based solely on basic salary.
This being the case, the Revised Guidelines on the Implementation of the 13th Month Pay
Law issued by then Secretary Drilon providing for the inclusion of commissions in the 13th
month pay, were issued in excess of the statutory authority conferred by P.D. 851.
Respondents question the propriety of petitioners' attack on the constitutionality of the
Revised Guidelines, they contend, should be confined purely to the correction of errors and/or
defects of jurisdiction, including matters of grave abuse of discretion amounting to lack or
excess of jurisdiction and not extend to a collateral attack on the validity and/or
constitutionality of a law or statute. They add that the Revised merely clarified a gray area
occasioned by the silence of the law as to the nature of commissions.
RULING: Memorandum Order No. 28 did not repeal, supersede or abrogate P.D. 851. As
may be gleaned from the language of the Memorandum Order No. 28, it merely "modified"
Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of 13th Month
Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and while
entitlement to said benefit was no longer limited to employees receiving a monthly basic
salary of not more than P1,000.00, said benefit was, and still is, to be computed on the basic
salary of the employee-recipient as provided under P.D. 851. Thus, the interpretation given to
the term "basic salary" as defined in P.D. 851 applies equally to "basic salary" under
Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong, this Court delineated the coverage of the term
"basic salary" as used in P.D. 851. We said at some length:
“…Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th month pay. Any compensations
or remunerations which are deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus.
Under the Rules and Regulations implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances; b) Profit-sharing payments; and c) All allowances and monetary
benefits which are not considered or integrated as part of the regular basic salary of the
employee at the time of the promulgation of the Decree
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree
851 Presidential Decree 851 issued by then Labor Secretary, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the computation of the 13th
month pay.
The exclusions indicate the intention to strip basic salary of other payments which are
properly considered as "fringe" benefits…”
Quite obvious from the foregoing is that the term "basic salary" is to be understood in its
exclusive of such additional payments as bonuses and overtime. 
In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed
or guaranteed wage is patently the "basic salary" for this is what the employee receives for a
standard work period. Commissions are given for extra efforts exerted in consummating sales
or other related transactions. They are, as such, additional pay, which this Court has made
clear do not form part of the "basic salary."
In including commissions in the computation of the 13th month pay, the second paragraph of
Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law
unduly expanded the concept of "basic salary" as defined in P.D. 851.
WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of
Section 5 (a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law is
declared null and void. SO ORDERED.
G.R. No. 75289 August 31, 1989
KAMAYA POINT HOTEL V NLRC

Facts:
 Respondent Memia Quiambao with thirty others who are members of private respondent
Federation of Free Workers (FFW) were employed by petitioner as hotel crew. On the
basis of the profitability of the company's business operations, management granted a
14th month pay to its employees starting in 1979. In January 1982, operations ceased to
give way to the hotel's conversion into a training center for Libyan scholars. However,
due to technical and financing problems, the Libyans pre-terminated the program
petitioner without any business, aside from the fact that it was not paid for the use of the
hotel premises and in addition had to undertake repairs of the premises damaged by the
Libyan students. All in all petitioner allegedly suffered losses amounting to P2 million.
 Although petitioner reopened the hotel premises to the public, it was not able to pick-up
its lost patronage. In a couple of months, it effected a retrenchment program until finally
it totally closed its business. 
 Private respondent (FFW); a legitimate labor organization, filed with the Ministry of
Labor and Employment, a complaint against petitioner for illegal suspension, violation
of the CBA and non-payment of the 14th month pay.  Records however show that the
case was submitted for decision on the sole issue of alleged non-payment of the 14th
month pay for the year 1982 .
 Labor Arbiter rendered its decision ordering Kamaya Point to pay 14 th month pay and
payment of monetary benefits under the CBA, to all its rank and file employees. NLRC
set aside the award of monetary benefits but affirmed the grant of 14 th month pay.
o xxx We believe that individual complainants herein are still entitled to the
14th month pay for 1982 because to our mind, the granting of this 14th month
pay has already ripened into a company practice which respondent company
cannot withdraw unilaterally. This 14th month pay is now an existing benefit
which cannot be withdrawn without violating article 100 of the Labor Code.
 Hence, this petition.

Issue: W/N the rank and file employees are entitled to the 14 th month pay

Ruling: NO. There is no law that mandates the payment of the 14th month pay. This is emphasized
in the grant of exemption under Presidential Decree 851 (13th Month Pay Law) which states:
"Employers already paying their employees a 13th month pay or its equivalent are not covered by
this Decree." Necessarily then, only the 13th month pay is mandated. Having enjoyed the
additional income in the form of the 13th month pay, private respondents' insistence on the 14th
month pay for 1982 is already an unwarranted expansion of the liberality of the law.

Also contractually, as gleaned from the collective bargaining agreement between management and
the union, there is no stipulation as to such extra remuneration. Evidently, this omission is an
acknowledgment that such benefit is entirely contilagent or dependent on the profitability of the
company's operations.

Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, gratuitous in
nature. The granting of the 14th month pay is a management prerogative which cannot be forced
upon the employer. It is something given in addition to what is ordinarily received by or strictly
due the recipient. It is a gratuity to which the recipient has no right to make a demand. 
This Court is not prepared to compel petitioner to grant the 14th month pay solely because it has
allegedly ripened into a company practice" as the labor arbiter has put it. Having lost its catering
business derived from Libyan students, Kamaya Hotel should not be penalized for its previous
liberality.