LABOR STANDARDS

CASE DIGESTS

1|Page
 BASIC PRINCIPLES

SONZA VS. ABS-CBN,

G.R. No. 138051, June 10, 2004

DOCTRINE:
Independent Contractor vs. Employee

Characteristics of an Independent contractor

Four fold test; emphasis on the important test which is the “control test”.

FACTS: In May 1994, ABS-CBN signed an agreement with Mel and Joey Management
and Developments Corporation (MJMDC), a television program. Referred to in the
Agreement as “Agent”, MJMDC agreed to provide Sonza’s services exclusively to ABS-
CBN as talent for radio and television. ABS-CBN agreed to pay Sonza’s services a
monthly talent fee of P310, 000 for the first year and P317,000 for the second and third
year of the agreement.

On April 1, 1996, Sonza wrote a letter to ABS-CBN addressed to President Lopez stating
that he will irrevocably resign in view of the recent events concerning his program and
career, that he is waiving and renouncing recovery of the remaining amount stipulated
in the Agreement, but reserves the right to seek recovery of the other benefits under
said agreement.

On April 30, 1996, Sonza filed a complaint against ABS-CBN before the Department of
Labor and Employment, NCR alleging that ABS-CBN did not pay his salary, separation
pay, service incentive leave, 13 th month pay , signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan (ESOP). ABS-CBN moved for the
dismissal of the complaint on the ground that there was no employer-employee
relationship between them. ABS-CBN insists that Sonza was an independent contractor.

ISSUE: Whether an employer-employee relationship exists.

Ruling: The Court sustained ABS-CBN’s contention and hence, dismissed the petition.

The Supreme Court ratiocinated that Independent contractors often present themselves
to possess unique skills, expertise, and talent, to distinguish them from ordinary
employees. The specific selection and hiring of Sonza, because of his unique skills,
talent, and celebrity status not possessed by an ordinary employee, is a circumstance
indicative of an independent contractual relationship. Whatever benefits Sonza enjoyed
arose from a contract and not because of an employer-employee relationship. Sonza’s
talent fees are so huge and out of the ordinary that they indicate more an independent
contractual relationship.

2|Page
Applying the control test in the case at bar, the Court found that Sonza is not an
employee but an independent contractor. First, ABS-CBN engaged Sonza’s services
specifically to co-host the “Mel and Jay” program. ABS-CBN did not assign any other
work to Sonza. To perform his work, Sonza only needed his skills and talent. Sonza
delivered his lines appeared on the television and sounded on radio, all outside the
control of ABS-CBN. Sonza did not have to work eight hours a day. The Agreement
required Sonza to attend only rehearsals and tapings. ABS-CBN could not dictate the
contents of Sonza’s script. Sonza had a free hand on what to say or discuss in his shows.
Clearly, ABS-CBN did not exercise control over the means and methods of performance
of Sonza’s work.

3|Page
LAZARO VS. SOCIAL SECURITY COMMISSION, GR No. 138254

DOCTRINE: The determination of employer-employee relationship warrants the

application of the “control test,” that is whether the employer controls or has reserved
the right to control the employee, not only as to the result of the work done, but also as
to the means and methods by which the same is accomplished.

FACTS: Laudato (private respondent) filed a petition before the SSC for social
security coverage and remittance of unpaid monthly social security contributions against
her three employers, one of whom is Lazaro (petitioner). Laudato alleged that despite
her employment as sales supervisor of the sales agents for Royal Star Marketing, Lazaro
had failed to report her to the SSC for compulsory coverage or remit her social security
contributions.

Lazaro denied that Laudato was a sales supervisor of Royal Star, averring that
she was a mere sales agent whom he paid purely on commission basis, and maintaining
that she was not subjected to definite hours and conditions of work. As such, Laudato
could not be deemed an employee of Royal Star.

ISSUE: Lazaro insists that Laudato was not qualified for social security coverage,
as she was not an employee of Royal Star, her income dependent on a generation of
sales and based on commissions.

RULING: Laudato was an employee of Royal Star.

It is an accepted DOCTRINE that for the purposes of coverage under the Social
Security Act, the determination of employer-employee relationship warrants the
application of the “control test,” that is whether the employer controls or has reserved
the right to control the employee, not only as to the result of the work done, but also as
to the means and methods by which the same is accomplished.

The SSC found that Laudato was a sales supervisor and not a mere agent. He
oversaw and supervised the sales agents of the company, and this was subject to the
control of the management as to how she implements its policies and its end results.
The SSC also examined the cash vouchers ISSUEd by Royal Star to Laudato, calling cards
of Royal Star denominating Laudato as a “Sales Supervisor” of the company, and
Certificates of Appreciation ISSUEd by Royal Star to Laudato in recognition of her efforts
in promoting the company. On the other hand, Lazaro failed to present any convincing
contrary evidence, relying instead on his bare assertions.

4|Page
PHIL. GLOBAL COMMUNICATIONS V. DE VERA, 459 SCRA 260 [2005]

DOCTRINE:
Test of Employer-Employee Relationship. The elements to determine the existence of an
employment relationship are: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; (4) the employer’s power to control
the employee’s conduct. The most important of the four-fold test is the element of
control, whereby the employer has reserved the right to control the employee not only
as to the result of the work done but also as to the means and methods by which the
same is to be accomplished.||| In the given case, this element is wanting.

FACTS:
Philippine Global Communications inc. (PhilComm) is a corporation engaged in the
business of communication services and allied activities while Ricardo de Vera is a
physician by profession whom petitioner enlisted to attend to the medical needs of its
employees. The controversy rose when petitioner terminated de Vera’s engagement.
In 1981, Dr. de Vera offered his services to PhilComm. The parties agreed and formalized
the de Vera’s proposal in a document denominated as retainership contract which will
be for a period of one year, subject to renewal and clearly stated that de Vera will cover
the retainership the company previously had with Dr. Eulau. The agreement went until
1994, in the years 1995-1996, it was renewed verbally.
The turning point of the parties’ relationship was when petitioner, thru a letter bearing
the subject TERMINATION – RETAINERSHIP CONTRACT, informed Dr. de Vera of its
decision to discontinue the latter’s retainer contract because the management has
decided that it would be more practical to provide medical services to its employees
through accredited hospitals near the company premises.
On January 1997, de Vera filed a complaint for illegal dismissal before the NLRC, alleging
that he had been actually employed by the company as its company physician since
1991. The Labor Arbiter rendered decision in favor of Philcomm and dismissed the
complaint saying that de Vera was an independent contractor. On appeal to NLRC, it
reversed the decision of the Labor Arbiter stating that de Vera is a regular employee and
directed the company to reinstate him. Philcomm appealed to the CA where it rendered
decision deleting the award but reinstating de Vera. Philcomm filed this petition
involving the difference of a job contracting agreements from employee-employer
relationship.

ISSUE:
Whether or not there is an employer-employee relationship between the parties.

Ruling:
No. Employer-Employee relationship is not present.
The elements of an employer-employee relationship is wanting in this case. The records
are replete with evidence showing that respondent had to bill petitioner for his monthly

5|Page
professional fees. It simply runs against the grain of common experience to imagine that
an ordinary employee has yet to bill his employer to receive his salary.
Private respondent can even negotiate his work schedule. If he is an employee, he
cannot do so.
The power to terminate the parties’ relationship was mutually vested on both. Either
may terminate the arrangement at will, with or without cause. This is not the case in an
employer-employee relationship.
Remarkably absent is the element of control whereby the employer has reserved the
right to control the employee not only as to the result of the work done but also as to
the means and methods by which the same is to be accomplished.
Petitioner had no control over the means and methods by which respondent went
about performing his work at the company premises. In fine, the parties themselves
practically agreed on every terms and conditions of the engagement, which thereby
negates the element of control in their relationship.

6|Page
ABS CBN BROADCASTING CORPORATION V MARILYN NAZARENO (GR NO. 164156)

DOCTRINE: an employment shall be deemed regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer and also if the employee has been performing the job
for at least a year, even if the performance is not continuous and merely intermittent as
the law deems repeated and continuing need for its performance as sufficient evidence
of the necessity of that activity to the business.

FACTS:
ABSCBN is engaged in the broadcasting business. It employed the respondents as
Production Assistants (PAs). They were ISSUEd IDs and were required to work for a
minimum of 8 hours a day. Respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Service Incentive Pay,
Sick Leave Pay and 13th month pay against petitioner with NLRC. When the Labor Arbiter
directed them to submit their position papers, the respondents failed to file their
position papers within the reglementary period. Hence, their complaint was dismissed.
Respondents then filed a motion to refile complaint alleging that they are regular and
full-time employees for a period of more than 5 years which was granted. Petitioners
now contend that the PAs are considered as “program employees” who are engaged by
the station for a particular program. The Labor Arbiter, NLRC and CA ruled that resp are
“regular employees”.

ISSUE:
1. W/N the resp’s appeal beyond the reglementary period is valid?
2. W/N the resp are regular employees

RULING:
1. Yes. Article 221 of the Labor Code provides that:
“in any proceedings before the Commission or any of the Labor Arbiters, the rules
of evidence prevailing in courts of law or equity shall not be controlling and it is
the spirit and intention of this Code that the Commission and its members and
the Labor Arbiters shall use every and all reasonable means to ascertain the
FACTS in each case speedily and objectively without regard to technicalities of
law or procedure, all in the interest of justice.”
In this case, the LA acted within his discretion as he is enjoined by law. Technical
rules are not binding in labor cases and are not to be applied strictly if the result
would be detrimental to the workingman.
2. Yes, they are regular employees. Art 280 of the Labor Code provides that:
“xxx an employment shall be deemed regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer xxx”
And the primary standard in determining regular employment is the reasonable
connection between the particular activity performed by the employee in

7|Page
relation to the usual trade or business of the employer and also if the employee
has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent as the law deems repeated and continuing
need for its performance as sufficient evidence of the necessity of that activity to
the business.
In this case, one year after the resp were employed, they became regular
employees by operation of law. It is undisputed that they had continuously
performed the same activities for an average of five years and their assigned
tasks are necessary or desirable in the usual business or trade of the petitioner.

Moreover, Art 1702 of the New Civil Code provides that:

“in case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living of the laborer”

8|Page
ANGELINA FRANCISCO v. NLRC, G.R. No. 170087

DOCTRINE: The better approach in determining the existence of an employer-employee

relationship would be to adopt a two-tiered test involving:
(1) the putative employers power to control the employee with respect to the
means and methods by which the work is to be accomplished
(2) the underlying economic realities of the activity or relationship

FACTS: In 1995, Petitioner Francisco was hired by Kasei Corporation as its Accountant
and Corporate Secretary. In 1996, Francisco was designated as Acting Manager. In
January 2001, Francisco was replaced by Liza R. Fuentes as General Manager. She was
assured she would still be connected with the Kasei Corporation as Technical Assistant
to Seiji Kamura and she was in charge of all BIR matters.

Francisco was also not paid her mid-year salary because the company was allegedly not
earning well. In October 2001, Francisco was unable to receive her salary from the
company. She made repeated follow-ups with the company cashier, but was informed
she was no longer connected with the company. As such, Francisco did not report for
work and filed an action for constructive dismissal before the Labor Arbiter.

Kasei Corporation averred that Francisco was not an employee of the company because
when she was hired as a technical consultant in 1995, she performed her work at her
own discretion without any control and supervision of Kasei Corporation.

The LA found that Francisco was an employee of Kasei Corporation. As such, her
dismissal was found to be illegal. The NLRC affirmed the LA’s decision. However, the
Court of Appeals reversed the NLRC decision.

ISSUE: Whether or not there was an employer-employee relationship between

Francisco and Kasei Corporation?

RULING: YES. We apply the two-tiered test.

Under the control test, there is no doubt that Francisco was an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura,
the corporation’s Technical Consultant.

Under theeconomic reality test, it can be deduced that Francisco is an employee of Kasei
Corporation because she has served the company for 6 years before her dismissal,
received check vouchers which indicate her salaries/wages, benefits, 13th month pay,
bonuses and allowances, and deductions and SSS contributions from August 1999 to
December 2000.

9|Page
 Francisco’s membership in SSS (manifested via (1) a copy of the SSS specimen
signature card signed by the corporation’s president, and (2) inclusion of her
name in the on-line inquiry system of SSS) evinces the existence of an
employer-employee relationship between the Francisco and Casei Corporation

A corporation who registers its workers with the SSS is proof that the registered worker
is the corporation’s employee. The SSS Law coverage is predicated on the existence of
an employer-employee relationship.

Thus, the Supreme Court granted the petition of Francisco, annulled and set aside the
CA RULING, and reinstated the NLRC RULING.

10 | P a g e
ROGELIO P. NOGALES v. CAPITOL MEDICAL CENTER, G.R. No. 142625

DOCTRINE: In general, a hospital is not liable for the negligence of an independent

contractor-physician. An exception is when the physician is the ostensible agent of the
hospital. The exception is known as the ‘DOCTRINE of apparent authority.’

FACTS: Corazon Nogales who was pregnant with her fourth child was under the prenatal
care of Dr. Oscar Estrada beginning the fourth month of her pregnancy. While Corazon
was on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood
pressure and a development of leg edemas indicating preeclampsia which is a
dangerous complication of pregnancy.

Around midnight of May 26, 1976, Corazon started to experience mild labor pains which
led to her and her husband seeing Dr. Estrada in the latter’s home. Dr. Estrada then
advised Corazon immediate admission to the Capitol Medical Center.

Upon admission, an internal examination was conducted on Corazon by a resident-

physician. Around 3 A.M., Dr. Estrada advised the administration of injections unto
Corazon. When asked if the services of an anesthesiologist was needed by Dr. Estrada,
the latter refused. Then, Corazon’s bag of water ruptured spontaneously, her cervix was
fully dilated and she experienced convulsions.

Dr. Estrada ordered his assisting doctor, Dr. Villaflor to administer a 10g injection to
Corazon, but Dr. Villaflor administered only 2.5g. Dr. Estrada also applied low forceps to
extract Corazon’s baby. When the baby came out, it was in an apnic, cyanotic, weak and
injured state which consequently had to be intubated and resuscitated.

Shortly after, Corazon began to manifest moderate vaginal bleeding which rapidly
became profused. Dr. Espinola, head of OB-Gyne Department of CMC, ordered
immediate hysterectomy. To this, Rogelio was made to sign a “Consent to Operation”.
Dr Espinola had to be fetched from his residence by an ambulance and arrived at CMC
only an hour later. When he arrived, he examined Corazon and ordered resuscitative
measures to be administered; however, despite Dr. Espinola’s efforts, Corazon died due
to “hemorrhage, post partum.”

Rogelio and the other petitioners filed a complaint before the RTC against CMC and the
respondent doctors for negligence in the treatment and management of Corazon’s
condition. CMC was charged with negligence in the selection and supervision of
defendant physicians and hospital staff.

The RTC held that only Dr. Estrada was civilly liable to pay plaintiffs. The Court of
Appeals affirmed the decision of the RTC upon the Nogales’ claim that all other
respondents should be held equally liable for negligence.

11 | P a g e
ISSUE: Whether or not CMC is liable for the negligence of Dr. Estrada?

RULING: YES. Under the DOCTRINE of apparent authority, a hospital can be held
vicariously liable for the negligent acts of a physician providing care at the hospital,
regardless of whether the physician is an independent contractor, unless the patient
knows, or should have known, that the physician is an independent contractor.

For a hospital to be liable under the DOCTRINE of apparent authority, a plaintiff must
show that:

(1) the hospital, or its agent, acted in a manner that would lead a reasonable
person to conclude that the individual who was alleged to be negligent was
an employee or agent of the hospital;
(2) where the acts of the agent create the appearance of authority, the
plaintiff must also prove that the hospital had knowledge of and acquired in
them; and
(3) the plaintiff acted in reliance upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence.

The DOCTRINE of apparent authority involves two factors to determine the liability of an
independent-contractor physician.

The FIRST FACTOR focuses on whether the hospital acted in a manner which would lead
a reasonable person to conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital. The hospital need not make express
representations to the patient that the treating physician is an employee of the hospital;
rather, a representation may be general and implied. Here, CMC impliedly held out Dr.
Estrada as a member of its medical staff which lead Spouses Nogales to believe that Dr.
Estrada was an employee or agent of CMC.

The SECOND FACTOR focuses on whether the plaintiff acted in reliance upon the
conduct of hospital or its agent, consistent with ordinary care and prudence. Rogelio
testified that he and Corazon chose Dr. Estrada to handle Corazon’s delivery because of
Dr. Estrada’s connection with the reputable hospital, the CMC. Thus, Dr. Estrada’s
relationship with CMC played a significant role in Spouses Nogales’ decision in accepting
Dr. Estrada’s services as Corazon’s ob-gyne.

Thus, the Supreme Court finds CMC vicariously liable for the negligence of Dr. Oscar
Estrada.

12 | P a g e
COCA COLA BOTTLERS VS. DR. CLIMACO , GR NO. 146881

DOCTRINE:

An employee who is required to stay in the employer’s workplace or proximately close

thereto that he cannot utilize his time effectively and gainfully for his own purpose is
compensable time.

FACTS:

Dr. Dean Climaco(respondent), a medical doctor, was hired by Coca- cola Bottlers Phil.
(petitioner) by virtue of a Retainer Agreement. Among the terms and conditions under
their retainer agreement are:

1. Tthat the agreement shall only for 1 year beginning Jan. 1, 1988 to Dec. 31, 1988.
Either party may terminate the contract upon giving a 30- day written notice to
the other;
2. That petitioner shall compensate respondent a retainer fee of P3,800/month.
The DOCTOR may charge professional fee for hospital services rendered in line
with his specialization;
3. That in consideration of the retainer’s fee, the DOCTOR agrees to perform the
duties and obligations in the COMPREHENSIVE MEDICAL PLAN, made an integral
part of this retainer agreement;
4. That the DOCTOR shall observe clinic hours at the company’s premises from
Monday to Saturday of a minimum of two (2) hours each day or a maximum of
TWO (2) hours each day or treatment from 7:30 a.m. to 8:30 a.m and 3:00pm to
4:00pm. It is further understood that the DOCTOR shall be on call at all times
during the other workshifts to attend to emergency case(s);
5. That no employee-employer relationship shall exist between the company and
the DOCTOR.

The retainer agreement expired after 1 year. However, despite the non- renewal of the
agreement, respondent continued to perform his functions as company doctor to
petitioner until he received a letter dated march 9, 1995 from the company ending their
retainership agreement.

Respondent thereafter filed a complaint before the NLRC seeking recognition as a

regular employee of petitioner and thus prayed from payment of all the benefits of a
regular employee including 13th month pay, COLA, holiday pay, service incentive leave,
and Christmas bonus.
Also, respondent filed another complaint for illegal dismissal against petitioner.

In the Decisions dated Nov. 28, 1996 & Feb. 24, 1997, both the instant complaint was
dismissed by the Labor Arbiters and subsequently affirmed by the NLRC on the ground

13 | P a g e
that no employer-employee relationship existed between petitioner company and
respondent.

However when it was elevated to CA for review, the latter ruled that employer-
employee relationship existed between the parties after applying the four-fold test: (1)
power to hire employee (2) payment of wages (3) power to dismissal (4) and power to
control over the employee with respect to the means and methods by which the work is
to be accomplished.

The CA held it in this wise:

1. First, the agreement provide “the company desires to engage on a retainer basis
the services of a physician and the said DOCTOR is accepting such engagement”.
This clearly shows that coca-cola company exercised its power to hire.
2. Secondly, the agreement showed that petitioner would compensate the doctor
for P3,800/month. This would represent the element of payment of wages.
3. Thirdly, it was provided in the agreement that the same shall be valid only for 1
year. “the said term notwithstanding, either party may terminated the contract
upon giving 30-day written notice”. This would show that petitioner had the
power to dismissal.
4. Lastly, the agreement reveal that Coca-cola control over the conduct of
respondent in the latter’s performance of his duties sas a doctor for the
company.

Hence, this petition filed by Coca-cola company

ISSUE:

Whether or not there exist an employer-employee relationship between the parties.

RULING:

The Court agrees with the finding of the Labor Arbiter and the NLRC.

The Court held that the Labor Arbiter and the NLRC correctly found that petitioner
company lacked the power of control over the performance by respondent of his duties.

The Court citing the case of Neri vs. NLRC said, petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure that the end result
was achieved. In other words, what was sought to be controlled by the petitioner
company was actually the end result of the task. The guidelines or the Comprehensive
Medical Plan were laid down merely to ensure that the desired end result was
achievedbut did not control the means and methods by which respondent performed
his assigned tasks.

14 | P a g e
The Supreme Court further held that, an employee is required to stay in the employer’s
workplace or proximately close thereto that he cannot utilize his time effectively and
gainfully for his own purpose. Such is not the prevailing situation here. The respondent
does not dispute that fact that outside of the two (2) hours that he is required to be at
petitioner company’s premises, he is not at all further required to just sit around in the
premises and wait for an emergency to occur so as to enable him from using such hours
for his own benefit and advantage. In fact, respondent maintains his own private clinic
attending his private practice in the city, where he services his patients and bills them
accordingly.
The Court finds that the requirement to be on call for emergency cases do not amount
to such control, but are necessary incidents to the Retainership Agreement.

The Supreme Court also notes that the Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did
not wield the sole power of dismissal or termination. Therefore, the petition was
GRANTED.

15 | P a g e
CALAMBA MEDICAL CENTER VS. NLRC, ET. AL., GR NO. 176484

DOCTRINE:

Under the "control test," an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which
the physician is to accomplish his task.

FACTS:

Calamba Medical Center, engaged the services of medical doctors-spouses Dr. Ronaldo
and Dr. Merceditha Lanzanas as part of its team of resident physicians.Reporting at the
hospital twice-a-week on twenty-four-hour shifts, respondents were paid a monthly
"retainer" of P4,800.00 each. Also resident physicians were also given a percentage
share out of fees charged for out-patient treatments, operating room assistance and
discharge billings, in addition to their fixed monthly retainer.

The work schedules of the members of the team of resident physicians were fixed by
petitioner's medical director Dr. Desipeda, and they were ISSUEd ID, enrolled in the SSS
and withheld tax from them.

After an incident where Dr. Trinidad overheard a phone conversation between Dr.
Ronaldo and a fellow employee Diosdado Miscala, the former was given a preventive
suspension and his wife Dr. Merceditha was not given any schedule after sending the
Memorandum. On March 1998, Dr. Ronaldo filed a complaint for illegal suspension and
Dr. Merceditha for illegal dismissal.

ISSUE:

Whether or not there exists an employer-employee relationship between petitioner and

the spouses-respondents?

RULING:

Drs. Lanzanas are declared employee by the petitioner hospital. Under the "control
test," an employment relationship exists between a physician and a hospital if the
hospital controls both the means and the details of the process by which the physician is
to accomplish his task.

That petitioner exercised control over respondents gains light from the undisputed fact
that in the emergency room, the operating room, or any department or ward for that
matter, respondents' work is monitored through its nursing supervisors, charge nurses
and orderlies. Without the approval or consent of petitioner or its medical director, no
operations can be undertaken in those areas. For control test to apply, it is not essential

16 | P a g e
for the employer to actually supervise the performance of duties of the employee, it
being enough that it has the right to wield the power.

With respect to respondents' sharing in some hospital fees, this scheme does not sever
the employment tie between them and petitioner as this merely mirrors additional form
or another form of compensation or incentive similar to what commission-based
employees receive as contemplated in Article 97 (f) of the Labor Code.

Moreover, respondents were made subject to petitioner-hospital's Code of Ethics,the

provisions of which cover administrative and disciplinary measures on negligence of
duties, personnel conduct and behavior, and offenses against persons, property and the
hospital's interest.

More importantly, petitioner itself provided incontrovertible proof of the employment

status of respondents, namely, the identification cards it ISSUEd them, the payslips and
BIR W-2 (now 2316) Forms which reflect their status as employees, and the classification
as "salary" of their remuneration. Moreover, it enrolled respondents in the SSS and
Medicare (Philhealth) program. It bears noting at this juncture that mandatory coverage
under the SSS Law is premised on the existence of an employer-employee relationship,
except in cases of compulsory coverage of the self-employed.

17 | P a g e
ESCASINAS ET. AL. VS. SHANGRI-LA, G.R. NO. 178827

DOCTRINE:

The existence of an independent and permissible contractor relationship is generally

established by considering the following determinants: whether the contractor is
carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance
of a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.

FACTS:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were
engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent
doctor) to work in her clinic at respondent Shangri-la’s Mactan Island Resort (Shangri-la)
in Cebu of which she was a retained physician.
In late 2002, petitioners filed with the NLRC a complaint for regularization,
underpayment of wages, non-payment of holiday pay, night shift differential and 13th
month pay differential against respondents, claiming that they are regular employees of
Shangri-la. Shangri-la claimed, however, that petitioners were not its employees but of
respondent doctor whom it retained via Memorandum of Agreement (MOA) pursuant
to Article 157 of the Labor Code, as amended. Respondent doctor for her part claimed
that petitioners were already working for the previous retained physicians of Shangri-la
before she was retained by Shangri-la; and that she maintained petitioners’ services
upon their request.

ISSUE:

1. Whether or not there was an employee-employer relationship between Shangri-

La and the petitioners.
2. Whether or not Dr. Pepito is an independent contractor

RULING:

SC ruled that there no such relationship. The petitioners are under the direct supervision
of Dr. Pepito, an independent contractor.

18 | P a g e
On the first ISSUE

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157
vis a vis Art. 280 and the provisions on permissible job contracting of the Labor Code, as
amended. Under the foregoing provision, Shangri-la, which employs more than 200
workers, is mandated to “furnish” its employees with the services of a full-time
registered nurse, a part-time physician and dentist, and an emergency clinic which
means that it should provide or make available such medical and allied services to its
employees, not necessarily to hire or employ a service provider. The term “full-time” in
Art. 157 cannot be construed as referring to the type of employment of the person
engaged to provide the services, for Article 157 must not be read alongside Art. 280[9]
in order to vest employer-employee relationship on the employer and the person so
engaged. The phrase “services of a full-time registered nurse” should thus be taken to
refer to the kind of services that the nurse will render in the company’s premises and to
its employees, not the manner of his engagement.

