June 27, 1968

G.R. No. L-25389

LIBERATION STEAMSHIP CO., INC., petitioner, 
vs.
COURT OF INDUSTRIAL RELATIONS and THE UNLICENSED CREW MEMBERS OF
THE THREE (3) DONA VESSELS, ALL AFFILIATES WITH THE PHILIPPINE
MARITIME INDUSTRIAL UNION (PMIU), et al., respondents.
G.R. No. L-25390
NATIONAL DEVELOPMENT COMPANY, petitioner, 
vs.
UNLICENSED CREW MEMBERS of THREE (3) DONA VESSELS (PMIU) and the
COURT OF INDUSTRIAL RELATIONS, respondents.

Facts:three shipping vessels owned by NDC (a GOCC) was sold to Liberation Steamship.
The contract of sale failed to stipulate the retention of seamen employed by NDC so upon
the transfer of ownership, Liberation ordered the dismissal of all seamen who were
employed by NDC. CIR ordered Liberation to reinstate the dismissed seamen and refrain
from firing them.

The unlicensed crew members of the three vessels thus petitioned the Industrial Court for
an order to restrain LISTCO from carrying out its ejection threat of the officers and/or
crew members of the M/S "Dona Alicia" and of the two other vessels upon their delivery
to the new owner. A restraining order was accordingly issued on June 30, 1961 against
therein respondent NDC and/or its successor, the LISTCO, directing the maintenance
of status quo during the pendency of the dispute. During this juncture, the petitioners
demand payments from the NDC, including gratuity pay equivalent to one month of
service from their employment up to the termination of their services on account of the
sale of the vessels to Liberation.

Thereafter, an agreement was reached between the petitioning officers and crew

members of the M/S "Dona Alicia" and the LISTCO, duly approved by the court on
November 29, 1961, by virtue of which those who were laid off in June, 1961 were
readmitted to work. On August 14, 1962, however, the NDC again took possession of the
vessels and resumed their operation.

Issue:whether or not the petitioners are entitled to a gratuity pay

Held: Petitioner contends such reopening to be error because gratuity is not demandable
by an employee as a matter of right, being a reward given by an employer in recognition
of the services rendered by the employee; consequently, it is a proper subject for
negotiation or collective bargaining. It is argued further that there being no showing that
the collective bargaining contract between the employees and the NDC provides for
payment of gratuity by the employer upon termination of the employee's services, the
order to remand the case for reception of evidence on Demand 1 lacks legal basis.

To this reasoning we can not agree. While normally discretionary, the grant of a gratuity
or bonus, by reason of its long and regular concession, may become regarded as part of
regular compensation (Philippine Education Co., Inc. vs. C.I.R., 92 Phil. 382, 385, and
cases cited therein). In order to determine whether such conditions operated in the
instant case, the reopening of the trial for receiving evidence on the point was evidently
proper.

Case was remanded to the lower court for determination whether gratuity pay is part of
regular compensation.
G.R. No. 111744 September 8, 1995

LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND

VILMA L. CRUZ, petitioners, 
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE
CO., LTD., respondents.

Facts: petitioners were under the employ of insular life assurance co for more than 20
years, but were dismissed because their positions were declared redundant. They were
given benefits upon dismissal, all were either provided by the company or required by the
law. Petitioners are claiming that they are entitled to receive their service awards. In the
same year of the petitioners’ dismissal, private respondent celebrated its 80 th anniversary
and granted anniversary bonus equivalent to one (1) month salary only to permanent and
probationary employees as of November 15, 1990. On March 26, 1991, respondent company
announced the grant of performance bonus to both rank and file employees and
supervisory specialist grade and managerial staff equivalent to two (2) months’ salary and
2.75 basic salary, respectively, as of December 30, 1990. The performance bonus, however,
would be given only to permanent employees as of March 30, 1991.

petitioners contended that they are likewise entitled to the performance and anniversary
bonuses because, at the time the performance bonus was announced to be given, they
were only short of two (2) months service to be entitled to the full amount thereof as they
had already served the company for ten (10) months prior to the declaration of the grant
of said benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of
the anniversary bonus when it was announced to be given to employees as of November
15, 1990.

In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay
petitioners their service awards, anniversary bonuses and prorated performance bonuses,
including ten percent (10%) thereof as attorney's fees.

Respondent company appealed to public respondent NLRC claiming grave abuse of

discretion committed by the labor arbiter in holding it liable to pay said service award,
performance and anniversary bonuses, and in not finding that petitioners were estopped
from claiming the same as said benefits had already been given to them and the
petitioners have already signed a quitclaim.

Issue:whether or not the petitioners are entitled to the bonuses that they are claiming

Held: Under prevailing jurisprudence, the fact that an employee has signed a satisfaction
receipt for his claims does not necessarily result in the waiver thereof. A deed of release or
quitclaim cannot bar an employee from demanding benefits to which he is legally
entitled. 

The grant of service awards in favor of petitioners is more importantly underscored in the
precedent case of Insular Life Assurance Co.,  Ltd., et al.  vs. NLRC, et al., 24 where this
Court ruled that "as to the service award differentials claimed by some respondent union
members, the company policy shall likewise prevail, the same being based on the
employment contracts or collective bargaining agreements between the parties. As the
petitioners had explained, pursuant to their policies on the matter, the service award
differential is given at the end of the year to an employee who has completed years of
service divisible by 5.

A bonus is not a gift or gratuity, but is paid for some services or consideration and is in
addition to what would ordinarily be given.  The term "bonus" as used in employment
contracts, also conveys an idea of something which is gratuitous, or which may be
claimed to be gratuitous, over and above the prescribed wage which the employer agrees
to pay.

While there is a conflict of opinion as to the validity of an agreement to pay additional

sums for the performance of that which the promisee is already under obligation to
perform, so as to give the latter the right to enforce such promise after performance, the
authorities hold that if one enters into a contract of employment under an agreement
that he shall be paid a certain salary by the week or some other stated period and, in
addition, a bonus, in case he serves for a specified length of time, there is no reason for
refusing to enforce the promise to pay the bonus, if the employee has served during the
stipulated time, on the ground that it was a promise of a mere gratuity.

This is true if the contract contemplates a continuance of the employment for a definite
term, and the promise of the bonus is made at the time the contract is entered into. If no
time is fixed for the duration of the contract of employment, but the employee enters
upon or continues in service under an offer of a bonus if he remains therein for a certain
time, his service, in case he remains for the required time, constitutes an acceptance of
the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be
withdrawn, but can be enforced by the employee. 
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner,
vs.  NATIONAL LABOR RELATIONS COMMISSION, ROLANDO S. ANGELES
and RICARDO P. PABLO, JR., respondents.
Facts:Private respondents were validly dismissed due to serious misconduct (bribery).
The tollway general manager conducted an entrapment operation and found out that the
respondents were taking bribe from motorists who were smuggling dogs to Baguio city.
Private respondents filed for a complaint of illegal dismissal and the Labor Arbiter ruled
in their favor. He also ordered petitioner to pay respondents’ backwages and midyear
bonus.

On appeal, the NLRC modified the decision of the Labor Arbiter.  It held that private
respondents’ act of receiving a sum of money and a dog from motorists constituted
bribery which was a sufficient ground for their dismissal.  The NLRC nonetheless ordered
petitioner to pay private respondents their separation pay on the ground of equity.  It also
retained the award of private respondents’ mid-year bonus for 1994.  

Issue: whether private respondents are entitled to separation pay and mid-year bonus.
Held:no. An employee who is dismissed for just cause is generally not entitled to
separation pay.  In some cases, however, the Court awards separation pay to a legally
dismissed employee on the grounds of equity and social justice.  This is not allowed,
though, when the employee has been dismissed for serious misconduct or some other
cause reflecting on his moral character.

Likewise, private respondents are not entitled to the mid-year bonus they are
claiming.  We do not agree with the Solicitor General’s contention that private
respondents have already earned their mid-year bonus at the time of their dismissal.  A
bonus is a gift from the employer and the grant thereof is a management
prerogative.  Petitioner may not be compelled to award a bonus to private respondents
whom it found guilty of serious misconduct.

The general rule is that a bonus is a gratuity or an act of liberality which the recipient has
no right to demand as a matter of right.   A bonus, however, is a demandable or enforceable
obligation when it is made part of the wage or salary or compensation of the
employee.   Whether or not a bonus forms part of wages depends upon the circumstances
and conditions for its payment.   If it is additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage.   But if it is
paid only if profits are realized or if a certain level of productivity is achieved, it cannot be
considered part of the wage.   Where it is not payable to all but only to some employees and
only when their labor becomes more efficient or more productive, it is only an inducement
for efficiency, a prize therefor, not a part of the wage.”
G.R. No. 100701       March 28, 2001

PRODUCERS BANK OF THE PHILIPPINES, petitioner, 

vs.
NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK
EMPLOYEES ASSOCIATION,1respondents.