On the second ISSUE

The existence of an independent and permissible contractor relationship is generally

established by considering the following determinants: whether the contractor is
carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance
of a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.

Against the above-listed determinants, the Court holds that respondent doctor is a
legitimate independent contractor. That Shangri-la provides the clinic premises and
medical supplies for use of its employees and guests do not necessarily prove that
respondent doctor lacks substantial capital and investment. Besides, the maintenance
of a clinic and provision of medical services to its employees is required under Art. 157,
which are not directly related to Shangri-la’s principal business – operation of hotels and
restaurants.

19 | P a g e
TONGKO V. MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC., GR 167622

DOCTRINE:

Guidelines indicative of labor law “control” do not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature of
dictating the means and methods to be employed in attaining the result.

FACTS:

[FACTS taken from the 2008 decision of this case]

The contractual relationship between Tongko and Manulife had two phases. The first
phase began on July 1, 1977, under a Career Agent’s Agreement, which provided that
“the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the
Company and the Agent.”

The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s
Sales Agency Organization. In 1990, he became a Branch Manager. In 1996, Tongko
became a Regional Sales Manager.

Respondent Renato Vergel de Dios, sales manager, wrote Tongko a letter dated
November 6, 2001 on concerns regarding complaints from petitioner Tongko about the
direction of the company.

On December 18, 2001, de Dios wrote Tongko another letter which served as notice of
termination of his Agency Agreement with the company effective fifteen days from the
date of the letter. Tongko filed an illegal dismissal complaint with the National Labor
Relations Commission (NLRC), alleging that he was Manulife’s employee before he was
illegally dismissed.

Petitioner Tongko bases his claims that he is an employee of respondent company on

the fact that it was respondent company that set objectives as regard to his production,
recruitment, training, and all activities pertaining to its business, and that a respondent
company prescribed a Code of Conduct which governs in minute detail all aspects of the
work to be undertaken by its employees.

The labor arbiter decreed that no employer-employee relationship existed between the
parties.

The NLRC reversed the labor arbiter’s decision on appeal; it found the existence of an
employer-employee relationship and concluded that Tongko had been illegally
dismissed.

20 | P a g e
The Court of Appeals found that the NLRC gravely abused its discretion in its RULING
and reverted to the labor arbiter’s decision that no employer-employee relationship
existed between Tongko and Manulife.

The Supreme Court initially granted the petition however reversed its decision in a 2010
resolution from a motion for reconsideration filed by the respondents. Hence, the
petition.

ISSUE:

W/N there is an employer-employee relationship between Tongko and Manulife?

RULING:

No, petitioner failed to show that the control Respondent Manulife exercised over him
was the control required to exist in an employer-employee relationship.

With regard to the objectives set by the company, the Court held that they are controls
aimed only at specific results in undertaking an insurance agency and are parameters
set by law in defining an insurance agency and the attendant duties and responsibilities
an insurance agent must observe and undertake. They do not reach the level of control
into the means and manner of doing an assigned task that invariable characterizes an
employment relationship as defined by labor law.

Likewise, Manulife’s codes of conduct do not necessarily intrude into the insurance
agent’s means and manner of conducting their sale. Codes of conduct are norms or
standards of behavior rather than employer directives into how specific tasks are to be
done. These codes, as well as insurance industry rules and regulations, are not per se
indicative of labor law control under jurisprudence.

21 | P a g e
SEMBLANTE V COURT OF APPEALS, G.R. NO. 196426

DOCTRINE: Employer-Employee Relationship

As found by both the NLRC and the CA, respondents had no part in petitioners'
selection and management; petitioners' compensation was paid out of the arriba (which
is a percentage deducted from the total bets), not by petitioners; and petitioners
performed their functions as masiador and sentenciador free from the direction and
control of respondents. In the conduct of their work, petitioners relied mainly on their
"expertise that is characteristic of the cockfight gambling," and were never given by
respondents any tool needed for the performance of their work. 

FACTS:
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that
they were hired by respondents-spouses Vicente and Maria Luisa Loot, the
owners ofGallera de Mandaue (the cockpit), as the
official masiador and sentenciador, respectively, of the cockpit sometime in 1993. On
November 14, 2003, however, petitioners were denied entry into the cockpit upon the
instructions of respondents, and were informed of the termination of their services
effective that date. This prompted petitioners to file a complaint for illegal dismissal
against respondents.
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found
petitioners to be regular employees of respondents as they performed work that was
necessary and indispensable to the usual trade or business of respondents for a
number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed,
and so ordered respondents to pay petitioners their backwages and separation pay.
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found
petitioners to be regular employees of respondents as they performed work that was
necessary and indispensable to the usual trade or business of respondents for a
number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed,
and so ordered respondents to pay petitioners their backwages and separation pay.
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found
petitioners to be regular employees of respondents as they performed work that was
necessary and indispensable to the usual trade or business of respondents for a
number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed,
and so ordered respondents to pay petitioners their backwages and separation pay. The
Court of Appeals affirmed the decision of the NLRC. Hence the petition.

ISSUE:
1. Whether or not the posting of a bond perfects the appeal?
2. Whether or not petitioners are employees of private respondents which entitles
them to backwages and separation pay caused by the illegal dismissal?

22 | P a g e
RULING:
1. Indeed, the posting of a bond is indispensable to the perfection of an appeal in
cases involving monetary awards from the Decision of the Labor Arbiter. Time
and again, however, this Court, considering the substantial merits of the case,
has relaxed this rule on, and excused the late posting of, the appeal bond when
there are strong and compelling reasons for the liberality, such as the
prevention of miscarriage of justice extant in the case or the special
circumstances in the case combined with its legal merits or the amount and the
ISSUE involved.
2. It is evident that petitioners are NOT employees of respondents, since their
relationship fails to pass muster the four-fold test of employment We have
repeatedly mentioned in countless decisions: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee's conduct, which is the most important
element.
As found by both the NLRC and the CA, respondents had no part in petitioners'
selection and management; petitioners' compensation was paid out of the arriba
(which is a percentage deducted from the total bets), not by petitioners; and
petitioners performed their functions as masiador and sentenciador free from
the direction and control of respondents. In the conduct of their work,
petitioners relied mainly on their "expertise that is characteristic of the cockfight
gambling," and were never given by respondents any tool needed for the
performance of their work.
Respondents, not being petitioners' employers, could never have dismissed,
legally or illegally, petitioners, since respondents were without power or
prerogative to do so in the first place.

23 | P a g e
BERNARTE, vs. PBA, GR 192084

DOCTRINE: To determine the existence of an employer-employee relationship, case law

has consistently applied the four-fold test, to wit: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee on the means and methods by which the
work is accomplished. The so-called "control test" is the most important indicator of the
presence or absence of an employer-employee relationship. In this case, the referees
hired by the PBA were ruled to be independent contractors since the PBA does not exert
"control" (d) over the referees. 

FACTS:
Petitioners Jose Mel Bernarte and Renato Guevarra aver that they were invited to join
the PBA as referees. 

Complainant Bernarte, was not made to sign a contract during the first conference of
the All-Filipino Cup which was from February 23, 2003 to June 2003. It was only during
the second conference when he was made to sign a one and a half month contract for
the period July 1 to August 5, 2003. On January 15, 2004, Bernarte received a letter from
the Office of the Commissioner advising him that his contract would not be renewed
citing his unsatisfactory performance on and off the court.

Complainant Guevarra alleges that he was invited to join the PBA pool of referees in
February 2001. Beginning 2002, he signed a yearly contract. On May 6, 2003,
respondent Martinez ISSUEd a memorandum to Guevarra expressing dissatisfaction
over his questioning on the assignment of referees officiating out-of-town games.
Beginning February 2004, he was no longer made to sign a contract.

Respondents claim complainants entered into two contracts of retainer with the PBA in
the year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and
the second was for September 1 to December 2003. After the lapse of the latter period,
PBA decided not to renew their contracts. Respondents claim that omplainants were not
illegally dismissed because they were not employees of the PBA. Their respective
contracts of retainer were simply not renewed. PBA had the prerogative of whether or
not to renew their contracts, which they knew were fixed. 

A complaint was filed with the Labor Arbiter, who declared petitioner an employee
whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the
reinstatement of petitioner and the payment of backwages, moral and exemplary
damages and attorney's fees,  the NLRC affirmed the Labor Arbiter's judgment.
Respondents filed a petition for certiorari with the Court of Appeals, which overturned
the decisions of the NLRC and Labor Arbiter. 
 

24 | P a g e
The ISSUE:
The main ISSUE in this case is whether petitioner is an employee of respondents, which
in turn determines whether petitioner was illegally dismissed 

RULING:
 To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee on the means and methods by which the work is
accomplished. The so-called "control test" is the most important indicator of the
presence or absence of an employer-employee relationship. 

Respondents argue that the all-important element of control is lacking in this case,
making petitioner an independent contractor and not an employee of respondents.

Petitioner asserts that he is an employee of the PBA since the latter exercise control
over the performance of his work. Petitioner cites the following stipulations in the
retainer contract which evidence control: (1) respondents classify or rate a referee; (2)
respondents require referees to attend all basketball games organized or authorized by
the PBA, at least one hour before the start of the first game of each day; (3) respondents
assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4)
referee agrees to observe and comply with all the requirements of the PBA governing
the conduct of the referees whether on or off the court; (5) referee agrees (a) to keep
himself in good physical, mental, and emotional condition during the life of the contract;
(b) to give always his best effort and service, and loyalty to the PBA, and not to officiate
as referee in any basketball game outside of the PBA, without written prior consent of
the Commissioner; (c) always to conduct himself on and off the court according to the
highest standards of honesty or morality; and (6) imposition of various sanctions for
violation of the terms and conditions of the contract.

The contractual stipulations do not pertain to, much less dictate, how and when
petitioner will blow the whistle and make calls. On the contrary, they merely serve as
rules of conduct or guidelines in order to maintain the integrity of the professional
basketball league. 

Referees exercise their own independent judgment, based on the rules of the game, as
to when and how a call or decision is to be made.  The very nature of petitioner's job of
officiating a professional basketball game undoubtedly calls for freedom of control by
respondents. As the respondents cannot control when the referee blows the whistle or
makes a call.

Unlike regular employees who ordinarily report for work eight hours per day for five
days a week, petitioner is required to report for work only when PBA games are
scheduled or three times a week at two hours per game. In addition, there are no

25 | P a g e
deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which
are the usual deductions from employees' salaries. 

The hiring party must have control over the means and methods by which the hired
party is to perform his work, which is absent in this case.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of
Appeals.

26 | P a g e
LIRIO VS GENOVIA, G.R. NO. 169757

DOCTRINE:
Elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer’s power to control the employee’s conduct. The most
important element is the employer’s control of the employee’s conduct, not only as to
the result of the work to be done, but also as to the means and methods to accomplish
it.
 
FACTS:
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner
Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-
payment of commission and award of moral and exemplary damages.
 
In his Position Paper, respondent Genovia alleged, among others, that on August 15,
2001, he was hired as studio manager by petitioner Lirio, owner of Celkor Ad Sonicmix
Recording Studio (Celkor). He was employed to manage and operate Celkor and to
promote and sell the recording studio's services to music enthusiasts and other
prospective clients. He received a monthly salary of P7,000.00. They also agreed that he
was entitled to an additional commission of P100.00 per hour as recording technician
whenever a client uses the studio for recording, editing or any related work. He was
made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m. On Saturdays,
he was required to work half-day only, but most of the time, he still rendered eight
hours of work or more. All the employees of petitioner, including respondent, rendered
overtime work almost every day, but petitioner never kept a daily time record to avoid
paying the employees overtime pay.
 
Respondent stated that a few days after he started working as a studio manager,
petitioner approached him and told him about his project to produce an album for his
15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records.
Petitioner asked respondent to compose and arrange songs for Celine and promised
that he (Lirio) would draft a contract to assure respondent of his compensation for such
services. As agreed upon, the additional services that respondent would render included
composing and arranging musical scores only, while the technical aspect in producing
the album, such as digital editing, mixing and sound engineering would be performed by
respondent in his capacity as studio manager for which he was paid on a monthly
basis.  Petitioner instructed respondent that his work on the album as composer and
arranger would only be done during his spare time, since his other work as studio
manager was the priority. Respondent then started working on the album.
 
Respondent alleged that before the end of September 2001, he reminded petitioner
about his compensation as composer and arranger of the album. Petitioner verbally
assured him that he would be duly compensated. By mid-November 2001, respondent

27 | P a g e
finally finished the compositions and musical arrangements of the songs to be included
in the album. Before the month ended, the lead and back-up vocals in the ten (10) songs
were finally recorded and completed. From December 2001 to January 2002,
respondent, in his capacity as studio manager, worked on digital editing, mixing and
sound engineering of the vocal and instrumental audio files.
 
Thereafter, respondent was tasked by petitioner to prepare official correspondence,
establish contacts and negotiate with various radio stations, malls, publishers, record
companies and manufacturers, record bars and other outlets in preparation for the
promotion of the said album. By early February 2002, the album was in its
manufacturing stage. ELECTROMAT, manufacturer of CDs and cassette tapes, was
tapped to do the job. The carrier single of the album, which respondent composed and
arranged, was finally aired over the radio on February 22, 2002.
 
On February 26, 2002, respondent again reminded petitioner about the contract on his
compensation as composer and arranger of the album. Petitioner told respondent that
since he was practically a nobody and had proven nothing yet in the music industry,
respondent did not deserve a high compensation, and he should be thankful that he was
given a job to feed his family. Petitioner informed respondent that he was entitled only
to 20% of the net profit, and not of the gross sales of the album, and that the salaries he
received and would continue to receive as studio manager of Celkor would be deducted
from the said 20% net profit share. Respondent objected and insisted that he be
properly compensated. On March 14, 2002, petitioner verbally terminated respondent’s
services, and he was instructed not to report for work.
 
Respondent asserts that he was illegally dismissed as he was terminated without any
valid grounds, and no hearing was conducted before he was terminated, in violation of
his constitutional right to due process. Having worked for more than six months, he was
already a regular employee. Although he was a so called “studio manager,” he had no
managerial powers, but was merely an ordinary employee.
 
Respondent prayed for his reinstatement without loss of seniority rights, or, in the
alternative, that he be paid separation pay, back wages and overtime pay; and that he
be awarded unpaid commission in the amount of P2,000.00 for services rendered as a
studio technician as well as moral and exemplary damages.
 
Respondent’s evidence consisted of the Payroll dated July 31, 2001 to March 15, 2002,
which was certified correct by petitioner, [2] and Petty Cash Vouchers[3] evidencing receipt
of payroll payments by respondent from Celkor.
 
In defense, petitioner stated in his Position Paper [4] that respondent was not hired as
studio manager, composer, technician or as an employee in any other capacity of
Celkor. Respondent could not have been hired as a studio manager, since the recording
studio has no personnel except petitioner. Petitioner further claimed that his daughter

28 | P a g e
Celine Mei Lirio, a former contract artist of ABS-CBN Star Records, failed to come up
with an album as the latter aborted its project to produce one.  Thus, he decided to
produce an album for his daughter and established a recording studio, which he named
Celkor Ad Sonicmix Recording Studio.  He looked for a composer/arranger who would
compose the songs for the said album. In July 2001, Bob Santiago, his son-in-law,
introduced him to respondent, who claimed to be an amateur composer, an arranger
with limited experience and musician without any formal musical training. According to
petitioner, respondent had no track record as a composer, and he was not known in the
field of music. Nevertheless, after some discussion, respondent verbally agreed with
petitioner to co-produce the album based on the following terms and conditions:  (1)
petitioner shall provide all the financing, equipment and recording studio;   (2) Celine
Mei Lirio shall sing all the songs; (3) respondent shall act as composer and arranger of all
the lyrics and the music of the five songs he already composed and the revival songs; (4)
petitioner shall have exclusive right to market the album; (5) petitioner  was entitled to
60% of the net profit, while respondent and Celine Mei Lirio were each entitled to 20%
of the net profit; and (6) respondent  shall be entitled to draw advances of P7,000.00 a
month, which shall be deductible from his share of the net profits and only until such
time that the album has been produced.    

According to petitioner, they arrived at the foregoing sharing of profits based on the
mutual understanding that respondent was just an amateur composer with no track
record whatsoever in the music industry, had no definite source of income, had limited
experience as an arranger, had no knowledge of the use of sound mixers or digital
arranger and that petitioner  would  help and teach him how to use the studio
equipment; that petitioner would shoulder all the expenses of production and provide
the studio and equipment as well as his knowledge in the use thereof; and Celine Mei
Lirio would sing the songs. They embarked on the production of the album on or about
the third week of August 2002. 
 
Petitioner asserted that from the aforesaid terms and conditions, his relationship with
respondent is one of an informal partnership under Article 1767of the New Civil Code,
since they agreed to contribute money, property or industry to a common fund with the
intention of dividing the profits among themselves. Petitioner had no control over the
time and manner by which respondent composed or arranged the songs, except on the
result thereof.  Respondent reported to the recording studio between 10:00 a.m. and
12:00 noon. Hence, petitioner contended that no employer-employee relationship
existed between him and the respondent, and there was no illegal dismissal to speak of.
 
ISSUE: Whether or not employer-employee relationship exists?

RULING: Yes. The elements to determine the existence of an employment relationship

are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important element is the employer’s control of the employee’s

29 | P a g e
conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.
 

It is settled that no particular form of evidence is required to prove the existence of an

employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted.
 
In this case, the documentary evidence presented by respondent to prove that he was
an employee of petitioner are as follows:  (a) a document denominated as "payroll"
(dated July 31, 2001 to March 15, 2002) certified correct by petitioner, which showed
that respondent received a monthly salary of P7,000.00 (P3,500.00 every 15th of the
month and another P3,500.00 every 30th of the month) with the corresponding
deductions due to absences incurred by respondent; and (2) copies of petty cash
vouchers,showing the amounts he received and signed for in the payrolls.
 
The said documents showed that petitioner hired respondent as an employee and he
was paid monthly wages of P7, 000.00.  Petitioner wielded the power to dismiss as
respondent stated that he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner.  The power of control
refers merely to the existence of the power. It is not essential for the employer to
actually supervise the performance of duties of the employee, as it is sufficient that the
former has a right to wield the power.  Nevertheless, petitioner stated in his Position
Paper that it was agreed that he would help and teach respondent how to use the
studio equipment. In such case, petitioner certainly had the power to check on the
progress and work of respondent.

30 | P a g e
JAO VS. BCC PRODUCT SALES INC., G.R. NO. 163700

DOCTRINE: Employer-Employee Relationship

FACTS:
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its
President, Terrance Ty, employed him as comptroller starting from September 1995
with a monthly salary of P20,000.00 to handle the financial aspect of BCC’s business. On
October 19,1995, the security guards of BCC, acting upon the instruction of Ty, barred
him from entering the premises of BCC where he then worked. His attempts to report to
work in November and December 12, 1995 were frustrated because he continued to be
barred from entering the premises of BCC. He then filed a complaint for illegal dismissal,
reinstatement with full backwages, non-payment of wages, damages and attorney’s
fees.
Respondents countered that petitioner was not their employee but the
employee of Sobien Food Corporation (SFC), the major creditor and supplier of BCC; and
that SFC had posted him as its comptroller in BCC to oversee BCC’s finances and
business operations and to look after SFC’s interests or investments in BCC.

ISSUE:
Whether or not an employer-employee relationship existed between petitioner Jao and
BCC

RULING:
The Supreme Court speaking through Justice Bersamin declared that the court cannot
side with petitioner.
In determining the presence or absence of an employer-employee relationship,
the Court has consistently looked for the following incidents, to wit: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer’s power to control the employee on the means and methods by
which the work is accomplished. The last element, the so-called control test, is the most
important element.

“The “control test,” under which the person for whom the services are rendered
reserves the right to direct not only the end to be achieved but also the means for
reaching such end, is generally relied on by the courts.”

Sadly, the private respondent failed to sufficiently discharge the burden of

showing with legal certainty that employee-employer relationship existed between the
parties.  On the other hand, it was clearly shown by the petitioner that it neither
exercised control nor supervision over the conduct of the private respondent’s
employment.  Hence, the allegation that there is employer-employee relationship must
necessarily fail. Hereunder are some of the circumstances and incidents occurring while
petitioner was supposedly employed by BCC that debunked his claim against

31 | P a g e
respondents. It can be deduced from the March 1996 affidavit of petitioner that
respondents challenged his authority to deliver some 158 checks to SFC. Considering
that he contested respondents’ challenge by pointing to the existing arrangements
between BCC and SFC, it should be clear that respondents did not exercise the power of
control over him, because he thereby acted for the benefit and in the interest of SFC
more than of BCC.

32 | P a g e
LEGEND HOTEL V. REALUYO G. R. NO. 153511
DOCTRINE: Employer-Employee Relationship; Four-Fold Test

FACTS:
Respondent filed a complaint for alleged unfair labor practice, constructive illegal
dismissal, and the underpayment/nonpayment of his premium pay for holidays,
separation fee, service incentive leave pay, and 13th month pay.
Respondent alleged that:
 He worked as a pianist at Legend Hotel’s Tanglaw Restaurant;
 He was an initial rate of P400/night, given after every performance which was
raised to P750/night;
 He could not choose the time of performance which was fixed at 7:00 pm to
10:00 om for 3 to 6 time/week;
 He was required to conform with the venue’s motif; and
 He was subjected to the rules on employees’ representation checks and chits
similar to other employees.
On July 9, 1999, the management ordered the respondent’s dismissal as part of its cost-
cutting measure.
Petitioner denied the existence of an employer-employee relationship.
The Labor Arbiter dismissed the respondent’s complaint for lack of merit (no employer-
employee relationship).
 What the respondent was receiving was talent fee and not salary as it was given
nightly compared to the regular employees of the hotel who are paid monthly.
 Absent of power to control with respect to the means and methods by which his
work was to be accomplished.
NLRC affirmed LA.
CA set aside the decision of the NLRC. There is employer-employee relationship.

ISSUES:
1. WON the respondent was an employee of the petitioner.
2. WON the respondent was validly terminated.

HELD/SC:
1. YES. There was an employer-employee relationship.

 Power of selection. This was evidenced by the express written

recommendation by the petitioner’s restaurant manager for the increase of
respondent’s remuneration.

 Payment of wages. Respondent’s remuneration, albeit denominated as talent

fees, was still considered as included in the term wage in the context of

33 | P a g e
 Article 97 (f) of the Labor Code, regardless of how the petitioner chose to
designate the remuneration.

That the respondent worked for less than 8 hours/day is immaterial to

finding employer-employee relationship. Article 83 of the Labor Code only
set a maximum of number of hours as "normal hours of work" but did not
prohibit work of less than eight hours.

 Power of control. Respondent could not choose the time and place of his
performance, required at certain times to perform only Tagalog songs or to
wear barong to conform with the motif and is subjected to the rules on
employee’s representation checks and chits similar to other employees.

 Power to dismiss. This was evidenced by the memorandum informing

respondent of the discontinuance of his service because of the financial
conditions of petitioner.

2. NO. Petitioner did not submit evidence of the losses to its business operations
and the economic havoc it would thereby imminently sustain. This bare
statement fell short of the norm to show a valid retrenchment.

34 | P a g e
THE NEW PHILIPPINE SKYLANDERS, INC. AND/OR JENNIFER M. ENANO-BOTE VS.
FRANCISO N. DAKILA , G.R. NO. 199547  

DOCTRINE: Retirement Pay

FACTS: Respondent was employed by petitionercorporation as early as 1987 and

terminated for cause in April 1997 when the corporation was sold. In May 1997, he was
rehired as consultant by the petitioners under a Contract for Consultancy Services  dated
April 30, 1997. On April 19, 2007, respondent Dakila informed petitioners of his
compulsory retirement effective May 2, 2007 and sought for the payment of his
retirement benefits pursuant to the Collective Bargaining Agreement. His request,
however, was not acted upon. Instead, he was terminated from service effective May 1,
2007. Dakila filed a complaint for constructive illegal dismissal, non-payment of
retirement benefits, under/non-payment of wages and other benefits of a regular
employee, and damages against petitioner. Petitioners asserted that there was no
employer-employee relationship since Dakila was a consultant and not their regular
employee. The latter was not included in petitioners' payroll and paid a fixed amount
under the consultancy contract. He was not required to observe regular working hours
and was free to adopt means and methods to accomplish his task except as to the
results of the work required of him.

ISSUE: Is respondent Dakila entitled to retirement pay?

RULING: The Supreme Court in this case that following Article 279 of the Labor Code, an
employee who is unjustly dismissed from work is entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages computed from the
time he was illegally dismissed. However, considering that respondent Dakila was
terminated on May 1, 2007, or one (1) day prior to his compulsory retirement on May 2,
2007, his reinstatement is no longer feasible. Accordingly, the NLRC correctly held him
entitled to the payment of his retirement benefits pursuant to the CBA.

35 | P a g e
TESORO ET AL, VS (RETREADERS) BANDAG , G.R. NO. 171482
DOCTRINE: Determining the presence of emplpyer-employee relationship

FACTS:

Petitioners( Tesoro, Ang and Sharp) used to work as salesmen for respondents
Manila Retreaders, Inc. Northern Luzon (Bandag). In 1998 Bandag developed a
franchising scheme that would enable others to operate tire and retreading business
using its trade name and service system. Bandag would provide funding support to the
petitioners subject to a regular or periodic liquidation of their revolving funds, so
petitioners quitted their jobs as salesman and entered into separate service franchise
agreement (SFA) with Bandag. The expenses out of these funds would be deducted from
petitioner's’ sales to determine their incomes, which actually was a win-win situation for
them at first.

After a length of time, petitioners managed to operate their franchises without

any problem, however negligent as they are, they begin to default their obligations to
submit periodic liquidations of their personal expenses in relation to the revolving funds
Bandag provided them. So Bandag terminated the SFA. Petitioners filed a complaint for
constructive dismissal, non-payment of wages, incentive pay, 13th month pay and
damages against Bandag. In the part of Bandag, they pointed out that petitioners freely
resigned and decided to avail of the opportunity to be independent.

ISSUE:

1) Whether or not petitioners remained to be Bandag’s salesmen under the

Franchise Scheme Agreement they entered into with the latter.

RULING:

No, petitioners were no longer employees of Bandag the moment they entered
into the SFA -- franchising a business method of expansion that allows an individual or
group of individuals to market a product or a service and to use of the patent ,
trademark, trade name and the systems prescribed by the owner.

The test for determining employer-employee relationship are:

(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished. (This is the so called "Control Test",
which is the most important.)

36 | P a g e
 In the case at bar, when the petitioners agreed to operate Bandag's franchise
branches in different parts of the country, they knew that this substantially changed
their former relationships. They were to cease working as Bandag's salesmen, the
position they occupied before they ventured into running separately Bandag’s branches.
They were to cease receiving salaries or commissions. Their incomes were to depend on
the profits they made. And, petitioners did not even complain of constructive dismissal.
They took their chances to run their branches,instead -- Gregoria Sharp in La Union for
several months, and Ashmor Tesoro in Baguio and Pedro Ang in Pangasinan for over a
year--. Clearly, their belated claim of constructive dismissal is quite hollow.

It is pointed out that Bandag continued, like an employer, to exercise control

over petitioner's' work. It points out that Bandag:
(a) retained the right to adjust the price rates of products and services;
(b) imposed minimum processed tire requirement ;
(c) reviewed and regulated credit applications;and
(d) retained the power to suspend petitioner's' services for failure to meet service
standards.

But uniformity in prices, quality of services, and good business practices are the
essence of all franchises. A franchisee will damage the franchisor's business if he sells at
different prices, renders different or inferior services, or engages in bad business
practices. These business constraints are needed to maintain collective responsibility for
faultless and reliable service to the same class of customers for the same prices.

This is not the "control" contemplated in employer-employee relationships.

Control in such relationships addresses the details of day to day work like :
(1) assigning the particular task that has to be done;
(2) monitoring the way tasks are done and their results; or
(3) determining the time during which the employee must report for work or accomplish
his assigned task.

Furthermore, petitioners cannot use the revolving funds feature on the SFAs as
evidence of their employer-employee relationship with Bandag. These funds do not
represent wages. They are more in the nature of capital advances for operations that
Bandag conceptualized to attract prospective franchises. Petitioners' income depended
on the profits they make, controlled by their individual abilities to increase sales and
reducing operating costs.

37 | P a g e
ROYALE HOMES MARKETING CORP., VS. ALCANTARA, G.R. NO. 195190

FACTS: Royale Homes, a corporation engaged in marketing real estates, appointed

Alcantara as its Marketing Director for a fixed period of one year. His work consisted
mainly of marketing Royale Homes' real estate inventories on an exclusive basis. Royale
Homes reappointed him for several consecutive years
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal against Royale
Homes alleging that he was dismissed from work without any valid or just cause and in
gross disregard of the proper procedure for dismissing employees. He prayed t to be
reinstated to his former position without loss of seniority rights and other privileges, as
well as to be paid backwages, moral and exemplary damages, and attorney's fees
Royale Homes denied that Alcantara is its employee because: (1) it engaged his services
as an independent sales contract for one year only; (2) he never received any salary,
13th month pay, overtime pay or holiday pay; (3) he was paid on commission basis; (4) it
had no control on how Alcantara would accomplish his tasks

Labor Arbiter rendered a Decision holding that Alcantara is an employee of Royale

Homes.

NLRC rendered its Decision RULING that Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its RULING mainly on the contract

CA promulgated its Decision reversing the NLRC's Decision pointing out that Royale
Homes exercised some degree of control over Alcantara since his jobis subject to
company rules, regulations, and periodic evaluations.

ISSUE: Whether Alcantara was an independent contractor or an employee of Royale

Homes

RULING: Alcantara is not an employee of Royal Home but a mere independent

contractor

The juridical relationship of the parties based on their written contract

The primary evidence of the nature of the parties' relationship in this case is the written
contract that they signed. While the existence of employer-employee relationship is a
matter of law, the characterization made by the parties in their contract as to the nature
of their juridical relationship cannot be simply ignored, particularly in this case where
the parties' written contract unequivocally states their intention at the time they
entered into it.

In this case, the contract duly signed and not disputed by the parties, conspicuously
provides that "no employer-employee relationship exists between" Royale Homes and
Alcantara, as well as his sales agents. It is clear that they did not want to be bound by
employer-employee relationship at the time of the signing of the contract

38 | P a g e
Since "the terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations should control." No
construction is even needed as they already expressly state their intention.

The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has
generally relied on the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's
power to control the employee with respect to the means and methods by which the
work is to be accomplished. Among the four, the most determinative factor in
ascertaining the existence of employer- employee relationship is the "right of control
test".

In the case, the CA ratiocinated that since the performance of his tasks is subject to
company rules, regulations, code of ethics, and periodic evaluation, the element of
control is present.

The court disagrees. Not every form of control is indicative of employer-employee

relationship.
A person who performs work for another and is subjected to its rules, regulations, and
code of ethics does not necessarily become an employee. As long as the level of control
does not interfere with the means and methods of accomplishing the assigned tasks, the
rules imposed by the hiring party on the hired party do not amount to the labor law
concept of control that is indicative of employer-employee relationship.

In this case, the rules, regulations, code of ethics, and periodic evaluation alluded to by
Alcantara do not involve control over the means and methods by which he was to
perform his job. In Tongko Case, this Court held that guidelines or rules and regulations
that do not pertain to the means or methods to be employed in attaining the result are
not indicative of control as understood in labor law.

Neither does the repeated hiring of Alcantara prove the existence of employer-
employee relationship. The continuous rehiring of Alcantara simply signifies the
renewal of his contract with Royale Homes, and highlights his satisfactory services
warranting the renewal of such contract

Payment of Wages
The element of payment of wages is also absent in this case. Alcantara's remunerations
consist only of commission override of 0.5%, budget allocation, sales incentive and other
forms of company support. There is no proof that he received fixed monthly salary. No
payslip or payroll was ever presented and there is no proof that Royale Homes deducted
from his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund

39 | P a g e
FUJI TELEVISION NETWORK INC. V ESPIRITU G.R. NOS. 204944-45

DOCTRINE:
Applicability of the four-fold test in determining the existence of an employee and
employer relationship.
That there may be an EE-ER relationship where the EE does work desirable to the
company in a fixed term manner.
The difference between an EE-ER Relationship and an independent contractor

FACTS:
 Arelene Espiritu was a news correspondent/producer tasked to report Philippine
News to Fuji through its Manila Bureau field office
 In 2009, Arlene was diagnosed with cancer. She was informed by Fuji that there
is a problem with the renewal of her contract.
 Arlene thereafter accepted US18050 representing her monthly salary from
March 2009 to May 2009 through an acknowledgement receipt signed under
protest.
 On May 6, 2009 Arlene filed a complaint for illegal dismissal with the NCR RAB of
the NLRC alleging that she was forced to sign the non-renewal contract when Fuji
came to know her illness and that her salaries and other benefits for March
 The LA dismissed her case
 On appeal to the NLRC, the LA was reversed and she was considered an
employee because "she continuously rendered services that were deemed
necessary and desirable to Fuji's business."
 Fuji argued that she was hired as a stinger as such she was an independent
contractor. Fuji further argued that she had skills that distinguished her from
ordinary employees. Furthermore, that Fuji never controlled the manner which
she performed her functions. Lastly, Fuji posited that they and Arlene dealt in
equal terms. As such, there was no EE-ER. Fuji cited Sonza v. ABS-CBN positing
that 1. Arlene was hired for her skills. 2. That her salary was higher than that of
the normal rate. 3. That she had the power to bargain with her employer. 4. That
her contract was for a fixed term.
 The NLRC ordered Fuji to pay Arlene back wages computed from the date of
dismissal.
 On appeal, by both parties, to the CA - the CA affirmed the NLRC with
modification in ordering Arlene to be reinstated.

ISSUEs:
I. Is there an EE-ER relationship?
II. If so, was Arlene illegally dismissed? Did her disease constitute ground for dismissal?

40 | P a g e
HELD:
I. Was there an EE-ER relationship?
1. Sonza cannot be applied in this case. Sonza was a news anchor and talk show host
who enjoyed celebrity status whereas Arlene was
a simple news reporter.

2. That there are EE-ER relationships in a fixed - term manner and requisites have been
laid down in Brent School v. Zamora and GMA Network, Inc. Pabriga
A. The fixed period was knowingly and voluntarily agreed upon by
the parties without force, duress, or improper pressure
B. It satisfactorily appears that the EE and ER dealt with
each other on more or less equal terms

3. That an independent contractor on the other hand is one who carries on a distinct
and independent business and undertakes to
perform the job, work or service on its own account and under one's own responsibility
according to one's own manner and method,
free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results
thereof. No EE-ER relationship exists here.

4. That there are different kinds of independent contractors: those engaged in

legitimate job contracting(3) and those who have unique skills and talents that set them
apart from ordinary employees(1).

5. That the four-fold test is applied to determine an EE-ER Relationship. Its requisites
are:
1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control, which is the most
important element.

6. Arlene was a regular employee. Arlene was hired by Fuji as a news producer, but
there was no showing that she
was hired because of unique skills that would distinguish her from ordinary employees.

7. Neither was there any showing that she had a celebrity status. Her monthly salary
amounting to US$1,900.00 appears to be a substantial sum, 199 Indeed, wages may
indicate whether one is an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages should
not be the conclusive factor in determining whether one is an employee or an
independent contractor.

8. Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract.

41 | P a g e
9.Her contract also indicated that Fuji had control over her work because she was
required to work for eight (8) hours from Monday to Friday, although on flexible time.

10. Thus, Arlene was a regular employee with fixed term contract. An employee can be a
regular employee with a fixed-term contract. The law does not preclude the possibility
that a regular employee may opt to have a fixed-term contract for valid reasons. This
was recognized in Brent: For as long as it was the employee who requested, or
bargained, that the contract have a "definite date of termination," or that the fixed-term
contract be freely entered into by the employer and the employee, then the validity of
the fixed-term contract will be upheld.

II. That there was illegal dismissal.

1. That there was an EE-ER relationship, there was illegal dismissal.

2. As a regular employee, Arlene was entitled to security of tenure and could be

dismissed only for just or authorized causes and after the observance of due process.

3. For dismissal under Article 284 to be valid, two requirements must be complied with:
(1) the employee's disease cannot be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health as well as to the health of
his co-employees"; and (2) certification ISSUEd by a competent public health authority
that
even with proper medical treatment, the disease cannot be cured within six (6) months.

NB: This was a long case. The cases cited by J. Leonen were many. The ones reproduced
in this digest we’re the ones the pontente used to justify the decision. Thank you. //rpg

42 | P a g e
CABAOBAS ET AL. V. PEPSI COLA AND PHIL AIRLINES

FACTS: Respondent Pepsi-Cola Products Philippines Inc. is a domestic corporation

engaged in the manufacturing, bottling, and distribution of soft drink products which
operated plants all over the country, one of which is the Tanauan Plant in Lyet.
In 1999, the company allegedly incurred business losses in total of 29 million. To avert
further loss the company implemented a company-wide retrenchment program
denominated as Corporate-wide Rightsizing Program and retrenched 47 employees of
its Tanauan Plant.

Petitioners then who were permanent regular employees lodged a complaint after they
received their respective letters informing them of the cessation of their employment.

Petitioners argue that the respondent company was not suffering any serious business
losses and therefore the company’s retrenchment and subsequent dismissal of regular
employees are unlawful. They argued that since the company hired 4 employees in
replacement of the 47 employees then there must be no financial loss and that the
intent of such retrenchment was only to avoid the union in the company to the official
bargaining unit.

ISSUE: Is the retrenchment valid and therefore the dismissal of petitioners valid?

RULING: SC ruled that the Corporate wide Rightsizing Program and retrenchment was a
valid exercise of management prerogative when it sufficiently proved incurring loses as
evidenced by the audits, documents, and records presented by their third-party auditing
company, SGV.

Further, regular employees may be validly dismissed when both procedural and
substantive due process is followed by the company. In this case, as notices are given to
the employees prior to actual dismissal and in fact discussion existed between them –
being represented by the union, and the company then the notice rule has been
complied for.

Retrenchment is acknowledged in the Labor Code as one of the authorized causes so if

and when the company proves serious lose that warrants retrenchment, employees
may be validly dismissed.

43 | P a g e
BEGINO ET AL V ABS CBN CORP., GR NO. 199166
DOCTRINE
The “control test” is generally regarded as the most crucial and determinative indicator
of the presence or absence of an employer-employee relationship. Employer-employee
relationship is said to exist where the person for whom the services are performed
reserves the right to control not only the end result but also the manner and means
utilized to achieve the same.

FACTS
ABS-CBN engaged the services of Begino and Del Valle, through Villafuerte as manager,
to be cameramen, editors, and reporters for TV Broadcasting. They signed regularly
renewed talent contracts ranging from 3 months to 1 year, and were given project
assignment forms which details duration of a project, budget, and daily technical
requirements. The talent contract provided that nothing shall be deemed or construed
to establish an employer-employee relationship between the parties.

Petitioners filed against ABS-CBN a complaint for regularization before NLRC’s Sub-
Regional Arbitration Branch in Naga City, arguing that they worked under the direct
control and supervision of Villafuerte - they were mandated to wear company IDS,
provided the necessary equipment, informed about the news to be covered the next
day, and bound by the policy on attendance and punctuality. They were also subjected
to an annual competency assessment as condition for their continued employment.

ABS-CBN countered that they were hired as talents, and were never imposed control
over the means and methods by which they performed or discharged the tasks, and
were at most briefed whenever necessary regarding the general requirements of the
project to be executed.

While the case was pending, they were terminated, prompting them to file a second
complaint for illegal dismissal.

ISSUE: W/N Begino et. al. are regular employees of ABS-CBN.

RULING
Yes. As cameramen, editors and reporters, it appears that they were subject to the
control and supervision of ABS-CBN, which provided them with the equipment essential
for the discharge of their functions. The terms and conditions were demonstrative of the
control ABS-CBN exercised not only over the results of petitioners’ work but also the
means employed to achieve the same.

44 | P a g e
SOCIAL SECURITY SYSTEM VS DEBBIE UBANA, GR 200114.

DOCTRINE: “For Article 217 of the Labor Code to apply, and in order for the Labor
Arbiter to acquire jurisdiction over a dispute, there must be an employer-employee
relation between the parties thereto.”

FACTS
Respondent Ubana applied with the Social Security Commission. After passing the
examinations and accomplishing all the requirements for employment, she was instead
referred to DBP Service Corporation for transitory employment wherein she passed also
the pre-employment examination.
On May 28, 1996 she was made to sign a six-month Service Contract Agreement by DBP
Service Corporation appointing her as clerk for assignment with SSS Daet Branch. From
1996 to until her resignation in 2002, her Service Contract Agreement was never
renewed but she was required to work for SSS continuously under different assignments
with a maximum salary of only P 229 while a regular SSS Processor receives P 846.45
daily.
On the belief that she was exploited, she filed a civil case for damages against DBP
Service Corporation, petitioner SSS and the SSS Retirees Association before the RTC.
Petitioner together with the other co-defendants filed a motion to dismiss arguing that
the subject matter of the case and respondent’s claims arose out of employer-employee
relations which are beyond the RTC’s jurisdiction and is properly cognizable with the
NLRC.

ISSUE:
Whether or not the RTC has jurisdiction in this case.

RULING:
Yes, the RTC has jurisdiction.

For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter to acquire
jurisdiction over a dispute, there must be an employer-employee relation between the
parties thereto.

In Home Development Mutual Fund v. Commission on Audit, it was held that while they
performed the work of regular government employees, DBP Service Corporation
personnel are not government personnel, but employees of DBP Service Corporation
acting as an independent contractor.

Applying the foregoing pronouncement to the present case, it can be said that during
respondent's stint with petitioner, she never became an SSS employee, as she remained
an employee of DBP Service Corporation and SSS Retirees as she remained an employee
of DBP Service Corporation and SSS Retirees Association — the two being independent
contractors with legitimate service contracts with SSS. In legitimate job contracting, no

45 | P a g e
employer-employee relation exists between the principal and the job contractor's
employees. The principal is responsible to the job contractor's employees only for the
proper payment of wages.
Since there is no employer-employee relationship between the parties herein,
then there is no labor dispute cognizable by the Labor Arbiters or the NLRC.
Thus, the RTC has jurisdiction.

46 | P a g e
CENTURY PROPERTIES INC. V BABIANO GR 220978

DOCTRINE:
The presence of the following elements evince the existence of an employer-employee
relationship: (a) the power to hire, i.e., the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee's conduct, or the so called "control test." The control test is
commonly regarded as the most important indicator of the presence or absence of an
employer-employee relationship. Under this test, an employer-employee relationship
exists where the person for whom the services are performed reserves the right to
control not only the end achieved, but also the manner and means to be used in
reaching that end.

FACTS:
Babiano was hired by CPI as Director of Sales, and was eventually appointed as Vice
President for Sales. As CPI's Vice-President for Sales, Babiano was remunerated with,
among others, a 0.5% override commission for completed sales. His employment
contract also contained a "Confidentiality of Documents and Non-Compete Clause"
which, among others, barred him from disclosing confidential information, and from
working in any business enterprise that is in direct competition with CPI while he
employed and for a period of one year from date of resignation or termination. Should
Babiano breach any of the terms thereof, his "forms of compensation, including
commissions and incentives will be forfeited."

During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventually promoted as Project Director. As such, she signed an employment
agreement, denominated as "Contract of Agency for Project Director" which provided,
among others, that she would directly report to Babiano, and receive a monthly subsidy
of P60,000.00, 0.5% commission, and cash incentives. It was stipulated in the contract
that there exists no employer-employee relationship

After receiving reports that Babiano was revealing company information to competitors,
CPI sent a Notice asking Babiano to directing him to explain why he should not be
charged with disloyalty, conflict of interest, and breach of trust and confidence for his
actuations.

Babiano then tendered his resignation, revealing that he had been accepted as Vice
President of First Global BYO Development Corporation (First Global), a competitor of
CPI. Concepcion also resigned at CPI’s Project Director.

Babiano and Concepcion filed a complaint for nonpayment of commissions and damages
before the NLRC.

47 | P a g e
CPI contended that Babiano was merely an agent. His breach of the Confidentiality and
Non-Compete Clause justifies the forfeiture of his commissions. With regards to
Concepcion, CPI maintained that the NLRC has no jurisdiction because there exists no
employer-employee relationship between them, and his claims should have been in an
ordinary civil action.

LA ruled in favor of CPI, which was reversed in the NLRC. The CA affirmed the NLRC with
a corresponding increase in the award for unpaid commission.

ISSUE: Whether or not the CA erred in holding CPI liable for unpaid commissions

RULING:
The employment contract provided in no uncertain terms that should Babiano "[breach]
any term of [the employment contract], forms of compensation including commissions
and incentives will be forfeited." Here, CPI and Babiano indisputably wanted the said
clause to be effective even during the existence of the employer-employee relationship
between Babiano and CPI. It was evidently clear that when he sought and eventually
accepted the said position with First Global, he was still employed by CPI as he has not
formally resigned at that time. Irrefragably, this is a glaring violation of the
"Confidentiality of Documents and Non-Compete Clause" in his employment contract
with CPI, thus, justifying the forfeiture of his unpaid commissions.

Anent the nature of Concepcion's engagement, based on case law, the presence of the
following elements evince the existence of an employer-employee relationship: (a) the
power to hire, i.e., the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct, or the so called "control test." The control test is commonly
regarded as the most important indicator of the presence or absence of an employer-
employee relationship. Under this test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not
only the end achieved, but also the manner and means to be used in reaching that end.
All four was established in CPI and Concepcion’s relationship as CPI exercised power of
selection and discipline, gave remuneration in the form of a subsidy, and exercised the
power of control through Babiano.

Also, it has been said in case law that, “It is axiomatic that the existence of an employer-
employee relationship cannot be negated by expressly repudiating it in the
management contract and providing therein that the "employee" is an independent
contractor when the terms of the agreement clearly show otherwise. For, the
employment of a person is defined and prescribed by law and not by what the parties
say it should be. In determining the status of the management contract, the "four-fold
test" on employment earlier mentioned has to be applied.”

Hence, Babiano’s commission is forfeited, but Concepcion’s should be awarded.

48 | P a g e
LU VS. ENOPIA , G.R. NO. 197899

DOCTRINE:
Basic Principles
 The existence of an employer-employee relationship is a question of fact without
a particular form of evidence required (as long as the latter is competent and
relevant).
 The elements of an employer-employee relationship include (1) the selection and
engagement of the workers; (2) the power to control the worker’s conduct; (3)
the payment of wages by whatever means; and (4) the power of dismissal.
FACTS:
Petitioner Lu was the sole proprietor of Mommy Gina Tuna Resources (MGTR), which
was engaged in deep-sea fishing business. Between January 20, 1994 to March 20, 1996,
respondents were hired as crew members for petitioner’s fishing boat F/B MG-28. The
arrangement was that petitioner gets 55% of the income while respondent crew
members get 45% with an additional 4% “backing incentive”. They also share the
expenses for the maintenance and repair of the boat, and the purchases of nets, ropes
and payaos.
In August 1997, Lu proposed a Joint Venture Fishing Agreement (JFVA) to the crew
members but the latter refused because of the one-year term provided therein.
According to Lu, the respondents refused to sign the agreement and decided to return
the vessel. On the other hand, according to the respondents, Lu terminated their
services immediately on August 18, 1997, because of their refusal.
The crew members filed their complaint with the LA for illegal dismissal, monetary
claims and damages. Lu denied their allegations and claimed that their relationship was
one of a joint venture and not an employer-employee relationship, therefore there was
no illegal dismissal. Lu alleged that it was the master fisherman who hired the crew
members (not him), that he had no control over their day-to-day fishing operations, and
that they were not paid wages but rather shares. The LA ruled in favor of Lu as it was
alleged his use of the checker and radio were for logistics purposes, and not for
supervision on how, when and where to fish.
NLRC and CA dismissed the appeal of the respondent crew members. SC remanded the
case back to the CA for further proceedings. This time, CA found that petitioner
exercised control in the concept of employer over the respondents, and reversed NLRC’s
decision and ordered Lu to pay separation pay, full backwages, exemplary damages and
attorney’s fees. Lu appealed again to SC.
ISSUE: WON the relationship of petitioner Lu and respondent crew members were in the
concept of a joint venture or employer-employee relationship.
HELD:
The relationship between Lu and the crew members meet the requisites for an
employer-employee relationship to exist. The existence of an employer-employee
relationship is a question of fact without a particular form of evidence required, as long
as the evidence is competent and relevant. The elements of such include (1) the
selection and engagement of the workers; (2) the power to control the worker’s

49 | P a g e
conduct; (3) the payment of wages by whatever means; and (4) the power of dismissal.
All of these elements are present in this case.
Lu says that it was the master fisherman who hired the crew members, however the SSS
records of the crew members lists MGTR as its employer. This belies Lu’s argument that
he is not the one who hired the crew members as his employees.
Lu also contends he exercises no control over the operations of the respondents,
however his use of a radio operator and checker proves that he was constantly
monitoring and checking the progress over respondents activities at sea. As a matter of
fact, Lu would use these communication methods to instruct the master fisherman on
how to conduct the fishing operations.
As to the matter of wages, SC relied on Ruga vs. NLRC to establish that the payment of
wages based on percentage share of the fish catch would not be sufficient to negate the
employer-employee relationship. Lu’s argument that they are not employees as they are
being paid in shares thus fails.
Lastly, petitioner Lu de facto wielded the power of dismissal over respondents when he
dismissed them after they refused to sign the JFVA. In addition, respondents’ jobs as
fishermen-crew members is directly connected to the nature of the trade or business of
the employer and thus qualifies them as regular employees. Regular employees’ right to
security of tenure are protected under Article 279 of the Labor Code against unjust
termination. The mere refusal of signing the JFVA is violative of the crew members’ right
to security of tenure.
Employees who have been unjustly dismissed shall be entitled to reinstatement with full
backwages and allowances. However, since the most of the crew members were already
employed with other fishing companies, reinstatement is no longer feasible. Thus, the
crew members are correctly entitled to their separation pay, payment of backwages,
exemplary damages and attorney’s fees.

50 | P a g e
 HIRING OF EMPLOYEE

P T & T vs. NLRC, G.R. No. 118978

DOCTRINE: Marriage as a condition to employment or continued employment is illegal.

FACTS:
Grace de Guzman, private respondent, was initially hired by petitioner PT & T (Philippine
Telegraph and Telephone Company) as a reliever for a fixed period. Thereafter, private
respondent’s services as reliever were again engaged by petitioner.
On September 2, 1991, private respondent was once more asked to join petitioner’s
company as probationary employee. In the application form, she indicated in the
portion for civil status therein that she was single although she had contracted marriage
few months earlier.
When petitioner learned about this, its branch supervisor in Baguio City, Delia M. Oficial,
sent to De Guzman a memorandum requiring her to explain the discrepancy. She was
reminded about the company’s policy of not accepting married women for employment.
De Guzman answered that she was not aware of the policy and that she had not
deliberately hidden her true civil status. Nonetheless, De Guzman was dismissed.
She filed a complaint for illegal dismissal before the Regional Branch of the NLRC in
Baguio City. The Labor Arbiter declared the dismissal as illegal and ordered De Guzman’s
reinstatement plus payment of the corresponding back wages and COLA.
Petitioner appealed before the NLRC. However, NLRC upheld the decision of the Labor
Arbiter.