Facts:private respondents filed a case against producers bank before the nlrc charging
petitioner with diminution of benefits, non-compliance with Wage Order No. 6 and non-
payment of holiday pay and midyear and Christmas bonuses. The labor arbiter ruled in
favor of the petitioner herein but the NLRC reversed the decision, ruling in favor of the
producers bank employees association. The petitioner herein filed a motion for partial
reconsideration.

According to respondents, the mid-year and Christmas bonuses, by reason of their having
been given for thirteen consecutive years, have ripened into a vested right and, as such,
can no longer be unilaterally withdrawn by petitioner without violating Article 100 of
Presidential Decree No. 4429 which prohibits the diminution or elimination of benefits
already being enjoyed by the employees. Although private respondent concedes that the
grant of a bonus is discretionary on the part of the employer, it argues that, by reason of
its long and regular concession, it may become part of the employee's regular
compensation.

On the other hand, petitioner asserts that it cannot be compelled to pay the alleged
bonus differentials due to its depressed financial condition, as evidenced by the fact that
in 1984 it was placed under conservatorship by the Monetary Board. According to
petitioner, it sustained losses in the millions of pesos from 1984 to 1988, an assertion
which was affirmed by the labor arbiter. Moreover, petitioner points out that the
collective bargaining agreement of the parties does not provide for the payment of any
mid-year or Christmas bonus.

Issue:whether or not the respondents are entitled to bonuses

Held:no they are not. A bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the employer's business and
made possible the realization of profits. It is an act of generosity granted by an
enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits.12 The granting of a bonus is a management
prerogative, something given in addition to what is ordinarily received by or strictly due
the recipient.13 Thus, a bonus is not a demandable and enforceable obligation, 14 except
when it is made part of the wage, salary or compensation of the employee. 15
However, an employer cannot be forced to distribute bonuses which it can no longer
afford to pay. To hold otherwise would be to penalize the employer for his past
generosity.

Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same
amount of bonuses to its employees. Thus, the conservator was justified in reducing the
mid-year and Christmas bonuses of petitioner's employees. To hold otherwise would be
to defeat the reason for the conservatorship which is to preserve the assets and restore
the viability of the financially precarious bank. Ultimately, it is to the employees'
advantage that the conservatorship achieve its purposes for the alternative would be
petitioner's closure whereby employees would lose not only their benefits, but their jobs
as well.
G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner, 

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS
EMPLOYEES UNION-TUPAS,respondents.

Facts:a decision was rendered by the Third Division directing Philippine Duplicators to
pay its employees their 13th month pay based on their fixed wages plus sales commissions.
A first motion for reconsideration was filed by the petitioner.

During the pendency of the MoR, another case was decided upon, this time by the second
division in the two (2) consolidated cases of Boie-Takeda Chemicals,
Inc.  vs. Hon.  Dionisio de la Serna and Philippine Fuji Xerox Corp. vs.  Hon. Cresenciano
B.Trajano. according to petitioners, the decision in the latter directly opposes the decision
in the former. Because of this, Philippine Duplicators filed for another motion for
reconsideration, this time anchoring their assertions to the recently concluded case of
Boie-Takeda Chemicals.

*in boie-takeda, the second paragraph of section 5a of the revised guidelines

issued by labor secretary drilon was declared null and void. Section 5a,
paragraph 2 states that “Employees who are paid a fixed or guaranteed wage
plus commission are also entitled to the mandated 13th month pay, based
on their total earnings during the calendar year, i.e., on both their fixed or
guaranteed wage and commission.”

Issue:whether or not sales commission shall be considered in the computation of 13 th

month pay

Held: the sales commission earned by the 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 galary structure was intended for the
benefit of the 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.
In other words, the sales commissions received for every duplicating machine sold
constituted part of the basic compensation or remuneration of the salesmen of Philippine
Duplicators for doing their job. The portion of the salary structure representing
commissions simply comprised an automatic increment to the monetary value initially
assigned to each unit of work rendered by a salesman. Especially significant here also is
the fact that the fixed or guaranteed portion of the wages paid to the Philippine
Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year.

Sales commissions, such as those paid in Duplicators, are intimately related to or directly
proportional to the extent or energy of an employee's endeavors. Commissions are paid
upon the specific results achieved by a salesman-employee. It is a percentage of the sales
closed by a salesman and operates as an integral part of such salesman's basic pay.
MANILA ELECTRIC COMPANY, petitioner, vs. THE HONORABLE SECRETARY OF
LABOR LEONARDO QUISUMBING AND MERALCO EMPLOYEES AND
WORKERS ASSOCIATION (MEWA), respondents.