ISSUE:
Whether or not petitioner’s dismissal of De Guzman on account of her marriage is valid.

RULING:
No. Petitioner’s policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by Article 136 of the Labor Code and by no
less than the Constitution. The record discloses clearly that her ties with the company
were dissolved principally because of the company’s policy that married women are not
qualified for employment in PT & T, and not merely of her supposed acts of dishonesty.
The private respondent’s act of concealing the true nature of her status from PT & T
could not be properly characterized as willful or in bad faith as she was moved to act the
way she did mainly because she wanted to retain a permanent job in a stable company.
In other words, she was practically forced by that very same illegal company policy into
misrepresenting her civil status for fear of being disqualified from work. While loss of
confidence is a just cause for termination of employment, it should not be simulated. It
must rest on an actual breach of duty committed by the employee and not on the
employer’s caprices. Furthermore, it should never be used as a subterfuge for causes
which are improper, illegal, or unjustified.

51 | P a g e
DUNCAN ASSO. OF DETAILMAN-PTGWO VS. GLAXO WELLCOME PHILS., G.R. NO.
162994

FACTS:

Petitioner Pedro Tecson was hired by respondent Glaxo Wellcome Philppines (Glaxo) as
medical representative on Oct.24, 1994. He signed a contract of employment which
stipulates among others that he agrees to study and abide existing company rules; to
disclose to management any existing of future relationship by consanguinity or affinity
with co-employees or employees of competing drug companies and if ever the
management finds conflict of interest in such, he must resign. He was completely aware
of the stipulation before signing it. The Employee Code of Conduct of Glaxo similarly
provides that an employee is expected to inform management of any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing
drug companies. If management perceives a conflict of interest or a potential conflict
between such relationship and the employee’s employment with the company, the
management and the employee will explore the possibility of a “transfer to another
department in a non-counterchecking position” or preparation for employment outside
the company after six months.

Reminders from Tecson’s district manager did not stop petitioner from marrying Bettsy,
an Astra’s Branch Coordinator in Albay. She supervises the district managers and
medical representatives of her company and prepares marketing strategies for Astra in
that area.

Tecson’s managers continued to remind him of the potential existence conflict of

interest and the superiors advised him to decide who from him and Bettsy would resign
from their job but stressed that Tecson is doing great and he should keep at it.

Tecson was reassigned to another place and was not given products that the Astra also
offers and he was not included in products seminars and training.

Tecson requested for time in complying said policy by asking for a transfer in the Glaxo’s
milk division in which the other company had no counterpart. This was denied.
Thereafter, he brought the matter to Grievance Committee but the parties failed to
resolve such ISSUE. Glaxo offered Tecson a separation pay of one-half (½) month pay
for every year of service, or a total of P50,000.00 but he declined the offer. On
November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its
Decision declaring as valid Glaxo’s policy on relationships between its employees and
persons employed with competitor companies, and affirming Glaxo’s right to transfer
Tecson to another sales territory.

52 | P a g e
Tecson filed for a petition for review on the CA and the CA promulgated that the NCMB
did not err in rendering its decision. A recon was filed in appellate court but it was
denied, hence this petition for certiorari. Petitioner contended that the policy was
violative of the equal protection clause and that he was constructively dismissed while
the respondent’s contention was the policy is a valid exercise of its management
prerogatives.

ISSUEs:

1. Whether or not the policy of a pharmaceutical company prohibiting its

employees from marrying employees of another pharmaceutical company is valid?
2. Whether or not petitioner was constructively dismissed?

RULING:

1. This petition was denied. Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs
and information from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.

The prohibition against personal or marital relationships with employees of competitor

companies upon Glaxo’s employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. In laying
down the assailed company policy, Glaxo only aims to protect its interests against the
possibility that a competitor company will gain access to its secrets and procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No
less than the Constitution recognizes the right of enterprises to adopt and enforce such
a policy to protect its right to reasonable returns on investments and to expansion and
growth.

The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the
commands of the equal protection clause are addressed only to the state or those acting
under color of its authority.

From the wordings of the contractual provision and the policy in its employee
handbook, it is clear that Glaxo does not impose an absolute prohibition against
relationships between its employees and those of competitor companies. Its employees
are free to cultivate relationships with and marry persons of their own choosing. What
the company merely seeks to avoid is a conflict of interest between the employee and
the company that may arise out of such relationships.

53 | P a g e
 2. There was no merit in Tecson’s contention that he was constructively dismissed
when he was transferred from the Camarines Norte-Camarines Sur sales area to
the Butuan City-Surigao City-Agusan del Sur sales area, and when he was
excluded from attending the company’s seminar on new products which were
directly competing with similar products manufactured by Astra. Constructive
dismissal is defined as a quitting, an involuntary resignation resorted to when
continued employment becomes impossible, unreasonable, or unlikely; when
there is a demotion in rank or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee.
The record does not show that Tecson was demoted or unduly discriminated
upon by reason of such transfer.

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, a drug

salesman or medical representative is expected to travel. He should anticipate
reassignment according to the demands of their business. This is applicable to the case
at bar.

54 | P a g e
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, vs. RONALDO
D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, G.R. No. 164774.

DOCTRINE: Company Policy should not violate the right of the employee under the
Constitution and the Labor Code.

FACTS:

Star paper corporation is engaged in trading paper products. The company policies
stated that:

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to
[the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then
decided to get married, one of them should resign to preserve the policy stated above
The complainants alleged that when they married co-employees, they were compelled
to resign because of the company policy. Arguing that said policy is illegal, they lodged a
complaint for illegal dismissal and unfair labor practice
ISSUE:
Whether the policy of the employer banning spouses from working in the same
company violates the rights of the employee under the Constitution and the Labor Code
or is a valid exercise of management prerogative.

RULING:

No, it is not a valid exercise of management prerogative and violates the rights of
employees under the constitution. The case at bar involves Article 136 of the Labor
Code which provides “it shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married, a woman
employee shall be deemed resigned or separated , or to actually dismiss, discharge ,
discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.” The company policy of Star Paper, to be upheld, must clearly establish the
requirement of reasonableness. In the case at bar, there was no reasonable business
necessity. Petitioners failed to show how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be
detrimental to its business operations. The questioned policy may not facially violate
Article 136 of the Labor Code but it creates a disproportionate effect and under the
disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is
reasonable despite the discriminatory, albeit disproportionate, effect. Lastly, the
absence of a statute expressly prohibiting marital discrimination in our jurisdiction
cannot benefit the petitioners.

55 | P a g e
DEL MONTE PHILIPPINES, INC. vs. LOLITA VELASCO, G.R. NO. 153477 March 6, 2007

DOCTRINE: The totality of the infractions of an employee may be taken into

account to justify the dismissal. Provided, that the cause for the dismissal was
gross and habitual neglect.
Absences due to woman’s pregnancy and related illnesses are justified
and may not be cited as just cause to terminate employment.
FACTS:
Lolita M. Velasco (respondent) started working with Del Monte Philippines
(petitioner) on October 21, 1976 as a seasonal employee and was regularized on
May 1, 1977. Her latest assignment was as Field Laborer.
Respondent was repeatedly warned in writing due to her absences without
permission and her vacation entitlement for the employment years affected was
forfeited.
Sometime in 1994, a notice of hearing was sent to respondent notifying her of
the charges filed against her for violating the Absence Without Official Leave
rule: that is for excessive absence without permission on August 15-18, 29-31
and September 1-10, 1994. The hearing was set on September 23, 1994 which
the respondent failed to appear. It was again reset to October 5, 1994.
On January 10, 1995, after hearing, the petitioner terminated the services of
respondent effective January 16, 1994 due to excessive absences without
permission.
Aggrieved, respondent filed a case for illegal dismissal against petitioner
asserting that her dismissal was illegal because she was on the family way
suffering from urinary tract infection, a pregnancy-borne, at the time she
committed the alleged absences. She explained that the company doctor advised
her to have "rest-in-quarters" on account of a pregnancy-related sickness. She
attempted to file leaves of absence but the petitioner’s supervisor refused to
receive them.
On April 13, 1998, the Labor Arbiter dismissed the Complaint for lack of merit.
The Labor Arbiter held that the respondent was an incorrigible absentee; that
she failed to file leaves of absence; that her absences in 1986 and 1987 were
without permission; that the petitioner gave the respondent several chances to
reform herself; and that the respondent did not justify her failure to appear
during the scheduled hearings and failed to explain her absences.
Respondent appealed to the NLRC and reversed the decision of the Labor Arbiter
declaring the dismissal of complainant as ILLEGAL. 
The petitioner then appealed to the CA and affirmed the decision of NLRC.
Hence, the instant Petition.
ISSUE:
Whether or not the respondent was validly terminated from employment.

56 | P a g e
RULING:
The instant petition is untenable.
 The Filflex Industrial and Manufacturing Co. case is not applicable, principally
because the nature and gravity of the illness involved in that case – chronic
asthmatic bronchitis – are different from the conditions that are present in the
instant case, which is pregnancy and its related illnesses. The Court takes judicial
notice of the fact that the condition of asthmatic bronchitis may be intermittent,
in contrast to pregnancy which is a continuing condition accompanied by various
symptoms and related illnesses. Hence, as to the former, if the medical
certificate or other proof proffered by the worker fails to correspond with the
dates of absence, then it can be reasonably concluded that, absent any other
proof, such absences are unjustified. This is the RULING in Filflex which cannot
be applied in a straight-hand fashion in cases of pregnancy which is a long-term
condition accompanied by an assortment of related illnesses.
 Absences due to pregnancy and related illness are justified. It did not constitute
gross and habitual neglect. Her being pregnant at the time these absences were
incurred is not questioned and is even admitted by respondent. Medical and
health reports abundantly disclose that during the first trimester of pregnancy,
expectant mothers are plagued with morning sickness, frequent urination,
vomiting and fatigue all of which complainant was similarly plagued with.
 The Court agrees with the CA in concluding that respondent’s sickness was
pregnancy-related and, therefore, the petitioner cannot terminate respondent’s
services because in doing so, petitioner will, in effect, be violating the Labor Code
which prohibits an employer to discharge an employee on account of the latter’s
pregnancy.
Article 137 of the Labor Code provides:
Art. 137. Prohibited acts. – It shall be unlawful for any employer:
(1) To deny any woman employee the benefits provided for in this Chapter or to
discharge any woman employed by him for the purpose of preventing her from enjoying
any of the benefits provided under this Code;
(2) To discharge such woman on account of her pregnancy, while on leave or in
confinement due to her pregnancy; or
(3) To discharge or refuse the admission of such woman upon returning to her work for
fear that she may again be pregnant.
 The Court is convinced that the petitioner terminated the services of respondent
on account of her pregnancy which justified her absences and, thus, committed a
prohibited act rendering the dismissal illegal. In fine, the Court finds no cogent
reason to disturb the findings of the CA and the NLRC.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated July 23, 2001
and the Resolution dated May 7, 2002 of the Court of Appeals are AFFIRMED.

57 | P a g e
YRASUEGUI VS. PHIL AIR LINES
G.R. No. 168081. October 17, 2008.

DOCTRINE: The employer may set qualifying standards are norms that apply prior to and
after an employee is hired. If the employee cannot meet these standards he may be
validly dismissed especially if these qualifications are necessary in the employer’s
business.

FACTS:

This case portrays the peculiar story of an international flight steward who was
dismissed because of his failure to adhere to the weight standards of the airline
company.

Petitioner was a former international flight steward of PAL. He had problems meeting
the required weight standards for cabin and crew. He was advised to go on leave
without pay several times to address his weight concerns, to no avail. PAL had him
grounded until such time he satisfactorily complies with the weight standards and he
was directed to report every two weeks for weight checks.

On November 5, 1992, petitioner weighed 205 lbs, way beyond his ideal weight of 166
lbs. On June 15, 1993, petitioner was formally informed by PAL that due to his inability
to attain his ideal weight, and considering the utmost leniency extended to him which
spanned a period covering a total of almost five (5) years, his services were considered
terminated effective immediately

The Labor Arbiter ruled that he was illegally dismissed. The Labor Arbiter held that the
weight standards of PAL are reasonable in view of the nature of the job of petitioner. [15]
However, the weight standards need not be complied with under pain of dismissal since
his weight did not hamper the performance of his duties. [16] Assuming that it did,
petitioner could be transferred to other positions where his weight would not be a
negative factor. NLRC affirmed the decision of the Labor Arbiter, with modifications.

The CA, however, reversed the RULING. Contrary to the NLRC RULING, the weight
standards of PAL are meant to be a continuing qualification for an employee’s position.
The failure to adhere to the weight standards is an analogous cause for the dismissal of
an employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is not
willful disobedience as the NLRC seemed to suggest.

ISSUE:

Whether or not the petitioner was illegally dismissed.

58 | P a g e
RULING:

I. The obesity of petitioner is a ground for dismissal under Article 282(e) [44] of the Labor
Code. [T]he standards violated in this case were not mere orders of the employer; they
were the prescribed weights that a cabin crew must maintain in order to qualify for and
keep his or her position in the company. In other words, they were standards that
establish continuing qualifications for an employee’s position.

By its nature, these qualifying standards are norms that apply prior to and after an
employee is hired. They apply prior to employment because these are the standards a
job applicant must initially meet in order to be hired. They apply after hiring because an
employee must continue to meet these standards while on the job in order to keep his
job. Under this perspective, a violation is not one of the faults for which an employee
can be dismissed

II. The dismissal of petitioner can be predicated on the bona fide occupational
qualification defense. Aircrafts have constricted cabin space, and narrow aisles and exit
doors. Being overwieight impedes mobility in times of emergencies where seconds are
precious.

Petitioner was not, therefore, illegally dismissed. He is entitled to a separation pay,

including his regular allowances.

59 | P a g e
 WAGES & WAGE RATIONALIZATION ACT

S.I.P. FOOD HOUSE ET AL., VS. BATOLINA

GR No. 192473. Oct 11, 2010.

DOCTRINE: The free board and lodging SIP furnished the employees cannot operate as a
set-off for the underpayment of their wages. The free board and lodging are to be
considered as supplements that are non-deductible from the employee’s basic wages.

FACTS:

The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the employees of

the Government Service Insurance System (GSIS).  Incidental to its purpose, GMPC
wanted to operate a canteen in the new GSIS Building, but had no capability and
expertise in this area.  Thus, it engaged the services of the petitioner S.I.P. Food House
(SIP), owned by the spouses Alejandro and Esther Pablo, as concessionaire.  The
respondents Restituto Batolina and nine (9) others (the respondents) worked as waiters
and waitresses in the canteen.

In February 2004, GMPC terminated SIP’s “contract as GMPC concessionaire. The

termination of the concession contract caused the termination of the respondents’
employment, prompting them to file a complaint for illegal dismissal, with money
claims, against SIP and the spouses Pablo. NLRC ruled in favor of the petitioner and CA
affirmed the RULING of NLRC.SIP seeks a reversal of the appellate court’s RULING that it
was the employer of the respondents, claiming that it was merely a labor-only
contractor of GMPC

ISSUE:

Whether or not SIP was liable to them for their statutory benefits, although it was not
made to answer for their lost employment due to the involuntary nature of the
canteen’s closure

RULING:

The CA ruled out SIP’s claim that it was a labor-only contractor or a mere agent of
GMPC.  We agree with the CA; SIP and its proprietors could not be considered as mere
agents of GMPC because they exercised the essential elements of an employment
relationship with the respondents such as hiring, payment of wages and the power of
control, not to mention that SIP operated the canteen on its own account as it paid a fee
for the use of the building and for the privilege of running the canteen. The fact that the
respondents applied with GMPC in February 2004 when it terminated its contract with

60 | P a g e
SIP, is another clear indication that the two entities were separate and distinct from
each other.  We thus see no reason to disturb the CA’s findings.

The respondent’s money claims

We likewise affirm the CA RULING on the monetary award to Batolina and the other
complainants.  The free board and lodging SIP furnished the employees cannot operate
as a set-off for the underpayment of their wages.  We held in Mabeza v. National Labor
Relations Commissionthat the employer cannot simply deduct from the employee’s
wages the value of the board and lodging without satisfying the following
requirements:  (1) proof that such facilities are customarily furnished by the trade; (2)
voluntary acceptance in writing by the employees of the deductible facilities; and      (3)
proof of the fair and reasonable value of the facilities charged.  As the CA aptly noted, it
is clear from the records that SIP failed to comply with these requirements.

On the collateral ISSUE of the proper computation of the monetary award, we also find
the CA RULING to be in order.  Indeed, in the absence of evidence that the employees
worked for 26 days a month, no need exists to recompute the award for the
respondents who were “explicitly claiming for their salaries and benefits for the services
rendered from Monday to Friday or 5 days a week or a total of 20 days a month.”

61 | P a g e
SLL INTERNATIONAL CABLES SPECIALIST V NLRC
GR No. 172161
DOCTRINE: the burden of proving payment of monetary claims rests on the employer,
the rationale being that the pertinent personnel files, payrolls, records, remittances and
other similar documents — which will show that overtime, differentials, service
incentive leave and other claims of workers have been paid — are not in the possession
of the worker but in the custody and absolute control of the employer

FACTS:
Lopez et al were hired by Lagon of SLL International as apprentice/trainee
cable/lineman. They were paid the full minimum wage and other benefits, but since
they were only trainees, they did not report for work regularly but as substitutes to the
regular workers or in undertakings that needed extra workers. Their employment is
terminated upon completion of each project.

For 4 separate projects, they received P145 as daily wage, but the minimum wage
during the same period was increased by the Regional Wage Board to P150, then to
P155, and eventually to P198. And in a later project, they received P165 as daily wage,
while the existing rate was P213.

Eventually, Lopez et al filed a complaint for illegal dismissal, non-payment of wages,

holiday pay, 13th month pay, service incentive leave pay, as well as damages and
attorney’s fees.

ISSUE: W/N Lopez et al should be allowed to recover the differential due to the failure
of SLL International to pay the minimum wage.

RULING:
Yes. SLL International, aside from bare allegations that Lopez et al received wages higher
than the prescribed minimum, failed to present any evidence, such as payroll or
payslips, to support their defense of payment. Thus, petitioners failed to discharge the
onus probandi.

Respondents on the other hand are entitled to be paid the minimum wage, whether
they are regular or non-regular employees. Sec. 3, Rule VII of the Rule to Implement the
Labor Code specifically enumerates those who are not covered by the minimum wage,
and project employees are not among them.

62 | P a g e
VERGARA, JR. VS. COCA-COLA BOTTLERS PHILIPPINES, INC., GR NO. 168194 & 168603
DOCTRINE:
1) Principle against illegal dismissal of employees
2) Principle of non-dimunution of benefits
FACTS:
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola
Bottlers Philippines, Inc. from May 1968 until he retired on January 31, 2002 as a District
Sales Supervisor (DSS) for Las Piñas City, Metro Manila. Petitioner claims entitlement to
an additional Ph₱474,600.00 as Sales Management Incentives (SMI) and to the amount
of Ph₱496,016.67 which respondent allegedly deducted illegally, representing the
unpaid accounts of two dealers within his jurisdiction.
Petitioner filed a complaint before the NLRC for the payment of his "Full
Retirement Benefits, Merit Increase, Commission/Incentives, Length of Service, Actual,
Moral and Exemplary Damages, and Attorney’s Fees.
After a series of mandatory conference, both parties partially settled with regard
the ISSUE of merit increase and length of service. Subsequently, they filed their
respective Position Paper and Reply dealing on the two remaining ISSUEs of SMI
entitlement and illegal deduction.
LA rendered a decision in favor of petitioner, directing respondent to reimburse
the amount illegally deducted from petitioner’s retirement package and to integrate
therein his SMI privilege.
However, the NLRC upon appeal modified the award and deleted the payment of
SMI. Petitioner then moved to partially execute the reimbursement of illegal deduction.
Later, without prejudice to petitioner’s pending certiorari before the CA, the
parties executed a Compromise Agreement whereby petitioner acknowledged full
payment by respondent of the amount of Ph₱496,016.67 covering the amount illegally
deducted.
ISSUE: WON SMI should be included in the computation of petitioner’s retirement
benefits on the ground of consistent company practice.
RULING:
Petition denied. The Court finds no substantial evidence to prove that the grant
of SMI to all retired DSSs regardless of whether or not they qualify to the same had
ripened into company practice. No other evidence presented other than the sworn
statements of former DSSs Velasquez and Hidalgo which were countered by Biola,
Escasura, and Balles that Hidalgo was qualified for SMI but Vaelasquez did not and was
only granted such to achieve industrial peace.
Balles also confirmed that petitioner failed to meet the trade receivable
qualifiers of the SMI. Respondent’s isolated act of including the SMI in the retirement
package of Velazquez could hardly be classified as a company practice that may be
considered an enforceable obligation. Generally, employees have a vested right over
existing benefits voluntarily granted to them by their employer. Thus, any benefit and
supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer.

63 | P a g e
 There is diminution of benefits when the following requisites are present: (1) the
grant or benefit is founded on a policy or has ripened into a practice over a long period
of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error
in the construction or application of a doubtful or difficult question of law; and (4) the
diminution or discontinuance is done unilaterally by the employer.
The principle against diminution of benefits is applicable only if the grant or
benefit is founded on an express policy or has ripened into a practice over a long period
of time which is consistent and deliberate. It presupposes that a company practice,
policy and tradition favorable to the employees has been clearly established and that
the payments made by the company pursuant to it have ripened into benefits enjoyed
by them.
WHEREFORE, the petition is DENIED. The January 9, 2007 Decision and March 6,
2007 Resolution of the Court of Appeals in CA-G.R. SP No. 94622, which affirmed the
January 31, 2006 Decision and March 8, 2006 Resolution of the NLRC deleting the LA's
inclusion of sales management incentives in the computation of petitioner's retirement
benefits, is hereby AFFIRMED.

64 | P a g e
ROYAL PLANT WORKERS UNION VS. COCA-COLA BOTTLERS PHILIPPINES, GR NO.
198783
DOCTRINE/s: The management is free to regulate, according to its own discretion and
judgment, all aspects of employment. The exercise of management prerogative,
however, is not absolute as it must be exercised in good faith and with due regard to the
rights of labor.
Under Art. 100 of the Labor Code, the term "benefits" mentioned in the non-
diminution rule refers to monetary benefits or privileges given to the employee with
monetary equivalents.

FACTS:
Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in
the manufacture, sale and distribution of softdrink products. It has several bottling
plants all over the country, one of which is located in Cebu City. Under the employ of
each bottling plant are bottling operators. In the case of the plant in Cebu City, there are
20 bottling operators who work for its Bottling Line 1 while there are 12-14 bottling
operators who man its Bottling Line 2. All of them are male and they are members of
herein respondent Royal Plant Workers Union (ROPWU).
The bottling operators work in two shifts. Each shift has rotations of work time
and break time. Prior to September 2008, the rotation is this: after two and a half (2 1/2)
hours of work, the bottling operators are given a 30-minute break and this goes on until
the shift ends. In September 2008 and up to the present, the rotation has changed and
bottling operators are now given a 30-minute break after one and one half (1 1/2) hours
of work.
In 1974, the bottling operators of then Bottling Line 2 were provided with chairs
upon their request. In 1988, the bottling operators of then Bottling Line 1 followed suit
and asked to be provided also with chairs. Their request was likewise granted.
Sometime in September 2008, the chairs provided for the operators were removed
pursuant to a national directive of CCBPI.
This directive is in line with the "I Operate, I Maintain, I Clean" program of
petitioner for bottling operators, wherein every bottling operator is given the
responsibility to keep the machinery and equipment assigned to him clean and safe. The
program reinforces the task of bottling operators to constantly move about in the
performance of their duties and responsibilities.

ISSUE: WON the removal of chairs of the operators assigned at the

production/manufacturing line while performing their duties and responsibilities is valid
or not.

Petitioner: There is no connection between CCBPI's "I Operate, I Maintain, I Clean"

program and the removal of the chairs because the implementation of the program was
in 2006 and the removal of the chairs was done in 2008. The 30-minute break is part of
an operator's working hours and does not make any difference. The frequency of the
break period is not advantageous to the operators because it cannot compensate for

65 | P a g e
the time they are made to stand throughout their working time. The bottling operators
get tired and exhausted after their tour of duty even with chairs around. How much
more if the chairs are removed?
Management prerogatives are not absolute but subject to certain limitations
found in law, a collective bargaining agreement, or general principles of fair play and
justice. The operators have been performing their assigned duties and responsibilities
satisfactorily for thirty (30) years using chairs. There is no record of poor performance
because the operators are sitting all the time. There is no single incident when the
attention of an operator was called for failure to carry out his assigned tasks. CCBPI has
not submitted any evidence to prove that the performance of the operators was poor
before the removal of the chairs and that it has improved after the chairs were
removed.

Respondents: The removal of the chairs was a legitimate exercise of management

prerogative that it was done not to harm the bottling operators but for the purpose of
optimizing their efficiency and CCBPI's machineries and equipment; and that the
exercise of its management prerogative, was done in good faith and not for the purpose
of circumventing the alights of the employees under the special laws, the CBA or the
general principles of justice and fair play.

RULING:
The management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place, and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay-off of
workers, and discipline, dismissal and recall of workers. The exercise of management
prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor.
CBPI removed the operators' chairs pursuant to a national directive and in line
with its "I Operate, I Maintain, I Clean" program, launched to enable the Union to
perform their duties and responsibilities more efficiently. The chairs were not removed
indiscriminately. They were carefully studied with due regard to the welfare of the
members of the Union. The removal of the chairs was compensated by: a) a reduction of
the operating hours of the bottling operators from a two-and-one-half (2 1/2)-hour
rotation period to a one-and-a-half (1 1/2) hour rotation period; and b) an increase of
the break period from 15 to 30 minutes between rotations.
The fact that there is no proof of any operator sleeping on the job is of no
moment. There is no guarantee that such incident would never happen as sitting on a
chair is relaxing. Besides, the operators constantly move about while doing their job.
The ultimate purpose is to promote work efficiency.
The rights of the Union under any labor law were not violated. There is no law
that requires employers to provide chairs for bottling operators. The CA correctly ruled
that the Labor Code, specifically Article 132 thereof, only requires employers to provide
seats for women. No similar requirement is mandated for men or male workers. It must

66 | P a g e
be stressed that all concerned bottling operators in this case are men. There was no
violation either of the Health, Safety and Social Welfare Benefit provisions under Book
IV of the Labor Code of the Philippineshe directive did not expose the bottling operators
to safety and health hazards.
The CBA between the Union and CCBPI contains no provision whatsoever
requiring the management to provide chairs for the operators in the
production/manufacturing line while performing their duties and responsibilities. The
CBA expressly provides that benefits and/or privileges, not expressly given therein but
which are presently being granted by the company and enjoyed by the employees, shall
be considered as purely voluntary acts by the management and that the continuance of
such benefits and/or privileges, no matter how long or how often, shall not be
understood as establishing an obligation on the company's part.
The operators' chairs cannot be considered as one of the employee benefits
covered in Article 100 of the Labor Code. In the Court's view, the term "benefits"
mentioned in the non-diminution rule refers to monetary benefits or privileges given to
the employee with monetary equivalents. Such benefits or privileges form part of the
employees' wage, salary or compensation making them enforceable obligations. We can
only deduce that the other employee benefits spoken of by Article 100 pertain only to
those which are susceptible of monetary considerations. Without a doubt, equating the
provision of chairs to the bottling operators as something within the ambit of "benefits"
in the context of Article 100 of the Labor Code is unduly stretching the coverage of the
law.
Jurisprudence recognizes the exercise of management prerogatives. Labor laws
also discourage interference with an employer's judgment in the conduct of its business.
For this reason, the Court often declines to interfere in legitimate business decisions of
employers. The law must protect not only the welfare of the employees, but also the
right of the employers.

67 | P a g e
THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION, ET AL., VS. THE ALLIANCE
OF PROGRESSIVE, GR NO. 150326

DOCTRINE: The general rule is that the proper remedy from the decisions of voluntary
arbitrators is a petition for review under Rule 43 of the Rules of Court.
FACTS:
Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Resolution dated September 4, 2002 of the Court of Appeals (CA), which dismissed the
petitioner’s Petition for Certiorari for adopting a wrong mode of appeal and the CA
Resolution dated February 28, 2003 which denied petitioner’s Motion for
Reconsideration.
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV
Employees Union-ALU (respondent) entered into Collective Bargaining Agreement (CBA)
covering the petitioner rank-and-file employees, for a period of five (5) years effective
January 1, 1998. On June 7, 2000, respondent, through its Regional Vice-President,
Vicente P. Casilan, sent a letter to petitioner demanding holiday pay for all employees,
as provided for in the CBA. On June 20, 2000 petitioner, through its legal counsel, sent a
letter-reply to Casilan, explaining that after perusing all available pay slips, it found that
it had paid all employees all the holiday pays enumerated in the CBA. In its position
paper for arbitration in the National Conciliation and Mediation Board (NCMB), the
respondent employees admit that they were paid all of the days of the month even if
there was no work. The amount of P1, 054, 393.07 for the unpaid legal holidays, and
several pay slips were computed.
Petitioner insisted that payment of the holiday pay in compliance with the CBA
provisions, stating that payment was presumed since the formula used in determining
the daily rate of pay of the covered employees in basic Monthly Salary divided by 30
days or Basic Monthly Salary multiplied by 12 divided by 360 days, thus with said
formula, the employees are already paid their regular and special days, the days when
no work is done, the 51 un-worked Sundays and the 51 un-worked Saturdays.
The voluntary arbitrator rendered petitioner liable for payment of unpaid
holidays from 1998 to 2000 in the sum of P1, 054, 393.07 and was subsequently denied
in his Motion for Reconsideration. Thirty (30) days later, petitioner filed a Petition for
Certiorari in the Court of Appeals ascribing grave abuse of discretion amounting to lack
of jurisdiction of the Voluntary arbitrator but was dismissed for adopting a wrong mode
of appeal. The CA contends that the proper remedy is a petition for review under Rule
43 of the 1997 Rules of Civil Procedure; hence, the present petition for certiorari under
Rule 65 filed on August 15, 2002 should be rejected, as such a petition cannot be a
substitute for a lost appeal and adds that that period for appeal via a petition for review
by petitioner has already lapsed from a fifteen (15) days reglementary period. It also
denied petitioner’s Motion for Reconsideration.

ISSUE: WON the CA erred in rejecting the petition for certiorari under Rule 65 of the
Rules of Court to assail the Decision of the Voluntary Arbitrator.

68 | P a g e
RULING:
No, the Supreme Court ruled that the proper remedy from an award of voluntary
arbitrator is a petition for review to the CA embodied in Section 1, Rule 43 of the 1997
Rules of Court. However, the SC, in the broader interests of justice warrants relaxation
of the rules on procedure besides, petitioner alleges that the voluntary arbitrator’s
conclusion have no basis in fact and in law hence the case should not be dismissed on
the procedural grounds.

The RULING was also applied in the Wellington Investment and Manufacturing
Corporation vs. Trajano and Odango vs. National Labor Relations Commission. In
Wellington, it used 314 factor which deducts 51 Sundays from the 365 days normally
comprising a year and in Odango vs. NLRC, the employer used 304 divisor was clearly
above the minimum of 287 days.
Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner’s
divisor formula. In granting respondent’s claim of non-payment of holiday pay, a
“double burden” was imposed upon petitioner because it was being made to pay twice
for its employees’ monthly salary and sanctioned unjust enrichment in favor of the
respondent and caused unjust financial burden to the petitioner which the court cannot
allow.

69 | P a g e
ARIEL DAVID (YIELS HOG DEALER) VS. JOHN MACASIO
GR No. 195466

DOCTRINE: WAGES & WAGE RATIONALIZATION ACT- Proper application and

interpretation of the labor law provisions on holiday, SIL and 13 th month pay to a worker
engaged on task basis.

FACTS:

Macasio filed a complaint against David for non-payment of overtime pay, holiday pay
and 13th month pay. Macasio alleged that he had been working as a butcher for David as
an employee entitled to such benefits because:
(1) set the work day, reporting time and hogs to be chopped, as well as the manner by
which he was to perform his work; (2) daily paid his salary of ₱700.00, which was
increased from ₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 in 2005; and (3)
approved and disapproved his leaves.

David contends that Macasio is not entitled to those benefits because he is a chopper
on ”pakyaw” or task basis because:
(1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or
earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of
₱700.00 per engagement, regardless of the actual number of hours that he spent
chopping the delivered hogs; and (3) was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were delivered.

The Labor Arbiter dismissed the case, the NLRC confirmed its RULING. However, the CA
reversed the decision and partly granted Macasio’s certiorari petition. CA stated that
although they agree that Macasio was a task basis employee, they pointed out that the
exclusion from those benefits only apply to “field personnel”.

ISSUE: WON Macasio, a task basis employee is entitled for holiday, SIL and 13 th month
pay
Sub-ISSUE: WON Macasio is a field personnel which is not entitled to holiday, SIL and
13th month pay

SC RULING:

Not a Field personnel

Under Article 82,"Field personnel" shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of business or branch office
of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty.
In the case ate bar, it is established that Macasio perform his duties at David’s principal
place of business and Macasio’s hours of work can be determines

70 | P a g e
Entitled for Holiday pay and SIL
Under Article 94 the law provides that every worker shall be paid his regular daily wage
during regular holidays. In Article 95, the law provides that employees are entitled for a
5-day service incentive leave with pay, yearly provided that they have rendered at least
1 year of service.
One of the exceptions mentioned under the provisions above is that when an employee
is categorized as a field employee. In the case at bar, the SC said that, Macasio is proven
not be a field employee, therefore he is entitled to such benefits.

Not entitled to 13th month pay

Under Sec 3 of the Rules and Regulations implementing P.D. 851, one of the exemptions
from the coverage of the 13 th month pay are employees paid on task basis and those
who are paid a fixed amount for performing a specific work, irrespective of the time
consumed in the performance thereof.

The SC said that the law does not intend to qualify the exemption unlike the rules
governing the holiday pay and SIL. Since Macasio is a task basis employee, he is clearly
not entitled to receive the 13th month pay.

71 | P a g e
OUR HAUS REALTY DEVELOPMENT CORP., VS. PARIAN ET AL.
G.R. No. 204651

DOCTRINE: WAGES AND WAGE FIXING: Facilities; “For employers to deduct facilities in
the employees wage, the requisites must be clearly shown and proven.”

FACTS:

Respondents are laborers of petitioner-corporation (construction business). Because of

financial distress, the corporation suspended some projects, which resulted in giving
vacation leaves to the affected workers, including respondents. Instead of going back to
work after their vacation leaves, respondents filed a complaint with the Labor Arbiter,
citing underpayment of wages and Our Haus’ failure to pay their holiday, SIL, 13 th month
and overtime pays.

One of their contentions, respondent-laborers claim that value of their meals should not
be considered in determining their wage total amount since Our Haus failed to comply
with the requirement of agreement in writing under DOLE Memorandum Circular No. 2
and that the value of the facilities was not fair and reasonable. Labor Arbiter ruled in
favor of Our Haus, stating that respondents failed to substantiate their claims and if the
values of board and lodging would be taken into consideration, respondent’s wages
would meet the minimum wage rate. On appeal to the NLRC, the decision was reversed,
stating that respondents did not authorize Our Haus in writing to charge the values of
their board and lodging to their wages.

Our Haus moved to reconsider but was denied, so they filed a petition for certiorari with
the CA with a new theory regarding a significant distinction between ‘deduction’ and
‘charging’. They contended that a written authorization is only necessary if the facility's
value will be ‘deducted’ and will not be needed if it will merely be ‘charged’/included in
the computation of wages. Thus according to them, they did not actually deduct the
values of the meals and housing benefits. They only considered these in computing the
total amount of wages paid to the respondents for purposes of compliance with the
minimum wage law. CA denied this contention citing no difference between ‘deduction’
and ‘charging’. Our Haus filed a petition for review on certiorari under Rule 45 after their
motion for reconsideration was denied.

ISSUE:

Whether or not the facilities value will be deducted or merely included in the
computation of the wages.

72 | P a g e
HELD:

Petition DENIED;

In reality, deduction and charging both operate to lessen the actual take-home pay of
an employee; they are two sides of the same coin. In both, the employee receives a
lessened amount because supposedly, the facility's value, which is part of his wage, had
already been paid to him in kind. As there is no substantial distinction between the two,
the requirements set by law must apply to both.

Requisites of fair and reasonable facilities:

a. proof must be shown that such facilities are customarily furnished by the trade;
b. the provision of deductible facilities must be voluntarily accepted in writing by the
employee; and
c. The facilities must be charged at fair and reasonable value.

For the first requisite:

The sinumpaang salaysay presented by Our Haus is (1) self-serving; (2) on a per project
basis; and (3) cannot prove that it was enjoyed by other employees thus negating its
claimed customary nature. Even if the benefit is customarily provided by the trade, it
must still pass the purpose test set by jurisprudence. Under this test, if a benefit or
privilege granted to the employee is clearly for the employer's convenience, it will not
be considered as a facility but a supplement.

Our Haus is engaged in the construction business, a labor-intensive enterprise. The

success of its projects is largely a function of the physical strength, vitality and efficiency
of its laborers. Its business will be jeopardized if its workers are weak, sickly, and lack
the required energy to perform strenuous physical activities. Thus, by ensuring that the
workers are adequately and well fed, the employer is actually investing on its business.
Even under the purpose test, the subsidized meals and free lodging provided by Our
Haus are actually supplements. Although they also work to benefit the respondents, an
analysis of the nature of these benefits in relation to Our Haus' business shows that they
were given primarily for Our Haus' greater convenience and advantage. If weighed on a
scale, the balance tilts more towards Our Haus' side. Accordingly, their values cannot be
considered in computing the total amount of the respondents' wages.

For the second requisite:

Oddly, Our Haus only offered these documents when the NLRC had already ruled that
respondents did not accomplish any written authorization, to allow deduction from their
wages. The five kasunduans were also undated, making the SC wonder if they had really
been executed when respondents first assumed their jobs.

73 | P a g e
For the third requisite:

Our Haus never explained how it came up with the values it assigned for the benefits it
provided; it merely listed its supposed expenses without any supporting document. The
records however, are bereft of any evidence to support Our Haus' meal expense
computation. Without any corroborative evidence, it cannot be said that Our Haus
complied with this third requisite.

Respondents are entitled to other monetary benefits. A party who alleges payment as a
defense has the burden of proving it. Particularly in labor cases, the burden of proving
payment of monetary claims rests on the employer. Records will disclose the absence of
any credible document which will show that respondents had been paid their 13th
month pay, holiday and SIL pays. Our Haus merely presented a hand-written
certification from its administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they pass probation.

74 | P a g e
MILAN ET AL VS NLRC,
G.R. No. 202961

DOCTRINE: WAGE PROTECTION PROVISIONS & PROHIBITIONS REGARDING WAGES

FACTS: Petitioners consist of several employees of respondent corporation, Solid Mills.

They were represented by their collective bargaining agent which was the National
Federation of Labor Unions. One of the agreements in the employment was that Solid
Mills will grant “by way of goodwill and in the spirit of generosity” financial assistance
less accountabilities to members of the union. Through such agreement, several
employees were allowed by Solid Mills to occupy SMI village which was a property
owned by Solid Mills.
The ISSUE arose when respondent Solid Mills declared that they will cease business
operations due to serious business losses of which, petitioners were properly informed.
In consequence of this, the employees received notices to vacate SMI Village.
Employees were then made to sign a memorandum of agreement to effect that vacating
the SMI Village is a pre-condition for the release of their termination benefits and leave
pay. Petitioners are among those who refused to vacate and who did not sign the
agreement and instead demanded their benefits and pay. Petitioners argued that Solid
Mills cannot legally withhold their benefits because its payment is based on company
policy and practice and that their possession of the SMI property should not be
considered within the meaning of “accountabilities” in their agreement.
Labor Arbiter ruled in favor of petitioners RULING that there was illegal withholding of
wages.

NLRC and CA ruled in favor of Solid Mills, RULING that Solid Mills’ act of letting
employees dwell in SMI Village was merely an act of liberality on its part which can be
revoked at any time at its discretion. Hence, they were justified in withholding the
benefits and separation pay.

ISSUEs:
1. Whether or not NLRC has jurisdiction.
2. Whether or not the withholding of the benefits and separation pay was
proper.
RULING:
1. Yes, NLRC has jurisdiction. Under Art. 217 (6) of the Labor Code, the NLRC has
jurisdiction over claims arising from employer-employee relationship with an
amount exceeding 5,000 regardless of any claim for reinstatement except those
claims for employee compensation, Social Security, Medicare and Maternity
benefits. The claims is not only limited to claims by an employee but includes
claims by an employer against its employee. Moreover, such jurisdiction covers
rights over a property when it is sufficiently connected to the labor ISSUE such
that it is necessary to determine an ISSUE related to rights or claims arising from
an employer-employee relationship.

75 | P a g e
2. Yes, withholding was proper. While under Art. 116 and Art. 100 of the labor
code, withholding of wages and diminution of wages is prohibited, Art. 113 (3) of
the labor code allows an employer to deduct when such employer is authorized
by law or regulations ISSUEd by the Secretary of Labor and Employment. Here,
the act of Solid Mills falls within a clearance procedure which is a procedure
instituted to ensure that the properties, real or personal, belonging to the
employer but are in the possession of the separated employee, are returned to
the employer before the employee's departure. Clearance procedure is a
standard procedure among employers and is allowed under our laws.
Moreover, Art. 1706 of the new civil code allows withholding of wages for a debt
due. Here, the term ‘accountabilities’ was construed in its ordinary sense which
is essentially a debt or obligation. As long as accountabilities are incurred
because of employer-employee relationship, it can be a subject of a clearance
procedure.
Since Solid Mills’ act of allowing petitioners to dwell in SMI Village was merely an
act of liberality on its part, the property can be demanded back at its will. Here,
the return of the property became an obligation on the part of petitioners when
the employer-employee relationship ceased, as such was included in the term
accountabilities, thus the withholding of the wages and benefits was proper.

76 | P a g e
Toyota Pasig Inc vs. De Peralta
GR No. 213488, Nov 7, 2016

DOCTRINE:
Commissions are included in the definition of wages.
It is employer who has the burden of proof of payment even in cases where the
employee alleges non-payment rather than the employee having the burden of
proving non-payment.

FACTS: Respondent was an employee of petitioner corporation. She was initially hired as
a cashier and attained the position of Insurance sales executive due to her excellence in
the work as was shown when she was awarded Best Sales Insurance Executive from
2007 to 2011. Issue came when her husband, who was also an employee of petitioner,
organized a collective bargaining unit the members of which, including her husband,
were later dismissed from service. She also suffered the same fate, and according to
respondent, she was then accused of fraud in the processing of several insurance
transactions in that she claimed commissions in those transactions instead of
considering such under the marketing department’s new business accounts. With this,
she was preventively suspended and was later terminated upon her receipt of the
notice of termination.
Respondent then filed a case claiming payment of her earned substantial commissions,
tax rebates, and other benefits dating back from July 2011 to January 2012, amounting
to P617,248.08. Petitioner in defense, contended that respondent was terminated with
just cause and that the claims she is asking are unfounded and unsupported by
documents and that such claims do not partake of unpaid wages/salaries.

Labor Arbiter found respondent liable for the accusations against her and did not order
the payment of the benefits claimed by respondent, instead it merely required
petitioner to pay the unpaid salary.

NLRC and CA agreed with LA that respondent is guilty of the accusations but it ordered
petitioner to pay the claim of P617,248.08 of respondent.

ISSUE:
1. Whether or not the claims of respondent is included in the definition of “wages”
in the labor code.
2. Whether or not the claims will be discarded for failure of respondent to
substantiate such claims.
RULING:
1. Yes, respondent’s claims fall within the definition of “wages”. Under Art. 97 (f) of
the labor code, “wage paid to an employee shall mean the remuneration of
earnings, however designated, capable of being expressed in terms of money,
whether ascertained on a time, task, piece, or commission basis”. The claims of

77 | P a g e
 commissions, tax rebates for achieved monthly targets, and success share/profit
sharing, are given to respondent as incentives or forms of encouragement in
order for her to put extra effort in performing her duties as an insurance sales
executive are included in the term “commission” which falls within the definition
of “wages” under Art. 97(f) of the labor code. This is for the reason that the
nature of the work of a salesman is to stimulate growth in sales which can be
achieved by encouraging such employees to put more effort in their jobs
through commissions. Hence, commissions are indubitably included in a sales
employee’s wages.
2. No, the claims will not be discarded just because respondent was not able to
produce supporting documents. Under law, once an employee alleges non-
payment of specific claims in his/her complaint with particularity, the one who
pleads payment has the burden of proving it and even if the employee alleges
non-payment, it is still the employer who has to prove payment rather than the
employee to prove non-payment. Here, the petitioner did not allege payment of
the claims or at least allege that respondent is not entitled to such claims. Hence,
since petitioner failed to overcome the burden, the claims will not be discarded.

78 | P a g e
 WAGE ENFORCEMENT AND RECOVERY

TIGER CONSTRUCTION AND DEVELOPMENT CORPORATION VS. ABAY

GR 164141

DOCTRINE: Under Article 128 of the Labor Code, as amended by RA No. 7730,
the DOLE Secretary and het representatives, the regional directors, have jurisdiction
over labor standards violations based on findings made in the course of inspection of an
employer’s premises.

FACTS: Abay (respondent) and 59 others filed a complaint before the Regional
Office of the DOLE, prompting its officials to conduct an inspection at the premises of
TCDC (petitioner). Several labor standard violations were noted, such as deficiencies in
record keeping, non-compliance with various wage orders, non-payment of holiday pay,
and underpayment of 13th month pay. The case was then set for summary hearing.

However, before the hearing could take place, Director Manalo, the Director of
the Regional Office, ISSUEd an Order on July 25, 2002, which reads that the case should
be referred back to the NLRC on the ground that the aggregate money claim for each
worker exceeds the jurisdictional amount of this Office which is P5,000.00 only.

Before the NLRC could take action, the DOLE secretary ISSUEd another
inspection authority in the same case, discovering the same violations at the petitioner’s
premises. A Notice of Inspection Results was ISSUEd to petitioner directing it to rectify
the violations within 5 days from notice. For failure to comply, the case was set for
summary hearing. Petitioner questioned the inspector’s findings and argued that the
proceedings before the regional office had been rendered moot by the issuance of the
July 25 Order endorsing the case to the NLRC. Petitioner argues that the Order was
tantamount to a dismissal on the ground of lack of jurisdiction, which dismissal has
attained finality.

On September 30, 2002, Director Manalo ISSUEd an Order directing petitioners

to pay its employees for said violations. Petitioner filed a MR reiterating that Director
Manalo had lost jurisdiction over the matter.

ISSUE: Can petitioner still assail the Order of Director Manalo allegedly on the
ground of lack of jurisdiction, after said Order has attained finality and is already in the
execution stage?

RULING: While it is true that orders ISSUEd without jurisdiction are null and void
and, as a general rule, may be assailed at any time, in this case, Director Manalo acted
within her jurisdiction. The said jurisdiction is not affected by the amount of claim

79 | P a g e
involved, as RA 7730 had effectively removed the jurisdictional limitations found in
Articles 129 and 217 of the Labor Code.

Director Manalo’s inital endorsement of the case to the NLRC, on the mistaken
opinion that the claim was within the latter’s jurisdiction, did not oust or deprive her or
jurisdiction over the case. She therefore retained the jurisdiction to decide the case
when it was eventually returned to her office by the DOLE Secretary. Director Manalo’s
initial endorsement of the case to the NLRC was not meant as a final disposition of the
case; it was a mere referral to another agency, the NLRC, on the mistaken belief that
jurisdiction was lodged with the latter.

80 | P a g e
People’s Broadcasting (BomboRadyoPhils) vs. Sec of DOLE et al.

Doctrine:
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC.

If a complaint is brought before the DOLE to give effect to the labor standards provisions
of the Labor Code or other labor legislation, and there is a finding by the DOLE that
there is an existing employer-employee relationship, the DOLE exercises jurisdiction to
the exclusion of the NLRC.   If the DOLE finds that there is no employer-employee
relationship, the jurisdiction is properly with the NLRC.   If a complaint is filed with the
DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly
with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the
Labor Arbiter has original and exclusive jurisdiction over those cases involving wages,
rates of pay, hours of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement.  If a complaint is filed with the NLRC, and
there is still an existing employer-employee relationship, the jurisdiction is properly with
the DOLE.  The findings of the DOLE, however, may still be questioned through a petition
for certiorari under Rule 65 of the Rules of Court.

FACTS:

JandeleonJuezan (“Juezan”) filed a complaint before the DOLE against

BomboRadyoPhils. (“BomboRadyo”) for illegal deduction, non-payment of service
incentive leave, 13th month pay, premium pay for holiday and rest day and illegal
diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG
and Philhealth.

On the basis of the complaint, the DOLE conducted a plant level inspection.
After the conduct of summary investigations, and after the parties submitted their
position papers, the DOLE Regional Director found that private respondent was an
employee of petitioner, and was entitled to his money claims.

DOLE Director Rodolfo M. Sabulao found Juezan to be an employee of BomboRadyo.

Consequently, Director Sabulao ordered BomboRadyo to pay Juezan P203,726.30
representing his demanded money claims.
BomboRadyo moved for reconsideration and submitted additional evidence, but
Director Sabulao denied the motion. BomboRadyo then appealed to the DOLE Secretary,
insisting that Juezan was not its employee as he was a drama talent hired on a per
drama basis. The Acting DOLE Secretary dismissed the appeal for non-perfection due to

81 | P a g e
BomboRadyo's failure to put a cash or surety bond, as required by Article 128 (b) of
the Labor Code.|| 
CA affirmed the said finding.It further ruledthat the DOLE Secretary had jurisdiction over
the matter, as the jurisdictional limitation imposed by Article 129 of the Labor Code on
the power of the DOLE Secretary under Art. 128 (b) of the Code had been repealed by
Republic Act No. (RA) 7730.|||

ISSUE:
Whether or not the Secretary of Labor, or his duly authorized officers, has the power to
determine the existence of an employer-employee relationship.

RULING:
Yes. Under Art. 129 of the Labor Code,the power of the DOLE and its duly authorized
hearing officers to hear and decide any matter involving the recovery of wages and
other monetary claims and benefits was qualified by the proviso that the complaint not
include a claim for reinstatement, or that the aggregate money claims not exceed
PhP5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement
Powers of the Secretary of Labor, did away with the PhP5,000 limitation, allowing the
DOLE Secretary to exercise its visitorial and enforcement power for claims beyond
PhP5,000. The only qualification to this expanded power of the DOLE was only that
there still be an existing employer-employee relationship.

It is conceded that if there is no employer-employee relationship, whether it has been

terminated or it has not existed from the start, the DOLE has no jurisdiction.

Under Art. 128 (b) of the Labor Code,as amended by RA 7730, the first sentence reads,
"Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code and
other labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection." It is clear and
beyond debate that an employer-employee relationship must exist for the exercise of
the visitorial and enforcement power of the DOLE.||| 

To answer the issue. Yes, the Secretary of Labor and Employment has the power. The
SC in its decision places a limitation upon the power of the DOLE, that is, the
determination of the existence of an employer-employee relationship cannot be co-
extensive with the visitorial and enforcement power of the DOLE.

But even in conceding the power of the DOLE to determine the existence of an
employer-employee relationship, the Court held that the determination of the existence
of an employer-employee relationship is still primarily within the power of the NLRC,
that any finding by the DOLE is merely preliminary.