Facts: mewa and meralco renegotiated the last two years of their CBA, but failed to arrive
at the terms acceptable to both parties. Afterwards, mewa filed a notice of strike and the
national conciliation and mediation board also failed to reconcile both parties.
Thereafter, the labor secretary took cognizance of the case and resolved the issue
containing awards in favor of the workers. Among those awards were bonuses which will
be given to the workers such as Christmas bonus and signing bonus. Meralco countered
the order of the secretary, saying that it will gravely affect the meralco’s financial viability

Issue:whether or not the labor secretary erred in granting Christmas bonus and signing
bonus to the employees

Held: as to the Christmas bonus, the secretary did not err in granting Christmas bonus in
favor of the employees but he erred in granting the two-month bonus instead of one. The
one time meralco granted two-month bonus in 1955 is only because of the employees’
prompt and efficient response during the calamities .

As a rule, a bonus is not a demandable and enforceable obligation; it may

nevertheless be granted on equitable consideration as when the giving of such
bonus has been the company’s long and regular practice. 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.

In the case at bar, the record shows the MERALCO, aside from complying with the
regular 13th month bonus, has further been giving its employees an additional Christmas
bonus at the tail-end of the year since 1988. While the special bonuses differed in amount
and bore different titles, it can not be denied that these were given voluntarily and
continuously on or about Christmas time.  The considerable length of time MERALCO
has been giving the special grants to its employees indicates a unilateral and voluntary act
on its part, to continue giving said benefits knowing that such act was not required by
law.
Indeed, a company practice favorable to the employees has been established and the
payments made by MERALCO pursuant thereto ripened into benefits enjoyed by the
employees.  Consequently, the giving of the special bonus can no longer be withdrawn by
the company as this would amount to a diminution of the employee’s existing benefits.

Regarding the signing bonus, the labor secretary erred in granting the same to the
employees. On the signing bonus issue, the court agrees with the positions commonly
taken by MERALCO and by the Office of the Solicitor General that the signing bonus is a
grant motivated by the goodwill generated when a CBA is successfully negotiated and
signed between the employer and the union.  In the present case, this goodwill does not
exist since the CBA was not ratified by both parties.

In contractual terms, a signing bonus is justified by and is the consideration paid for
the goodwill that existed in the negotiations that culminated in the signing of a
CBA.  Without the goodwill, the payment of a signing bonus cannot be justified and any
order for such payment, to our mind, constitutes grave abuse of discretion.  This is more
so where the signing bonus is in the not insignificant total amount of P16 Million.
PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner, vs. THE
COURT OF APPEALS, THE HONORABLE SECRETARY OF LABOR
BIENVENIDO E. LAGUESMA and UNITED PHILACOR WORKERS UNION-
NAFLU, respondents.
Facts: Petitioner is a domestic corporation engaged in the business of manufacturing
refrigerators, freezers and washing machines. Respondent United Philacor Workers
Union-NAFLU is the duly elected collective bargaining representative of the rank-and-file
employees of petitioner. An early signing bonus of 4000 pesos was given by the petitioner
to its employees upon the conclusion of the negotiations. The CBA expired and the
respondents expressed their willingness to negotiate for a new CBA. They were able to
agree on some terms of the CBA but disagreed on the others such as the bonus due to
them. The union conducted a strike, but was mandated by the labor secretary to get back
to work. The labor secretary also mandated the petitioner to take the workers back and
give them 3000 signing bonus.

Petitioner argued that the award of the signing bonus was patently erroneous since it was
not part of the employees’ salaries or benefits or of the collective bargaining
agreement.  It is not demandable or enforceable since it is in the nature of an
incentive.  As no CBA was concluded through the mutual efforts of the parties, the
purpose for the signing bonus was not served. The court of appeals however affirmed the
decision of the labor secretary.

Issue: whether or not the employees are entitled to a signing bonus even if the CBA was
not ratified.

Held:no they are not. In the case at bar, two things militate against the grant of the
signing bonus: first, the non-fulfillment of the condition for which it was offered, i.e., the
speedy and amicable conclusion of the CBA negotiations; and second, the failure of
respondent union to prove that the grant of the said bonus is a long established tradition
or a “regular practice” on the part of petitioner.  

The first signing bonus was an incentive for a swift finish regarding the CBA negotiations.
Since on the second time, there was no consensus between the parties there is no signing
bonus due the employees.