82 | P a g e
No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship.  No procedure was laid down where
the DOLE would only make a preliminary finding, that the power was primarily held by
the NLRC.  The law did not say that the DOLE would first seek the NLRC’s determination
of the existence of an employer-employee relationship, or that should the existence of
the employer-employee relationship be disputed, the DOLE would refer the matter to
the NLRC.  The DOLE must have the power to determine whether or not an employer-
employee relationship exists, and from there to decide whether or not to issue
compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.

The DOLE, in determining the existence of an employer-employee relationship, has a

ready set of guidelines to follow, the same guide the courts themselves use.  The
elements to determine the existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; (4) the employer’s power to control the employee’s conduct. The use of this
test is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives,
can utilize the same test, even in the course of inspection, making use of the same
evidence that would have been presented before the NLRC.

The determination of the existence of an employer-employee relationship by the DOLE

must be respected.  The expanded visitorial and enforcement power of the DOLE
granted by RA 7730 would be rendered nugatory if the alleged employer could, by the
simple expedient of disputing the employer-employee relationship, force the referral of
the matter to the NLRC. 

The Court issued the declaration that at least a prima facie showing of the absence of an
employer-employee relationship be made to oust the DOLE of jurisdiction.  But it is
precisely the DOLE that will be faced with that evidence, and it is the DOLE that will
weigh it, to see if the same does successfully refute the existence of an employer-
employee relationship.

If the DOLE makes a finding that there is an existing employer-employee relationship, it

takes cognizance of the matter, to the exclusion of the NLRC.  The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or
it appears, upon review, that no employer-employee relationship existed in the first
place. 

It must also be remembered that the power of the DOLE to determine the existence of
an employer-employee relationship need not necessarily result in an affirmative
finding.  The DOLE may well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the case.  It must not be

83 | P a g e
precluded from being able to reach its own conclusions, not by the parties, and certainly
not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC.

Note:
Upon review, SC found that no employer-employee relationship exists.
“In the present case, the finding of the DOLE Regional Director that there was an
employer-employee relationship has been subjected to review by this Court, with the
finding being that there was no employer-employee relationship between petitioner and
private respondent, based on the evidence presented. Private respondent presented self-
serving allegations as well as self-defeating evidence. The findings of the Regional
Director were not based on substantial evidence, and private respondent failed to prove
the existence of an employer-employee relationship. The DOLE had no jurisdiction over
the case, as there was no employer-employee relationship present. Thus, the dismissal
of the complaint against petitioner is proper.”
  

84 | P a g e
SUPERIOR PACKAGING CORPORATION v. ARIEL BALAGSAY ET AL.,G.R. No. 178909
Doctrine: where an entity engages the service of a “labor-only contractor”, he is
considered to be the employer of the workers and as such, is solidarily liable to all the
rightful claims of its employees.

FACTS: SPC engaged the services of Lancer to provide reliever services to its business
which involves corrugated boxes. Their task was to load, unload and segregate the
boxes and they have been engaged for 4 months. Pursuant to a complaint filed by resp
for underpayment of wages and non-payment of premium pay and overtime pay, DOLE
conducted an inspection of SPC’s premises and found several violations such as non-
presentation of payrolls and daily time records and non-submission of annual report of
safety organization among others. The DOLE ruled in favor of respondents and held that
SPC failed to support its claim that the resp are not its employees and that assuming
that the resp are employed by Lancer instead, SPC is still jointly and severally liable with
the contractor to the extent of the work performed when the contractor fails to pay its
employees’ wages. Affirmed by the CA upon appeal.

ISSUES:
1. W/N DOLE has the authority to make a finding of an an employer-
employee relationship
2. W/N respondents are employees of SPC

RULING:
1. Yes, it has the authority to make a finding of an employer-employee
relationship since such determination is preliminary, incidental and
collateral to the DOLE’s primary function of enforcing labor standards.
It is done in the exercise of its visitorial and enforcement power. Uner
Art 128 (b) of the Labor Code, the DOLE is fully empowered to make a
determination as to the existence of an ER-EE relationship in the
exercise of its visitorial and enforcement power.

2. Yes, they are employees of SPC.

It was the consistent conclusion of the DOLE and the CA that Lancer
was not an independent contractor but was engaged in “labor-only
contracting” who undertakes to supply workers. Since labor-only
contracting is prohibited, the person acting as contractor shall be
considered merely as an agent of the employer. A finding that a

85 | P a g e
contractor is a “labor-only” contractor is equivalent to declaring that
there is an employer-employee relationship between the principal
and the employees of the supposed contractor and the “labor-only”
contractor is considered as a mere agent of the principal, the real
employer. Hence, the principal becomes solidarily liable for all the
rightful claims of the employees.

86 | P a g e
 WAGE PROTECTION PROVISIONS & PROHIBITIONS REGARDING WAGES

SHS PERFORATED MATERIALS, INC. v. MANUEL DIAZ, G.R. No. 185814

DOCTRINE: Absent any showing that the withholding of an employee’s wages falls under
the exceptions provided in Article 113 (of the Labor Code), the withholding thereof is
thus unlawful.

FACTS: SHS Perforated Materials, Inc. hired Manuel Diaz as Manager for Business
Development on probationary status with a monthly salary of Php 100,000. Diaz was
instructed by Hartmannshenn (president of SHS) to report to the SHS office and plant at
least 2 days every work week to learn about the company’s products which Diaz was
hired to market and sell.

During meetings, Hartmannshenn expressed his dissatisfaction with Diaz’s poor

performance. On the other hand, Diaz admitted that he had reported to the SHS office
only 8 times from July 18, 2005 to November 30, 2005.

On November 29, 2005, Hartmannshenn instructed Taguiang (head of Accounting

Services Department) not to release Diaz’s salary. Upon inquiry of his salary, Diaz was
told that it was being withheld and he had to immediately communicate with
Hartmannshenn. On the next day, Diaz sent a demand letter and a resignation letter to
SHS.

Hartmannshenn accepted Diaz’s resignation and informed the latter that his salary
would be released only upon (1) an explanation of his failure to report to work, and (2)
proof that he did work for the period in question. There was also a demand for Diaz to
surrender all company property and information in his possession.

On December 5, 2005, SHS alleged that its counsel informed Diaz’s counsel that a check
had been prepared and was ready for pick up; however, Diaz said such information was
only received by his counsel on December 20, 2005. On December 9, 2005, Diaz filed a
complaint against SHS before the Labor Arbiter.

The Labor Arbiter the withholding of Diaz’s salary was contrary to Article 116 of the
Labor Code. However, the NLRC reversed the LA’s decision and said that the withholding
of Diaz’s salary was a valid exercise of management prerogative. On appeal, the Court of
Appeals reversed the NLRC RULING and said that there is no such thing as management
prerogative to withholding wages temporarily.

87 | P a g e
ISSUE: Whether or not the temporary withholding of Diaz’s salary by SHS was a valid
exercise of management prerogative?

RULING: NO. Management prerogative refers to the right to regulate all aspects of
employees, but it cannot be understood to include the right to temporarily withhold
salary/wages without the consent of the employee.

Any withholding of an employee’s wages by an employer may be allowed in the form of

wage deductions under circumstances enumerated in Article 113 of the Labor Code. In
this case, the withholding of Diaz’s salary did not fall under any of the circumstances
provided under Article 113.

SHS’s continued refusal to release Diaz’s salary after the payroll period was clearly
unlawful. Despite the fact that SHS claims to have prepared a check ready for pick-up for
Diaz on December 5, 2005, such act cannot undo the unlawful withholding that was
done.

Thus, the Supreme Court affirmed the decision of CA.

88 | P a g e
NINA JEWELRY MANUFACTURING OF METAL ARTS, INC. v. MADELINE C. MONTECILLO,
G.R. No. 188169

DOCTRINE: Without proofs that requiring deposits and effecting deductions are
recognized practices, or without securing the Secretary of Labor's determination of the
necessity or desirability of the same, the imposition of new policies relative to
deductions and deposits can be made subject to abuse by the employers. This is not
what the law intends.

FACTS: Respondents were employed as goldsmiths by the petitioner Nia Jewelry

Manufacturing of Metal Arts, Inc. There were incidents of theft involving goldsmiths in
Nia Jewelry's employ. The petitioner imposed a policy for goldsmiths, which were
intended to answer for any loss or damage which Nia Jewelry may sustain by reason of
the goldsmiths' fault or negligence in handling the gold entrusted to them, requiring
them to post cash bonds or deposits in varying amounts but in no case exceeding 15% of
the latter's salaries per week.

The petitioner alleged that the goldsmiths were given the option not to post deposits,
but to sign authorizations allowing the former to deduct from the latter's salaries
amounts not exceeding 15% of their take home pay should it be found that they lost the
gold entrusted to them. The deposits shall be returned upon completion of the
goldsmiths' work and after an accounting of the gold received.

The respondents claimed otherwise insisting that petitioner left the goldsmiths with no
option but to post the deposits. The next day after the policy was imposed, the
respondents no longer reported for work and signified their defiance against the new
policy which at that point had not even been implemented yet.

The respondents alleged that they were constructively dismissed by the petitioner as
their continued employments were made dependent on their readiness to post the
required deposits. The respondents then led a complaint for illegal dismissal and for the
award of separation pay against the petitioner, and later led their amended complaint
which excluded their earlier prayer for separation pay but sought reinstatement and
payment of back wages, attorney's fees and 13th month pay.

ISSUEs: (1) Whether or not Nia Jewelry Manufacturing of Metal Arts, Inc. may impose
the policy for their goldsmiths requiring them to post cash bonds or deposits?; and
(2) Whether or not there was constructive dismissal?

RULING: (1) NO, Nia Jewelry may not impose the policy. Articles 113 and 114 of the
Labor Code are clear as to what are the exceptions to the general prohibition against
requiring deposits and effecting deductions from the employees' salaries.

89 | P a g e
The petitioners should first establish that the making of deductions from the salaries is
authorized by law, or regulations ISSUEd by the Secretary of Labor. The petitioners
failed to prove that their imposition of the new policy upon the goldsmiths under Nia
Jewelry's employ falls under the exceptions specified in Articles 113 and 114 of the
Labor Code.

(2) NO. There is no constructive dismissal. Constructive dismissal occurs when there is
cessation of work because continued employment is rendered impossible, unreasonable
or unlikely; when there is a demotion in rank or diminution in pay or both; or when a
clear discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee.

The petitioners did not whimsically or arbitrarily impose the policy to post cash bonds or
make deductions from the workers' salaries. As attested to by the respondents' fellow
goldsmiths in their Joint A davit, the workers were convened and informed of the reason
behind the implementation of the new policy. Instead of airing their concerns, the
respondents just promptly stopped reporting for work.

90 | P a g e
LOCSIN II VS. MEKENI FOOD CORP.
GR No. 192105
December 9, 2013

DOCTRINE:

An employer may not enrich himself at the expense of the employee considering that
the deductions made to the latter’s salary for his share in the cost of the car was for the
full benefit of the employer.

FACTS:

Petitioner Antonio Locsin II was the Regional Sales Manager of respondent Mekeni Food
Corporation. He was hired on February 2004 to oversee the NCR and Luzon operation.
In addition to his compensation and benefit package, a car was offered to him under
which one-half of the cost of the vehicle is to be paid by the company and the other half
to be deducted from petitioner's salary. The car valued at 280,000 which Locsin paid
through salary deductions of 5,000 per month.

On February 2006, Locsin resigned. A total of 112,500.00 had already been deducted
from his monthly salary and applied as part of his share in the car plan. Upon
resignation, petitioner made personal and written follow-ups regarding his unpaid
salaries, commissions, benefits, and offer to purchase his service vehicle. Mekeni replied
that the company car plan benefit applied only to employees who have been with the
company for five years; for this reason, the balance that petitioner should pay on his
service vehicle stood at P116,380.00 if he opts to purchase the same.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S.
Garcia, a Complaint for the recovery of monetary claims consisting of unpaid salaries,
commissions, sick/vacation leave benefits, and recovery of monthly salary deductions
which were earmarked for his cost- sharing in the car plan.

ISSUE: Whether or not petitioner is entitled to a refund of all the amounts applied to the
cost of the service vehicle under the car plan.

RULING: Any benefit or privilege enjoyed by petitioner from using the service vehicle
was merely incidental and insignificant, because for the most part the vehicle was under
Mekeni's control and supervision. Free and complete disposal is given to the petitioner
only after the vehicle's cost is covered or paid in full. Until then, the vehicle remains at
the beck and call of Mekeni. Given the vast territory petitioner had to cover to be able
to perform his work effectively and generate business for his employer, the service
vehicle was an absolute necessity, or else Mekeni's business would suffer adversely.

91 | P a g e
Thus, it is clear that while petitioner was paying for half of the vehicle's value, Mekeni
was reaping the full benefits from the use thereof.

Under Article 22 of the Civil Code, “every person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to him." Article
2142 of the same Code likewise clarifies that there are certain lawful, voluntary and
unilateral acts which give rise to the juridical relation of quasi-contract, to the end that
no one shall be unjustly enriched or benefited at the expense of another. In the absence
of specific terms and conditions governing the car plan arrangement between the
petitioner and Mekeni, a quasi-contractual relation was created between them.
Consequently, Mekeni may not enrich itself by charging petitioner for the use of its
vehicle which is otherwise absolutely necessary to the full and effective promotion of its
business. It may not, under the claim that petitioner's payments constitute rents for the
use of the company vehicle, refuse to refund what petitioner had paid, for the reasons
that the car plan did not carry such a condition; the subject vehicle is an old car that
is substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for
the most part; and any personal benefit obtained by petitioner from using the vehicle
was merely incidental.

Conversely, petitioner cannot recover the monetary value of Mekeni's counterpart

contribution to the cost of the vehicle; that is not property or money that belongs to
him, nor was it intended to be given to him in lieu of the car plan. Mekeni's share of the
vehicle's cost was not part of petitioner's compensation package. The vehicle is an asset
that belonged to Mekeni. Just as Mekeni is unjustly enriched by failing to refund
petitioner's payments, so should petitioner not be awarded the value of Mekeni's
counterpart contribution to the car plan, as this would unjustly enrich him at Mekeni's
expense.

Thus, Mekeni Food Corporation should refund petitioner Antonio Locsin II's payments
under the car plan agreement amounting only to the extent of the contribution Locsin
made, totalling to the amount of P112,500.00.

92 | P a g e
TH SHOPFITTERS CORP., ET AL., VS. T&H SHOPFITTERS CORP., UNION
GR No. 191714
Feb 26, 2014

FACTS:

On September 7, 2004, the T&H Shopfitters Corporation/ Gin Queen Corporation

workers union (THS-GQ Union) filed their Complaint for Unfair Labor Practice (ULP) by
way of union busting, and Illegal Lockout, with moral and exemplary damages and
attorney’s fees, against T&H Shopfitters Corporation (T&H Shopfitters) and Gin Queen
Corporation before the Labor Arbiter (LA).

1st CAUSE:
In their desire to improve their working conditions, respondents and other employees of
held their first formal meeting on November 23, 2003 todiscuss the formation of a
union. The following day, seventeen (17) employees were barred from entering
petitioners’ factory premises located in Castillejos, Zambales, and ordered to transfer to
T&H Shopfitters’ warehouseat Subic Bay Freeport Zone (SBFZ) purportedly because of its
expansion. Afterwards, the said seventeen (17) employees were repeatedly ordered
togo on forced leave due to the unavailability of work.

Respondents contended that the affected employees were not given regular work
assignments, while subcontractors were continuously hired to perform their functions.
Respondents sought the assistance of the National Conciliation and Mediation Board.
Subsequently, an agreement between petitioners and THS-GQ Union was reached.
Petitioners agreed to givepriority to regular employees in the distribution of work
assignments. Respondents averred, however, that petitioners never complied with its
commitment but instead hired contractual workers. Instead, Respondentsclaimed that
the work weeks of those employees in the SBFZ plant weredrastically reduced to only
three (3) days in a month.

2nd CAUSE:

On March 24, 2004, THS-GQ Union filed a petition for certification election and an order
was ISSUEd to hold the certification election in both T&HShopfitters and Gin Queen. On
October 10, 2004, petitioners sponsored a field trip to Iba, Zambales, forits employees.
The officers and members of the THS-GQ Union were purportedly excluded from the
field trip. On the evening of the field trip, acertain Angel Madriaga, a sales officer of
petitioners, campaigned against the union in the forthcoming certification election.

When the certification election was scheduled on October 11, 2004, the employees
were escorted from the field trip to the polling center in Zambalesto cast their votes.

93 | P a g e
The remaining employees situated at the SBFZ plant casttheir votes as well. Due to the
heavy pressure exerted by petitioners, the votes for "no union" prevailed.

3rd CAUSE:
A memorandum was ISSUEd by petitioner Ben Huang (Huang), Director forGin Queen,
informed its employees of the expiration of the lease contract between Gin Queen and
its lessor in Castillejos, Zambales and announcedthe relocation of its office and workers
to Cabangan, Zambales. When the respondents, visited the site in Cabangan, discovered
that it was a"talahiban" or grassland. The said union officers and members were made
to work as grass cutters in Cabangan, under the supervision of a certain Barangay
Captain Greg Pangan. Due to these circumstances, the employees assigned in Cabangan
did not report for work. The other employees who likewise failed to report in Cabangan
were meted out with suspension.
PETITIONERS’ DEFENSE:
In its defense, Petitioners also stress that they cannot be held liable for ULPfor the
reason that there is no employer-employee relationship between the former and
respondents. Further, Gin Queen avers that its decision to implement an enforced
rotation of work assignments for respondents was a management prerogative permitted
by law, justified due to the decrease inorders from its customers, they had to resort to
cost cutting measures toavoid anticipated financial losses. Thus, it assigned work on a
rotational basis. It explains that its failure to present concrete proof of its
decreasingorders was due to the impossibility of proving a negative assertion. It also
asserts that the transfer from Castillejos to Cabangan was made in good faith and solely
because of the expiration of its lease contract in Castillejos. It wasof the impression that
the employees, who opposed its economic measures, were merely motivated by spite in
filing the complaint for ULP against it.

ISSUES:

Whether ULP acts were committed by petitioners against respondents.

RULING:

ULP were committed by petitioners against respondents.

Petitioners are being accused of violations of paragraphs (a), (c), and (e) ofArticle 257
(formerly Article 248) of the Labor Code,13 to wit:

Article 257. Unfair labor practices of employers.––It shall be unlawful for an

employer to commit any of the following unfair labor practices:
(a) To interfere with, restrain or coerce employees in the exercise of
their right to self-organization;
xxxx

94 | P a g e
 (c) To contract out services or functions being performed by union members
when such will interfere with, restrain, or coerce employees in the exercise of
their right to self-organization;
xxxx
(e) To discriminate in regard to wages, hours of work, and other terms
and conditions of employment in order to encourage or discourage membership
in any labor organization. x x x

The questioned acts of petitioners, namely: 1) sponsoring a field trip to Zambales for its
employees, to the exclusion of union members, before thescheduled certification
election; 2) the active campaign by the sales officer of petitioners against the union
prevailing as a bargaining agent during the field trip; 3) escorting its employees after the
field trip to the polling center;4) the continuous hiring ofsubcontractors performing
respondents’ functions; 5) assigning union members to the Cabangan site to work as
grass cutters; and 6) the enforcement of work on a rotational basis for union members,
taken together, reasonably support an inference that, indeed, such were all
orchestrated to restrict respondents’ free exercise of their right to self-organization.

The Court is of the considered view those petitioners’ undisputed actions prior and
immediately before the scheduled certification election, while seemingly innocuous,
unduly meddled in the affairs of its employees in selecting their exclusive bargaining
representative.

95 | P a g e
WESLEYAN UNIVERSITY VS. WESLEYAN UNIVERSITY FACULTY AND STAFF
G.R. No. 181806
March 12, 2014

DOCTRINE:

Article 100 of the Labor Code provides for the Non-Diminution Rule. This rule prohibits
the employers from eliminating or reducing the benefits received by their employees. It
applies only if the benefit is based on an express policy, a written contract, or has
ripened into a practice.

FACTS:

Wesleyan University-Philippines (Petitioner), a non-stock, non-profit educational

institution duly organized and existing under the laws of the Philippines and Wesleyan
University-Philippines Faculty and Staff Association (Respondent), a duly registered
labor organization acting as the sole and exclusive bargaining agent of all rank-and-file
faculty and staff employees of petitioner signed a 5-year CBA9 effective June 1, 2003
until May 31, 2008.

A Memorandum providing guidelines on the implementation of vacation and sick leave

credits as well as vacation leave commutation was ISSUEd by petitioner, through its
President, Atty. Guillermo T. Maglaya (Atty. Maglaya). Respondent President, Cynthia L.
De Lara (De Lara) wrote a letter to Atty. Maglaya informing him that respondent is not
amenable to the unilateral changes made by petitioner and questioning the guidelines
for being contrary to the existing practices and the CBA.

Petitioner advised respondent to file a grievance complaint on the implementation of

the vacation and sick leave policy during their Labor Management Committee (LMC)
Meeting. Petitioner announced therein its plan of implementing a one-retirement policy
whichwas unacceptable to respondent.

Unable to settle their differences at the grievance level, the parties referred the matter
to a Voluntary Arbitrator. Respondent submitted affidavits showing that there is an
established practice of giving two retirement benefits: one from the Private Education
Retirement Annuity Association (PERAA) Plan and another from the CBA Retirement
Plan.

The Voluntary Arbitrator declared that the one-retirement policy and the Memorandum
dated August 16, 2005 is contrary to law.

96 | P a g e
Petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the
Rules of Court. The CA affirmed the nullification of the one-retirement policy and the
Memorandum dated August 16, 2005 on the ground that these unilaterally amended
the CBA without the consent of respondent. Petitioner moved for reconsideration but
the CA denied the same.

ISSUES:
• Whether or not the Court of Appeals committed grave and palpable error in
RULING that a university practice of granting its employees two (2) sets of Retirement
Benefits had already been established
• Whether or not the Court of Appeals committed grave and palpable error in
revoking petitioner Memorandum dated 16 August 2005 for being contrary to extant
policy

RULING:

Decision of the Court of Appeals is sustained.

LABOR LAW: non-diminution rule

Article 100 of the Labor Code provides for the Non-Diminution Rule. This rule prohibits
the employers from eliminating or reducing the benefits received by their employees. It
applies only if the benefit is based on an express policy, a written contract, or has
ripened into a practice. To be considered a practice, it must be consistently and
deliberately made by the employer over a long period of time. However, this rule admits
of an exception and that is when the practice is due to error in the construction or
application of a doubtful or difficult question of law. The error, however, must be
corrected immediately after its discovery; otherwise, the rule on Non-Diminution of
Benefits would still apply.

In the case at bar, respondent presented substantial evidence in the form of affidavits
supporting its claim that there are two retirement plans. As gleaned from the affidavits,
petitioner has been giving two retirement benefits as early as 1997. Petitioner failed to
present any evidence to refute the veracity of said affidavits. Moreover, no evidence
was shown to prove petitioner contention that there is only one retirement plan as the
CBA Retirement Plan and the PERAA Plan are one and the same.

LABOR LAW: collective bargaining agreement cannot be unilaterally changed

The Memorandum dated August 16, 2005 imposes a limitation not agreed upon by the
parties nor stated in the CBA. Hence, it must be struck down.

97 | P a g e
It is provided in Sections 1 and 2 of Article XII of the CBA that all covered employees are
entitled to 15 days sick leave and 15 days vacation leave with pay every year and that
after the second year of service, all unused vacation leave shall be converted to cash
and paid to the employee at the end of each school year, not later than August 30 of
each year. Whereas, it is provided in the Memorandum dated August 16, 2005 that
vacation and sick leave credits are not automatic as leave credits would be earned on a
month-to-month basis. The said Memorandum, therefore, limits the available leave
credits of an employee at the start of the school year.

Basic is the rule that when the provisions of the CBA is clear, the literal meaning of the
stipulation shall govern. Any doubt in its interpretation must be resolved in favor of
labor.

98 | P a g e
BLUER THAN BLUE JOINT VENTURES CO. V. ESTEBAN
G.R. No. 192582
April 7, 2014

DOCTRINE:

Wage deduction for loss or damage may be allowed subject to conditions set forth in
Section 14 of the Omnibus Rules Implementing the Labor Code.

FACTS:

Respondent Glyza Esteban, was a rank-in-file employee of petitioner company working

in SM City Marilao as a sales clerk for the petitioner’s boutique. Her primary task include
attending to the needs of customers, “ensuring efficient inventory, coordinating orders
from clients, cashiering and reporting to the accounting department.” Petitioner
received a report that several employees had access to its point-of-sale (POS) system
through a universal password given by Elmer Flores.

After investigation, it was discovered that Esteban gave the password to Flores.
Petitioner then sent a letter asking Esteban for her explanation why she should not be
meted with disciplinary action. Finding her explanation unsatisfactory, petitioner
terminated her employment on the ground of loss of trust and confidence.

Esteban was giver her final pay, including benefits and bonuses, less inventory variances
incurred by the store amounting to P8,304.93. Petitioner contends that this deduction
on Esteban’s wages of the negative variances in the sales is allowed by the Labor Code,
and such practice has been widely recognized in the retail industry.

Thereafter, Esteban filed before the Labor Arbiter a complaint for Illegal dismissal.

The LA found that she was illegally dismissed.

The NLRC reversed the Labor Arbiter’s decision.

The CA reversed the NLRC RULING and reinstated the LA’s decision.

ISSUE:

1. W/N respondent Esteban was illegally dismissed

2. W/N the deduction made by petitioner on inventory variances is proper

99 | P a g e
RULING:

1. Yes, the Court first determined whether or not respondent Esteban is a rank-in-
file employee occupying a position of trust and confidence. In this case, Esteban was a
sales clerk. Her duties, however, were more than that of a sales clerk. Aside from
attending to customers and tending to the ship, Esteban also assumed cashiering duties.
Given that she had in her care and custody the store’s property and funds, she is
considered as a rank-in-file employee occupying a position of trust and confidence

The Court finds that the acts committed by Esteban do not amount to a wilful breach of
trust. While she admitted that she accessed the POS system with the use of the
unauthorized password, she did so out of curiosity and without any obvious intention of
defrauding petitioner. To the Court’s mind, Esteban’s lapse, at best, is a careless act that
does not erit the imposition of dismissal.

2. No, Article 113 of the labor code provides that no employer, in his own behalf or
in behalf of any person, shall make any deduction from the wages of his employees,
except in the cases where the employer is authorized by law or regulations ISSUEd by
the Secretary of Labor and Employment, among others.

Section 14 of the Omnibus Rules Implementing the Labor Code provides – where the
employer is engaged in a trade, occupation, or business where the practice of making
deductions or requiring deposits is recognized to answer for the reimbursement of loss
or damage of tools, materials, or equipment supplied by the employer to the employee,
the employer may make wage deductions or require the employees to make deposits
from which deductions shall be made, subject to the following conditions.

a) That the employee concerned is clearly shown to be responsible for the loss or
damage;
b) That the employee is given reasonable opportunity to show cause why deduction
should not be made;
c) That the amount of such deduction is fair and reasonable and shall not exceed
the actual loss or damage; and
d) that the deduction from wages of the employee does not exceed 20 percent of
the employee’s wages in a week.

In this case, petitioner failed to establish that Esteban was responsible for the negative
variance it had in its sales for the year 2005 to 2006 and that Esteban was given the
opportunity to show cause the deduction from her last salary should not be made.

100 | P a g e
The court cannot accept the petitioner’s statement that it is the practice in the retail
industry to deduct variances from an employees, without more.

NETLINK COMPUTER INC. V DELMO

G.R. No. 160827
DOCTRINE: Non-diminution of benefits (Art. 100)
In the absence of a written agreement between the employer and the employee
that sales commissions shall be paid in a foreign currency, the latter has the right to be
paid in such foreign currency once the same has become an established practice of the
former. The rate of exchange at the time of payment, not the rate of exchange at the
time of the sales, controls.

FACTS:
Netlink Computer, Inc. Products and Services (Netlink) hired Eric
S. Delmo (Delmo) as account manager tasked to canvass and source clients and convince
them to purchase the products and services of Netlink. Delmo worked in the field most
of the time. He and his fellow account managers were not required to accomplish time
cards to record their personal presence in the office of Netlink. He was able to generate
sales worth P35,000,000.00, more or less, from which he earned commissions
amounting to P993,558.89 and US$7,588.30. He then requested payment of his
commissions, but Netlink refused and only gave him partial cash advances chargeable to
his commissions. Later on, Netlink began to nitpick and fault find, like stressing his
supposed absences and tardiness. In order to force him to resign, Netlink ISSUEd several
memoranda detailing his supposed infractions of the company's attendance policy.
Despite the memoranda, Delmo continued to generate huge sales forNetlink. 
On November 28, 1996, Delmo was shocked when he was refused entry into the
company premises by the security guard pursuant to a memorandum to that effect. His
personal belongings were still inside the company premises and he sought their return
to him. This incident prompted Delmo to file a complaint for illegal dismissal.

ISSUE:
1. Whether or not the payment of the commissions should be in US dollars?

Held:
1. There was no written contract between Netlink and Delmo stipulating that the
latter's commissions would be paid in US dollars. The absence of the contractual
stipulation notwithstanding, Netlink was still liable to pay Delmo in US dollars
because the practice of paying its sales agents in US dollars for their US dollar-
denominated sales had become a company policy. This was impliedly admitted
by Netlink when it did not refute the allegation that the commissions earned
by Delmoand its other sales agents had been paid in US dollars. Instead of
denying the allegation, Netlink only sought a declaration that the US dollar
commissions be paid using the exchange rate at the time of sale. The principle of

101 | P a g e
non-diminution of benefits, which has been incorporated in Article 100 of
the Labor Code, forbade Netlink from unilaterally reducing, diminishing,
discontinuing or eliminating the practice. Verily, the phrase "supplements, or
other employee benefits" in Article 100 is construed to mean the compensation
and privileges received by an employee aside from regular salaries or wages.
With the payment of US dollar commissions having ripened into a company
practice, there is no way that the commissions due to Delmo were to be paid in
US dollars or their equivalent in Philippine currency determined at the time of
the sales. To rule otherwise would be to cause an unjust diminution of the
commissions due and owing to Delmo.

102 | P a g e
PLDT v. ESTRANERO
GR. No. 192518
DOCTRINE: Article 113 of the Labor Code that no employer, in his own behalf or in
behalf of any person, shall make any deduction from the wages of his employees, except
in cases where the employer is authorized by law or regulations ISSUEd by the Secretary
of Labor and Employment, among others. In this case, the lack of a written authorization
from PLDT rendered invalid their deductions to Estranero’s wages.

FACTS
PLDT employed Estranero is an Auto-Mechanic/Electrician Helper, Job Grade 3 with a
monthly salary of P15,000.00 at the time of his separation from the service in 2003.

In the year 1995, PLDT adopted a company-wide Manpower Reduction Program (MRP),
aimed at reducing its work force. PLDT offered the affected employees an attractive
redundancy pay consisting of 100% of their basic monthly salary for every year of
service, in addition to their retirement benefits, if entitled. For those who were not
qualified to the retirement benefits, they were offered separation or redundancy
package of 200% of their basic monthly salary for every year of service. The
respondent’s position was one of many that were declared redundant.

The respondent expressed his conformity to his inclusion in the MRP due to the
separation pay offer. Since his length of service was seven (7) years, eleven (11) months
and fifteen (15) days, which was rounded to 8 years, the respondent was not qualified
for retirement pay which required an employee to have worked for at least 15 years.
The respondent was entitled to 200% of his basic monthly salary for every year of
service. In addition, he was also entitled to other benefits he has earned for the years
prior to, and during the year of his actual separation. Thus, his aggregate redundancy
pay plus other earned benefits amounted to P267,028.37.

However, the respondent had outstanding liabilities arising from various loans he
obtained from different entities, namely: the Home Development Mutual Fund (HDMF),
PLDT Employees Credit Cooperative, Inc., PLDT Service Cooperative, Inc., SSS, and the
Manggagawa ng KomunikasyonsaPilipinas, which summed to P267,028.37. PLDT
deducted the said amount from the payment that the respondent was supposed to
receive as his redundancy pay.

After the deduction, the respodent’s Receipt, Release and Quitclaim, showed that his
take home pay was in the amount of "zero pesos." The respondent decided to retract
his availment of the separation pay package offered to him through a letter. Despite said
retraction, however, the respondent was no longer allowed to report for work.

103 | P a g e
Respondent filed a complaint for illegal dismissal with reinstatement, as well as moral
and exemplary damages plus attorney's fees.

Labor Arbiter and NLRC’s decision:

The NLRC and LA ruled that the respondent should be paid his separation pay on
account of redundancy. (Which is a valid form of dismissal of an employee) As to the
setting-off of the respondent's outstanding loans, it agreed with the LA that the same is
not a labor dispute but one arising from a debtor-creditor relation where PLDT stands as
a collecting agent over which the labor tribunals has no jurisdiction.
CA decision:
The deductions are invalid unless the respondent gave his authorization through a
personal written authorization. “Petitioners failed to present convincing evidence that,
indeed, x xx respondent, has knowledge and consented to these deductions.. They did
not submit any written Authority to Deduct to evince the validity of the deductions.”

The ISSUEs:
Whether or not the petitioners can validly deduct the respondent's outstanding loan
obligation from his redundancy pay.
RULING of the Court:
Regarding dismissal: There is no question about the validity of the MRP implemented by
PLDT in 1995, since redundancy is one of the authorized causes for termination of
employment.

Regarding the offsetting: It is clear in Article 113 of the Labor Code that no employer, in
his own behalf or in behalf of any person, shall make any deduction from the wages of
his employees, except in cases where the employer is authorized by law or regulations
ISSUEd by the Secretary of Labor and Employment, among others. The Omnibus Rules
Implementing the Labor Code, meanwhile, provides that deductions from the wages of
the employees may be made by the employer when such deductions are authorized by
law, or when the deductions are with the written authorization of the employees for
payment to a third person.Thus, any withholding of an employee's wages by an
employer may only be allowed in the form of wage deductions under the circumstances
provided in Article 113 of the Labor Code, as well as the Omnibus Rules implementing it.
Further, Article 116 of the Labor Code clearly provides that it is unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker without the
worker's consent.

In this case, the deductions made to the respondent's redundancy pay do not fall under
any of the circumstances provided under Article 113, nor was it established with
certainty that the respondent has consented to the said deductions or that the
petitioners had authority to make such deductions.

The case would have been different if the deductions refer to the respondent's
contributions for his being a member of SSS, HDMF, or withholding taxes on income,

104 | P a g e
because if such was the case, the contributions are deductions already sanctioned by
existing laws. Here, it is evidently emphasized that the subject deductions pertain to the
respondent's outstanding loans from various entities.

The demand for payment of the said loans is not a labor, but a civil dispute. It involves
debtor-creditor relations, rather than employee-employer relations. Evidently, the
respondent's unpaid balance on his loans cannot be offset against the redundancy pay
due to him.

105 | P a g e
MILAN ET AL VS NLRC,
G.R. No. 202961

DOCTRINE: WAGE PROTECTION PROVISIONS & PROHIBITIONS REGARDING WAGES

FACTS: Petitioners consist of several employees of respondent corporation, Solid Mills.

They were represented by their collective bargaining agent which was the National
Federation of Labor Unions. One of the agreements in the employment was that Solid
Mills will grant “by way of goodwill and in the spirit of generosity” financial assistance
less accountabilities to members of the union. Through such agreement, several
employees were allowed by Solid Mills to occupy SMI village which was a property
owned by Solid Mills.
The ISSUE arose when respondent Solid Mills declared that they will cease business
operations due to serious business losses of which, petitioners were properly informed.
In consequence of this, the employees received notices to vacate SMI Village.
Employees were then made to sign a memorandum of agreement to effect that vacating
the SMI Village is a pre-condition for the release of their termination benefits and leave
pay. Petitioners are among those who refused to vacate and who did not sign the
agreement and instead demanded their benefits and pay. Petitioners argued that Solid
Mills cannot legally withhold their benefits because its payment is based on company
policy and practice and that their possession of the SMI property should not be
considered within the meaning of “accountabilities” in their agreement.
Labor Arbiter ruled in favor of petitioners RULING that there was illegal withholding of
wages.

NLRC and CA ruled in favor of Solid Mills, RULING that Solid Mills’ act of letting
employees dwell in SMI Village was merely an act of liberality on its part which can be
revoked at any time at its discretion. Hence, they were justified in withholding the
benefits and separation pay.

ISSUEs:
3. Whether or not NLRC has jurisdiction.
4. Whether or not the withholding of the benefits and separation pay was
proper.
RULING:
3. Yes, NLRC has jurisdiction. Under Art. 217 (6) of the Labor Code, the NLRC has
jurisdiction over claims arising from employer-employee relationship with an
amount exceeding 5,000 regardless of any claim for reinstatement except those
claims for employee compensation, Social Security, Medicare and Maternity
benefits. The claims is not only limited to claims by an employee but includes
claims by an employer against its employee. Moreover, such jurisdiction covers

106 | P a g e
 rights over a property when it is sufficiently connected to the labor ISSUE such
that it is necessary to determine an ISSUE related to rights or claims arising from
an employer-employee relationship.
4. Yes, withholding was proper. While under Art. 116 and Art. 100 of the labor
code, withholding of wages and diminution of wages is prohibited, Art. 113 (3) of
the labor code allows an employer to deduct when such employer is authorized
by law or regulations ISSUEd by the Secretary of Labor and Employment. Here,
the act of Solid Mills falls within a clearance procedure which is a procedure
instituted to ensure that the properties, real or personal, belonging to the
employer but are in the possession of the separated employee, are returned to
the employer before the employee's departure. Clearance procedure is a
standard procedure among employers and is allowed under our laws.
Moreover, Art. 1706 of the new civil code allows withholding of wages for a debt
due. Here, the term ‘accountabilities’ was construed in its ordinary sense which
is essentially a debt or obligation. As long as accountabilities are incurred
because of employer-employee relationship, it can be a subject of a clearance
procedure.
Since Solid Mills’ act of allowing petitioners to dwell in SMI Village was merely an
act of liberality on its part, the property can be demanded back at its will. Here,
the return of the property became an obligation on the part of petitioners when
the employer-employee relationship ceased, as such was included in the term
accountabilities, thus the withholding of the wages and benefits was proper.

107 | P a g e
GALANG VS BOIE TAKEDA CHEMICALS INC. GR NO. 183934

DOCTRINE: Entitlement to Retirement Pay

FACTS:
Respondent pharmaceutical company Boie Takeda Chemicals, Inc. (BTCI) hired
petitioners Ernesto Galang and Ma. Olga Jasmin Chan. Through the years, petitioners
rose from the ranks and were promoted to Regional Sales Managers in 2000. Petitioners
held these positions until their separation from BTCI on May 1, 2004. As Regional Sales
Managers, they belong to the sales department of BTCI. They primarily managed
regional sales budget and target, and were responsible for market share and company
growth within their respective regions. Within the organizational hierarchy, they
reported to the National Sales Director.In 2002, when the National Sales Director
position became vacant (alter the retirement of MelchorBarretto), petitioners assumed
and shared (with the general manager) the functions and responsibilities of this higher
position, and reported directly to the General Manager.
petitioners were informed that BTCI promoted Villanueva as National Sales
Director. BTCI explained that the appointment was pursuant to its management
prerogative, and that it arrived at such decision only "after careful assessment of the
situation, the needs of the position and the qualifications of the respective candidates."
The promotion of Villanueva as the National Sales Director caused ill-feelings on
petitioners' part.
After Villanueva's promotion, petitioners claimed that Nomura threatened to
dismiss them from office if they failed to perform well under the newly appointed
National Sales Director. This prompted petitioners to inquire if they could avail of early
retirement package due to health reasons. Specifically, they requested Nomura if they
could avail of the early retirement package of 150% plus 120% of monthly salary for
every year of service tax free, and lull ownership of service vehicle tax free. They
claimed that this is the same retirement package given to previous retirees namely,
former Regional Sales Director Jose Sarmiento, Jr. (Sarmiento), and former National
Sales Director MelchorBarretto. Nomura, however, insisted that such retirement
package does not exist and Sarmiento's case was exceptional since he was just a few
years shy from the normal retirement age.

ISSUE:
Whether petitioners are entitled to a higher retirement package.

RULING:
Petitioners were not discriminated against in terms of their
retirement package. The entitlement of employees to retirement benefits must
specifically be granted under existing laws, a collective bargaining agreement or

108 | P a g e
employment contract, or an established employer policy. Based on both parties'
evidence, petitioners are not covered by any agreement. There is also no dispute that
petitioners received more than what is mandated by Article 287 of the Labor Code.
Petitioners, however, claim that they should have received a larger pay because BTCI
has given more than what they received to previous retirees. In essence, they claim that
they were discriminated against because BTCI did not give them the package of 150% of
monthly salary for every year of service on top of the normal retirement package.
To prove that their claim on the additional grant of 150% of salary, petitioners
presented evidence showing that former employees received significantly larger
retirement benefits. However, the cases of Ducay, Arada, and Rafael cannot be used as
precedents to prove this specific company practice because these employees were not
shown to be similarly situated in terms of rank, nor are the applicable retirement
packages corresponding to their ranks alike. Also, these employees, including
Sarmiento, all retired in the same year of 2001, or only within a one-year period.
Definitely, a year cannot be considered long enough to constitute the grant of
retirement benefits to these employees as company practice. It cannot therefore be
disputed that petitioners already received the benefits as specified in the CBA between
BTC1 and BTCI Supervisory Union.  Petitioner Chan, for her 21 years of service, received
a total of P1,764,000.00 as retirement benefits following the formula of P70,000.00 x
120% x 21 years. Petitioner Galang, for his 29 years of service, received a total of
P3,248,000.00 as retirement benefits following the formula of P70,000.00 x 160% x 29
years.

109 | P a g e
 PAYMENT OF WAGES

CONGSON V. NLRC
G.R. No. 114250
DOCTRINE: Form of payment of wages

FACTS:
Private respondents were hired as piece-rate employees of Southern Fishing Industry
owned by petitioner Congson. They were uniformly paid at a rate of P1.00 per tuna
weighing thirty (30) to eighty (80) kilos per movement and worked 7 days a week.
Due to alleged scarcity of tuna, Congson notified the private respondents his proposal to
reduce the rate-per-tuna movement. Private respondents resisted the proposed rate
reduction. When they reported back to work, they found out that they were already
replaced with new set of workers. They wanted to have a dialogue with the
management, but they waited in vain.
Private respondents filed a case before NLRC for underpayment of wages (violation of
the minimum wage law) and non-payment of overtime pay, 13th month pay, holiday
pay, rest day pay, and five (5)-day service incentive leave pay; and for constructive
dismissal.
Petitioner conceded that his payment of wages falls below the minimum wage law. He
averred that NLRC should have considered as forming a substantial part of private
respondents' total wages the cash value of the tuna liver and intestines private
respondents were entitled to retrieve. He argued that the combined value of the cash
wage and monetary value of the tuna liver and intestines clearly exceeded the minimum
wage fixed by law.
Both the Labor Arbiter and the NLRC ruled in favor of the respondents.

ISSUE:
WON the form of payment by Congson is valid pursuant to Article 102 of the Labor
Code.

HELD/SC:
Petitioner's practice of paying the private respondents the minimum wage by means of
legal tender combined with tuna liver and intestines runs counter to Article 102 of the
Labor Code.
The fact that said method of paying the minimum wage was not only agreed upon by
both parties in the employment agreement but even expressly requested by private
respondents, does not shield petitioner.
Wages shall be paid only by means of legal tender. The only instance when an employer
is permitted to pay wages informs other than legal tender, that is, by checks or money

110 | P a g e
order, is when the circumstances prescribed in the second paragraph of Article 102 are
present.

NORTH DAVAO MINING CORPORATION AND ASSET PRIVITIZATION TRUST   VS.

NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M.
VILLANUEVA AND WILFREDO GUILLEMA
G.R. NO. 112546

DOCTRINE: Place of payment of Wages and transportation pay for the trip going to the
place of payment

FACTS: petitioner North Davao completely ceased operations due to serious business
reverses. From 1988 until its closure in 1992, North Davao suffered net losses exceeding
its assets by 20,392 billion pesos, as shown by its financial statements audited by the
Commission on Audit. North Davao ceased operations, its remaining employees were
separated and given the equivalent of 12.5 days' pay for every year of service,
computed on their basic monthly pay, in addition to the commutation to cash of their
unused vacation and sick leaves. It was found that prior to the cessation of operations,
North Davao had been giving separation pay equivalent to thirty (30) days' pay for every
year of service. Moreover, inasmuch as the region where North Davao operated was
plagued by insurgency and other peace and order problems, the employees had to
collect their salaries at a bank in Tagum, Davao del Norte, some 58 kilometers from their
workplace and about 2 1/2 hours' travel time by public transportation; this arrangement
lasted from 1981 up to 1990. Wilfredo Guillema and 271 other separated employees for:
(1) additional separation pay of 17.5 days for every year of service; (2) back wages
equivalent to two days a month; (3) transportation allowance; (4) hazard pay; (5)
housing allowance; (6) food allowance; (7) post-employment medical clearance; and (8)
future medical allowance, all of which amounted to P58,022,878.31 as computed by
private respondent.

ISSUE: Is the private respondent entitled to separation pay? payment of back wages and
transportation pay?

RULING: Anent to the ISSUE on separation pay, the Supreme Court ruled that, according
to Art. 283 governs the grant of separation benefits "in case of closures or cessation of
operation" of business establishments " not due to serious business losses or financial
reverses . . . ". Where, however, the closure was due to business losses, as in the instant
case, in which the aggregate losses amounted to over P20 billion, the Labor Code
does not impose any obligation upon the employer to pay separation benefits.
With regard to the ISSUE on payment of back wages and transportation, the Supreme
court cited the Labor Arbiter’s findings and decision that from the evidence on record,
the Labor Arbiter found that the hours spent by complainants in collecting salaries at a
bank in Tagum, Davao del Norte shall be considered compensable hours worked.

111 | P a g e
Considering further the distance between Amacan, Maco to Tagum which is 2 1/2 hours
by travel and the risks in commuting all the time in collecting complainants' salaries,
would justify the granting of backwages equivalent to two (2) days in a month as prayed
for.
HOUSE OF SARA LEE VS. REY
G.R. No. 149013

DOCTRINE: Entitlement to 13th month pay

FACTS:

The House of Sara Lee is engaged in the direct selling of a variety of product lines
for men and women, including cosmetics, intimate apparels, perfumes, ready to wear
clothes and other novelty items, through its various outlets nationwide. In the pursuit of
its business, the petitioner engages and contracts with dealers to sell the
aforementioned merchandise.

Under existing company policy, the dealers must remit to the petitioner the
proceeds of their sales within a designated credit period, which would either be 38 days
for IGSs or 52 days for IBMs, counted from the day the said dealers acquired the
merchandise from the petitioner.

To discourage late remittances, the petitioner imposes a “Credit Administration

Charge,” or simply, a penalty charge, on the value of the unremitted payment.
Additionally, if the dealer concerned has overdue payments or is said to be in “default,”
he or she cannot purchase additional products from the petitioner.

Cynthia Rey, the Accounts Receivable Clerk and later Credit Administration
Supervisor, was found to have violated the company policies pertaining to the
unauthorized extension of credit periods, non-collection of remittances, non-imposition
of penalty charges, authorizing purchases and giving of supervision fees despite non-
remittance, etc.As a result, she was dismissed the respondent for breach of trust and
confidence.

ISSUES:

1) Was the dismissal valid?

2) Is she entitled to 13th month pay? 14th or 15th month pay?

HELD:
1)The dismissal was valid due to “Loss of Trust and Confidence”

As a just cause for dismissal, loss of confidence is premised on the fact that an
employee concerned holds a position of trust and confidence. This situation applies

112 | P a g e
where a person is entrusted with confidence on delicate matters, such as the custody,
handling, or care and protection of the employer’s property. But, in order to constitute a
just cause for dismissal, the act complained of must be “work-related,” such that the
employee concerned is unfit to continue working for the employer. Distinction must be
made as to the application of the DOCTRINE of breach of trust and confidence with
respect to rank-in-file employees and managerial employees.

In the case at bar, respondent is not an ordinary rank-and-file employee.

Respondent occupied a highly sensitive and critical position and may thus be dismissed
on the ground of loss of trust and confidence. The position carried with it the duty to
observe proper company procedures in the fulfillment of her job, as it relates closely to
the financial interests of the company. Respondent’s unauthorized extensions of the
credit periods of the dealers are prejudicial to the interest of the petitioner and bear
serious financial implications: First, the dealer concerned is allowed to withhold
remittances to the company for his or her credit purchases beyond the expiration of the
38- or 52-day rolling deadline; second, the Credit Administration Charges or interest
penalties are not imposed on the erring dealer; third, the dealer concerned is allowed to
purchase goods on credit despite the fact that he or she has not remitted payment,
which is against company policy; and fourth, undue Service Fees were unknowingly paid
by the company to certain IBMs.

2)Respondent is not entitled of a 13th, 14th or 15th month pay

The award of 13 month pay must be deleted. Respondent is not a rank-and-file

employee and is, therefore, not entitled to thirteenth-month pay.

The NLRC and the CA are also correct in refusing to award 14th and 15th month
pay as well as the “monthly salary increase of 10 percent per year for two years based
on her latest salary rate.” The respondent must show that these benefits are due to her
as a matter of right. The rule in these cases is, she who alleges, not she who denies,
must prove. Mere allegations by the respondent do not suffice in the absence of proof
supporting the same. With respect to salary increases in particular, the respondent must
likewise show that she has a vested right to the same, such that her salary increases can
be made a component in the computation of backwages. What is evident is that salary
increases are a mere expectancy. They are by nature volatile and dependent on
numerous variables, including the company’s fiscal situation, the employee’s future
performance on the job, or the employee’s continued stay in a position. In short, absent
any proof, there is no vested right to salary increases.

113 | P a g e
 CONDITIONS OF EMPLOYMENT

SAN JUAN DE DIOS HOSPITAL VS. NLRC, 282 SCRA 316 [1997]

FACTS: Petitioners, the rank-and-file employee-union officers and members of San

Juan De Dios Hospital Employees Association, sent a letter requesting for the
expeditious implementation and payment by respondent, San Juan De Dios
Hospital, of the '40-hours/5-day workweek' with compensable weekly two (2) days
off provided for by Policy Instruction No. 54 ISSUEd by the Secretary of Labor.
Said policy instruction purports to implement R.A. No. 5901, otherwise known as
“An Act Prescribing Forty Hours A Week of Labor For Government and Private
Hospitals Or Clinic Personnel.” Respondent hospital failed to give a favorable
response; thus, petitioners filed a complaint regarding their claims for statutory
benefits under the above-cited law and policy issuance. However, the Labor
Arbiter and, subsequently, NLRC dismissed the complaint. Hence, this petition
ascribing grave abuse of discretion on the part of NLRC in concluding that Policy
Instructions No. 54 proceeds from a wrong interpretation of R.A. 5901 and Article
83 of the Labor Code.
ISSUE: Whether or not Policy Instruction No. 54, entitling a full weekly wage of 7
days upon completion of 40-hour/5-day workweek, is valid based on existing labor
laws.