Verily, a signing bonus is justified by and is the consideration paid for the goodwill
that existed in the negotiations that culminated in the signing of a CBA.
In the case at bar, the CBA negotiation between petitioner and respondent union
failed notwithstanding the intervention of the NCMB.  Respondent union went on strike
for eleven days and blocked the ingress to and egress from petitioner’s two work
plants.  The labor dispute had to be referred to the Secretary of Labor and Employment
because neither of the parties was willing to compromise their respective positions
regarding the four remaining items which stood unresolved.  While we do not fault any
one party for the failure of the negotiations, it is apparent that there was no more
goodwill between the parties and that the CBA was clearly not signed through their
mutual efforts alone.  Hence, the payment of the signing bonus is no longer justified and
to order such payment would be unfair and unreasonable for petitioner.
SENTINEL SECURITY AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, ADRIANO CABANO, JR., VERONICO C. ZAMBO, HELCIAS
ARROYO, RUSTICO ANDOY, and MAXIMO ORTIZ, respondents.

[G.R. No. 122716.  September 3, 1998]

PHILIPIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION, VERONICO ZAMBO, HELCIAS ARROYO,
ADRIANO CABANO, MAXIMO ORTIZ, and RUSTICO ANDOY, respondents.
Facts:the complainants in this case are employees of sentinel security agency who are
assigned to guard the premises of philamlife insurance company in cebu city. Upon
expiration of their contract, philamlife renewed its contract with sentinel with the order
that the guards on duty in their offices should be replaced by the security agency. The
agency complied and reassigned the complainants to other clients. However, they were
not given any assignment so they filed a complaint for illegal dismissal and prayed for
payment of separation pay and other benefits.

The client and the agency averred that there was no illegal dismissal and that the
complainants did not give them the chance to give them a new assignment. Moreover,
the client argued that there is no employer-employee relationship existing between the
client and the complainants. Simply put, the client maintains that the complainants have
no cause of action against it.

The commission ruled that the complainants are indeed constructively dismissed.

Issue:whether or not the philamlife and sentinel security agency are jointly and severally
liable in paying the complainants their backwages, 13 th month pay and service incentive

Held: The Client did not, as it could not, illegally dismiss the complainants.  Thus, it
should not be held liable for separation pay and back wages.  But even if the Client is not
responsible for the illegal dismissal of the complainants, it is jointly and severally liable
with the Agency for the complainants’ service incentive leave pay.  

“In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.

Under articles 106, 107, 109 and 95, the indirect employer, who is the Client in the
case at bar, is jointly and severally liable with the contractor for the workers’ wages, in the
same manner and extent that it is liable to its direct employees.  This liability of the
Client covers the payment of the service incentive leave pay of the complainants during
the time they were posted at the Cebu branch of the Client.  As service had been
rendered, the liability accrued, even if the complainants were eventually transferred or
reassigned.
[G.R. No. 112139. January 31, 2000]

LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION, petitioner, vs. THE

HONORABLE COURT OF APPEALS (Former Eighth Division) and COMMANDO
SECURITY SERVICE AGENCY, INC., respondents.

Facts:lapanday and commando entered into a guard service contract whereby commando
provided security guards to man the lapanday plantation in exchange for payments.
Lapanday complied with the minimum wage prescribed but in june and November 1984,
wage order 5 and 6 were passed increasing the wage for security services. Commando
demanded that its Guard Service Contract with defendant be upgraded in compliance
with Wage Order Nos. 5 and 6. Defendant refused. Their Contract expired on June 6, 1986
without the rate adjustment called for Wage Order Nos. 5 and 6 being implemented,
accruing a large sum of money amounting to P462,346.25 which is due to commando.

The trial court ruled in favor of the security agency.

Issue: whether or not lapanday is liable to commando for the wage adjustments provided
under wage orders 5 and 6

Held:no, it is not. It will be seen that the liability of the petitioner to reimburse the
respondent only arises if and when respondent actually pays its employees the increases
granted by Wage Order Nos. 5 and 6. The security agency did not actually pay its security
guards the wage increase due them as mandated by wage orders 5 and 6 and if the
security agency may go after lapanday for the same, it will be unjustly enriching itself.
Private respondent has no cause of action against petitioner to recover the wage
increases. Needless to stress, the increases in wages are intended for the benefit of the
laborers and the contractor may not assert a claim against the principal for salary wage
adjustments that it has not actually paid to its employees.