HELD: Policy Instruction No. 54 is void, it being inconsistent with and repugnant
to the provision of Article 83 of the Labor Code, as well as to R.A. No. 5901. A
perusal of R. A. No. 5901 reveals nothing therein that gives two days off with pay
for health personnel who complete a 40-hour work or 5-day workweek. In fact,
the Explanatory Note of House Bill No. 16630 (later passed into law as Republic
Act No. 5901) explicitly states that the bill's sole purpose is to shorten the
working hours of health personnel and not to dole out a two days off with pay.
Petitioners' position is also negated by the very rules and regulations promulgated
by the Bureau of Labor Standards which implement Republic Act No. 5901.
Section 15 of aforementioned implementing rules grants specific rate of
additional compensation for work performed on Sunday or for work performed in
excess of forty hours a week. Policy Instruction No. 54 unduly extended the
statute. Article 83 merely provides: (1) the regular office hour of eight hours a
day, f ive days per week for health personnel, and (2) where the exigencies of
service require that health personnel work for six days or forty-eight hours then
such health personnel shall be entitled to an additional compensation of at least
thirty percent of their regular wage for work on the sixth day. There is nothing in
the law that supports then Secretary of Labor and petitioner’s assertion. The

114 | P a g e
Secretary of Labor exceeded his authority by including a two days off with pay in
contravention of the clear mandate of the statute. Administrative interpretation of
the law is at best merely advisory, and the Court will not hesitate to strike down
an administrative interpretation that deviates from the provision of the statute.
SIME DARBY PILIPINAS INC. v NLRC (2 nd DIVISION) and SIME DARBY SALARIED
EMPLOYEES ASSOCIATION (ALU-TUCP)
G.R. No. 119205. April 15, 1998.

J. Bellosillo

DOCTRINE: Revising the work schedule of employees discarding paid lunch break in
favor of a one-hour lunch break with no pay is not constitutive of unfair labor practice.
As such, it is a valid exercise of management prerogative.

FACTS:

1. Petitioner corporation provided for a paid lunch break for their employees with a
work schedule of 7:45am to 3:45pm with a 30-minute paid “on call” lunch break.
2. On August 1992, petitioner corporation ISSUEd a memorandum advising the
change of work schedule from 7:45am to 4:45pm from Monday to Friday and
7:45am-11:45am on Saturday. The memorandum provided for a coffee break of
ten minutes between 9:30am-10:30am and 2:30-3:30pm. Lastly, the
memorandum provided for the lunch break to be between 12:00nn to 1:00pm
from Monday to Friday.
3. Private respondent filed a complaint with the LA for unfair labor practice in
discontinuing the 30-minute paid “on call” lunch break.
4. The LA dismissed the petition contending that it was a valid exercise of
management prerogative and there would be unjust enrichment on the part of
the private respondent if they were to be paid while they were no longer on call.
5. On appeal to the NLRC it affirmed the decision of the LA.
6. On MR, the NLRC reversed its decision relying on an older case involving the
same petitioner corporation.
7. The OSG filed a manifestation and motion recommending the petition be
granted as there is no unfair labor practice.

ISSUE: Are the actions of petitioner corporation constitutive of unfair labor practice?

HELD: No. The employees are no longer required to work during this one-hour lunch
break, there is no more need for them to be compensated for this period. We agree
with the Labor Arbiter that the new work schedule fully complies with the daily work
period of eight (8) hours without violating the Labor Code. 7 Besides, the new schedule
applies to all employees in the factory similarly situated whether they are union
members or not.

115 | P a g e
PHIL AIRLINES V. NLRC

FACTS: Private respondent Dr. Fabros was employed as flight surgeon at petitioner
company. He was assigned at the PAL Medical Clinic and was on duty from 4:00 in the
afternoon until 12:00 midnight.
On Feb.17, 1994, at around 7:00 in the evening, Dr. FAbros left the clinic to have his
dinner at his residence, which was abou t5-minute drive away. A few minutes later, the
clinic received an emergency call from the PAL Cargo Services. One of its employeeshad
suffered a heart attack. The nurse on duty, Mr. Eusebio, called private respondent at
home to inform him of the emergency. The patient arrived at the clinic at 7:50 in the
evening and Mr. Eusebio immediately rushed him to the hospital. When Dr. Fabros
reached the clinic at around 7:51 in the evening, Mr. Eusebio had already left with the
patient to the hospital. The patient died the following day.
Upon learning about the incident, PAL Medical Director ordered the Chief Flight Surgeon
to conduct an investigation. In his explanation, Dr. Fabros asserted that he was entitled
to a thirty-minute meal break; that he immediately left his residence upon being
informed by Mr. Eusebio about the emergency and he arrived at the clinic a few minutes
later; that Mr. Eusebio panicked and brought the patient to the hospital without waiting
for him.

Finding private respondent’s explanation unacceptable, the management charged

private respondent with abandonment of post while on duty. He denied that he
abandoned his post on February 17, 1994. He said that he only left the clinic to have his
dinner at home. In fact, he returned to the clinic at 7:51 in the evening upon being
informed of the emergency.

After evaluating the charge as well as the answer of private respondent, he was given a
suspension for three months effective December 16, 1994.

Private respondent filed a complaint for illegal suspension against petitioner.

On July 16, 1996, the Labor Arbiter rendered a decision declaring the suspension of
private respondent illegal. It also ordered petitioner to pay private respondent the
amount equivalent to all the benefits he should have received during his period of
suspension plus P500,000.00 moral damages.

Petitioner appealed to the NLRC.

The NLRC, however, dismissed the appeal after finding that the decision of the Labor
Arbiter is supported by the FACTS on record and the law on the matter. The NLRC
likewise denied petitioner’s motion for reconsideration.
Hence, this petition.

116 | P a g e
ISSUES:
1. WON the nullifying of the 3-month suspension by the NLRC erroneous.
2. WON the awarding of moral damages is proper.

RULING: The petition is PARTIALLY GRANTED. The portion of the assailed decision
awarding moral damages to private respondent is DELETED. All other aspects of the
decision are AFFIRMED

1. The legality of private respondent’s suspension: Dr. Fabros left the clinic that night
only to have his dinner at his house, which was only a few minutes’ drive away from the
clinic. His whereabouts were known to the nurse on duty so that he could be easily
reached in case of emergency. Upon being informed of Mr. Acosta’s condition, private
respondent immediately left his home and returned to the clinic. These FACTS belie
petitioner’s claim of abandonment. Petitioner argues that being a full-time employee,
private respondent is obliged to stay in the company premises for not less than eight (8)
hours. Hence, he may not leave the company premises during such time, even to take
his meals. We are not impressed. Art. 83 and 85 of the Labor Code read: Art. 83. Normal
hours of work. — The normal hours of work of any employee shall not exceed eight (8)
hours a day. Health personnel in cities and municipalities with a population of at least
one million (1,000,000) or in hospitals and clinics with a bed capacity of at least one
hundred (100) shall hold regular office hours for eight (8) hours a day, for five (5) days a
week, exclusive of time for meals, except where the exigencies of the service require
that such personnel work for six (6) days or forty-eight (48) hours, in which case they
shall be entitled to an additional compensation of at least thirty per cent (30%) of their
regular wage for work on the sixth day. For purposes of this Article, “health personnel”
shall include: resident physicians, nurses, nutritionists, dieticians, pharmacists, social
workers, laboratory technicians, paramedical technicians, psychologists, midwives,
attendants and all other hospital or clinic personnel. (emphasis supplied) Art. 85. Meal
periods. — Subject to such regulations as the Secretary of Labor may prescribe, it shall
be the duty of every employer to give his employees not less than sixty (60) minutes
time-off for their regular meals. Sec. 7, Rule I, Book III of the Omnibus Rules
Implementing the Labor Code further states: Sec. 7. Meal and Rest Periods. — Every
employer shall give his employees, regardless of sex, not less than one (1) hour time-off
for regular meals, except in the following cases when a meal period of not less than
twenty (20) minutes may be given by the employer provided that such shorter meal
period is credited as compensable hours worked of the employee; (a) Where the work is
non-manual work in nature or does not involve strenuous physical exertion; (b) Where
the establishment regularly operates not less than sixteen hours a day; (c) In cases of
actual or impending emergencies or there is urgent work to be performed on
machineries, equipment or installations to avoid serious loss which the employer would
otherwise suffer; and (d) Where the work is necessary to prevent serious loss of
perishable goods. Rest periods or coffee breaks running from five (5) to twenty (20)
minutes shall be considered as compensable working time. Thus, the eight-hour work

117 | P a g e
period does not include the meal break. Nowhere in the law may it be inferred that
employees must take their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return to their posts on time.
Private respondent’s act, therefore, of going home to take his dinner does not
constitute abandonment.

2. The award of moral damages: Not every employee who is illegally dismissed or
suspended is entitled to damages. As a rule, moral damages are recoverable only where
the dismissal or suspension of the employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals,
good customs or public policy In the case at bar, there is no showing that the
management of petitioner company was moved by some evil motive in suspending
private respondent. It suspended private respondent on an honest, albeit erroneous,
belief that private respondent’s act of leaving the company premises to take his meal at
home constituted abandonment of post which warrants the penalty of suspension.
Under the circumstances, we hold that private respondent is not entitled to moral
damages.

118 | P a g e
LINTON COMMERCIAL CO. V HELLERA ET AL.
GR No. 163147
DOCTRINE: reduction of working hours is valid taking into consideration the following:
1. the arrangement was temporary
2. it was a more humane solution instead of a retrenchment of personnel
3. there was notice and consultations with the workers and supervisors
4. a consensus were reached on how to deal with deteriorating economic
conditions
5. it was sufficiently proven that the company was suffering from losses.

FACTS
Due to the currency crisis, Linton initially ISSUEd a memorandum to suspend its
operations. After resumption, it ISSUEd another memorandum informing its employees
that each worker would be working on a rotation basis for 3 working days instead of 6. It
submitted an establishment termination report concerning the rotation of its workers,
and proceeded with the implementation of the new policy without waiting for DOLE’s
approval.

69 workers filed a complaint for illegal reduction of workdays with the Arbitration
Branch of NLRC, pointing out that Linton implemented the reduction of work hours
without observing Art. 283 of the Labor Code, which required submission of notice to
DOLE one month prior to the implementation of reduction of personnel, since Linton
filed the establishment report enacting the compressed workweek on the very day of its
implementation.

ISSUE: W/N there was an illegal reduction of work hours.

RULING
Yes. Linton failed to establish enough factual basis to justify the necessity of a reduced
workweek, and persuasive evidence that it was indeed suffering from drastic business
losses. Linton’s financial statements showed no indication of financial losses, and the
alleged loss of P3 million was insubstantial considering its total asset is P1 billion.

119 | P a g e
BISIG MANGGAGAWA SA TRYCO VS. NLRC, GR 151309, OCTOBER 15, 2008.
DOCTRINE: “D.O. No. 21 sanctions the waiver of overtime pay in consideration of the
benefits that the employees will derive from the adoption of a compressed workweek
scheme.” (Benefits of Compressed Workweek)

FACTS:
Petitioners Larino, Barte, Egera and Aya-ay are Tryco Pharma Corporation’s
regular employees. The petitioners are members of Bisig Manggagawa sa Tryco(BMT),
the exclusive bargaining representative of the rank-and-file employes.
Tryco and petitioners then signed a Memorandum of Agreement providing for a
compressed workweek schedule to be implemented in the company pursuant to
Department of Labor and Employment Department Order (D.O.) No. 21, Series of 1990,
Guidelines on the Implementation of Compressed Workweek.
As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be
considered as the regular working hours, and no overtime pay shall be due and payable
to the employee for work rendered during those hours. The MOA specially stated that
the employee waives the right to claim overtime pay for work rendered after 5:00 p.m.
until 6:12 p.m. from Monday to Friday considering that the compressed workweek
schedule is adopted in lieu of the regular workweek schedule which also consists of 46
hours. However, should an employee be permitted or require to work beyond 6:12 pm,
such employee shall be entitled to overtime pay.
Tryco informed the Bureau of Working Conditions of the Department of Labor
and Employment of the implementation of a compressed workweek in the company
Tryco then received a letter from the Bureau of Animal Industry of the
Department of Agriculture that its production should be conducted in Bulacan and not
in Caloocan.
Tryco then ISSUEd a Memorandum ordering petitioners to report to the
company’s plant site in Bulacan. However, petitioners refused.
BMT opposed the transfer contending that it constitutes unfair labor practice.
And declared a strike.
Petitioners then filed separate complaints for illegal dismissal, underpayment of
wages, nonpayment of OT pay and service incentive leave and refusal to bargain against
Tryco alleging that it acted in bad faith in ordering the transfer of petitioners to paralyze
the union.
Respondent in its defense aver that petitioners were not dismissed but they
refused to comply with the management directive for them to report to Bulacan due to
the letter reminder from the Bureau of Animal Industry.

ISSUE:
Whether or not the Memorandum of Agreement providing for compressed workweek is
unenforceable as it is contrary to law.

120 | P a g e
RULING:
No, the MOA is enforceable and binding against the petitioners.
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits
that the employees will derive from the adoption of a compressed workweek scheme,
thus:
“The compressed workweek scheme was originally conceived for
establishments wishing to save on energy costs, promote greater work efficiency
and lower the rate of employee absenteeism, among others. Workers favor the
scheme considering that it would mean savings on the increasing cost of
transportation fares for at least one (1) day a week; savings on meal and snack
expenses; longer weekends, or an additional 52 off-days a year, that can be
devoted to rest, leisure, family responsibilities, studies and other personal
matters, and that it will spare them for at least another day in a week from
certain inconveniences that are the normal incidents of employment, such as
commuting to and from the workplace, travel time spent, exposure to dust and
motor vehicle fumes, dressing up for work, etc. Thus, under this scheme, the
generally observed workweek of six (6) days is shortened to ve (5) days but
prolonging the working hours from Monday to Friday without the employer
being obliged for pay overtime premium compensation for work performed in
excess of eight (8) hours on weekdays, in exchange for the benefits above cited
that will accrue to the employees.”
Moreover, the adoption of a compressed workweek scheme in the company will
help temper any inconvenience that will be caused the petitioners by their transfer to a
farther workplace.
Notably, the MOA complied with the following conditions set by the DOLE, under
D.O. No. 21, to protect the interest of the employees in the implementation of a
compressed workweek scheme:
1. The employees voluntarily agree to work more than eight (8) hours a day the
total in a week of which shall not exceed their normal weekly hours of work
prior to adoption of the compressed workweek arrangement;

2. There will not be any diminution whatsoever in the weekly or monthly

takehome pay and fringe benefits of the employees;

3. If an employee is permitted or required to work in excess of his normal

weekly hours of work prior to the adoption of the compressed workweek
scheme, all such excess hours shall be considered overtime work and shall be
compensated in accordance with the provisions of the Labor Code or
applicable Collective Bargaining Agreement (CBA);

121 | P a g e
4. Appropriate waivers with respect to overtime premium pay for work
performed in excess of eight (8) hours a day may be devised by the parties to
the agreement.

5. The effectivity and implementation of the new working time arrangement

shall be by agreement of the parties.

Thus, the MOA is enforceable and a valid undertaking,

122 | P a g e
DASCO V PHILTRANCO GR211141

DOCTRINE:
Field personnel are those who regularly perform their duties away from the principal
place of business of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. They are not entitled to holiday pay and SIL.

FACTS:
On July 4, 2011, the petitioners filed a case against the respondents alleging that: (1)
they were already qualified for regular employment status since they have been working
with the respondents for several years; (2) they were paid only P404.00 per round trip,
which lasts from two to five days, without overtime pay and below the minimum wage
rate; (3) they cannot be considered as field personnel because their working hours are
controlled by the respondents from dispatching to end point and their travel time is
monitored and measured by the distance because they are in the business of servicing
passengers where time is of the essence; and (4) they had not been given their yearly
five-day SIL since the time they were hired by the respondents.

In response, the respondents asserted that: (1) the petitioners were paid on a fixed
salary rate of P0.49 centavos per kilometer run, or minimum wage, whichever is higher;
(2) the petitioners are seasonal employees since their contracts are for a fixed period
and their employment was dependent on the exigency of the extraordinary public
demand for more buses during peak months of the year; and (3) the petitioners are not
entitled to overtime pay and SIL pay because they are field personnel whose time
outside the company premises cannot be determined with reasonable certainty since
they ply provincial routes and are left alone in the field unsupervised.

The LA ruled in favor of the respondents who were able to prove that petitioners were
paid with a fixed salary or minimum wage, whichever is higher. It also held that
employees were not entitled to holiday pay and SIL as field personnel.

The NLRC held that the petitioners are not field personnel considering that they ply
specific routes with fixed time schedules determined by the respondents; thus, they are
entitled to minimum wage, SIL pay, and overtime benefits.

The CA reversed the NLRC and reinstated the LA.

ISSUE: Whether the petitioners as bus drivers and/or conductors are field personnel,
and thus entitled to overtime pay and SIL pay

123 | P a g e
RULING:
It is necessary to stress that the definition of a "field personnel" is not merely concerned
with the location where the employee regularly performs his duties but also with the
fact that the employee's performance is unsupervised by the employer. Field personnel
are those who regularly perform their duties away from the principal place of business
of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an inquiry must be
made as to whether or not the employee's time and performance are constantly
supervised by the employer

The NLRC properly concluded that they are not field personnel but regular employees
who perform tasks usually necessary and desirable to the respondents' business.
Evidently, the petitioners are not field personnel as defined above and the NLRC's
finding in this regard is supported by the established FACTS of this case: (1) the
petitioners, as bus drivers and/or conductors, are directed to transport their passengers
at a specified time and place; (2) they are not given the discretion to select and contract
with prospective passengers; (3) their actual work hours could be determined with
reasonable certainty, as well as their average trips per month; and (4) the respondents
supervised their time and performance of duties. Thus, they are consequently entitled
to the benefits accorded to regular employees of the respondents, including overtime
pay and SIL pay.

124 | P a g e
HSY MARKETING LTD., CO. VS. VILLASTIQUE
[G.R. No. 219569]

DOCTRINE:
Conditions of employment
 Company drivers who are under the control and supervision of management
officers are regular employees entitled to benefits including the service incentive
leave pay.

FACTS:
Petitioner HSY Marketing hired respondent Villatisque as field driver for Fabulous Jeans
to deliver RTW items and/or general merchandise. Villatisque figured in an accident
which resulted in a pedestrian being hospitalized, and Fabulous Jeans shouldering the
hospitalization and medical expenses. Villatisque went on absence without leave to
presumably avoid liability. He was asked to reimburse for the costs but to no avail. He
was also asked to resign but he refused to do so. A few days later, he tried to collect his
salary but was told it was withheld because of his refusal to resign. Villatisque then filed
a complaint for illegal dismissal with money claims against petitioner.
LA dismissed the complaint for illegal dismissal as there was no substantial evidence
presented that respondent was dismissed. LA ruled however that because there was
strained relationship between petitioner and respondent, reinstatement was no longer
feasible and petitioner was asked to deliver separation pay and service incentive leave
pay to respondent. NLRC and CA affirmed LA’s RULING.

ISSUES: WON Villatisque as a company driver falls under the definition of a regular
employee and is thus entitled to service incentive leave pay.

HELD:
Yes, respondent Villatisque is a regular employee and should be awarded his SIL.
A regular employee’s task is necessary and desirable to the usual trade and business of
the company, and is thus entitled to the benefits including SIL. Villatisque is not a field
employee but rather a regular since he is expected to deliver goods at a specified time
and place and is under the control and supervision of HSY Marketing. Company drivers
who are under the control and direct supervision of management officers – like
respondent herein – are regular employees entitled to benefits including SIL.

125 | P a g e
A. NATE CASKET MAKER AND  vs.  ARANGO,
G.R. No. 192282. October 5, 2016.

DOCTRINE:Pakyaw workers are considered regular employees for as long as their

employers exercise control over them.

FACTS:
Petitioners Armando and Anely Nate are the owners/proprietors of A. Nate
Casket Maker. They employed respondents on various dates as
carpenters,mascilladors and painters in their casket-making business from 1998 until
their alleged termination in March 2007. Petitioners alleged that respondents
are pakyaw workers who are paid per job order. On February 3, 2007, they met with
respondents in order to present a proposed employment agreement which would
change the existing pakyaw system to "contractual basis" and would provide for
vacation leave and sick leave pay and other benefits given to regular employees.
On the other hand, respondents then alleged that when they were adamant and
eventually refused to sign the contract, petitioners told them to go home because their
employment has been terminated.
Respondents filed a Complaint for illegal dismissal and non-payment of
separation pay against petitioners including claims for underpayment of wages, non-
payment of overtime pay, holiday pay, 5-day service incentive leave pay and 13th month
pay.
The Labor Arbiter (LA) ISSUEd a Decision dismissing the complaint for lack of
merit. While the LA acknowledged that respondents being pakyaw workers are
considered regular employees, he ruled that petitioners did not terminate the services
of respondents. On the ISSUE of underpayment, the LA held that respondents were
earning more than the minimum wage per day; and as pakyaw workers, though they
are deemed regular workers, they are not entitled to overtime pay, holiday pay, service
incentive leave pay and 13th month pay citing the case of field personnel and those paid
on purely commission basis. The decision of the LA was affirmed by the NLRC.
The CA reversed and set aside the decision of the NLRC.

ISSUE:
Whether respondents being pakyaw workers are considered regular employees which
would not warrant their dismissal without payment of back wages and other benefits.

RULING:
Yes. Respondents being pakyaw workers are considered regular employees and their
dismissal is illegal and they must be paid with their back wages and corresponding
benefits.

126 | P a g e
 There is no dispute that the tasks performed by respondents as carpenters,
painters, and mascilladors were necessary and desirable in the usual business of
petitioners who are engaged in the manufacture and selling of caskets. We have to also
consider the length of time that respondents worked for petitioners, commencing on
various dates from 1998 to 2007. In addition, the power of control of petitioners over
respondents is clearly present in this case. Respondents follow the steps in making a
casket, as instructed by the petitioners, like carpentry, mascilla, rubbing and painting.
They had their own notebooks where they listed the work completed with their
signature and the date finished. The same would be checked by petitioners as basis for
the compensation for the day. Thus, petitioners wielded control over the respondents in
the discharge of their work.
 Hence, pakyaw workers are considered regular employees for as long as their
employers exercise control over them. Thus, while respondents' mode of compensation
was on a per-piece basis, the status and nature of their employment was that of regular
employees.
As regular employees, respondents were entitled to security of tenure and could
be dismissed only for just or authorized causes and after the observance of due process.
Petitioners violated respondents' rights to security of tenure and constitutional
right to due process in not even serving them with a written notice of termination which
would recite any valid or just cause for their dismissal. Respondents were merely told
that their services are terminated. Thus, the Court of Appeals correctly ruled that
private respondents were illegally dismissed.
Under Article 279 of the Labor Code , an employee unjustly dismissed from work
is entitled to reinstatement and backwages, among others. Reinstatement restores the
employee who was unjustly dismissed to the position from which he was removed, that
is, to his status quo ante dismissal, while the grant of backwages allows the same
employee to recover from the employer that which he had lost by way of wages as a
result of his dismissal. These twin remedies — reinstatement and payment of
backwages — make the dismissed employee whole who can then look forward to
continued employment. Thus, do these two remedies give meaning and substance to
the constitutional right of labor to security of tenure. Respondents are, therefore,
entitled to reinstatement with full backwages pursuant to Article 279 of the Labor Code,
as amended by R.A. No. 6715.

127 | P a g e
 MINIMUM LABOR STANDARD BENEFITS

SAN MIGUEL CORP., VS. CA

G.R. No. 146775, Jan. 30, 2002

FACTS:

On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District
Office, conducted a routine inspection in the premises of San Miguel Corporation (SMC)
in Sta. Filomena, Iligan City. It was discovered that there was underpayment by SMC of
regular Muslim holiday pay to its employees. DOLE sent a copy of the inspection result
to SMC and it was received by and explained to its personnel officer Elena delaPuerta.
SMC contested the findings and DOLE conducted summary hearings on 19 November
1992, 28 May 1993 and 4 and 5 October 1993. Still, SMC failed to submit proof that it
was paying regular Muslim holiday pay to its employees. Hence, Alan M. Macaraya,
Director IV of DOLE Iligan District Office ISSUEd a compliance order, dated 17 December
1993, directing SMC to consider Muslim holidays as regular holidays and to pay both its
Muslim and non-Muslim employees holiday pay within thirty (30) days from the receipt
of the order.

SMC appealed to the DOLE main office in Manila. However, the appeal was dismissed
for lack of merit and the order of Director Macaraya was affirmed. SMC went to SC for
relief via a petition for certiorari, which the Court referred to the Court of Appeals. The
appellate court modified the order with regards the payment of Muslim holiday pay
from 200% to 150% of the employee's basic salary. Its motion for reconsideration having
been denied for lack of merit, SMC filed a petition for certiorari before the SC

ISSUEs:

1. Whether or not public respondents seriously erred and committed grave abuse
of discretion when they granted Muslim Holiday Pay to non-Muslim employees
of SMC.
2. Whether or not SMC was not accorded with due process of law in the issuance of
the compliance order.
3. Whether or not regional director Macaraya, undersecretary Trajano and
undersecretary Espanol have jurisdiction in issuing the assailed compliance
orders.

RULING:

128 | P a g e
The court ruled the ISSUEs in negative.Muslim holidays are provided under Articles 169
and 170, Title I, Book V, of Presidential Decree No. 1083, otherwise known as the Code
of Muslim Personal Laws, which states:

Art. 169. Official Muslim holidays. - The following are hereby recognized as legal Muslim
holidays:
a) ‘AmunJadīd (New Year), which falls on the first day of the first lunar month of
Muharram;
b) Maulid-un-Nabī (Birthday of the Prophet Muhammad), which falls on the
twelfth day of the third lunar month of Rabi-ul-Awwal;
c) LailatulIsrāWalMi’rāj (Nocturnal Journey and Ascension of the Prophet
Muhammad), which falls on the twenty-seventh day of the seventh lunar
month of Rajab;
d) ‘Īd-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar
month of Shawwal, commemorating the end of the fasting season; and
e) ‘Īd-ūl-Adhā (Hari Raya Haji),which falls on the tenth day of the twelfth lunar
month of Dhū’l-Hijja.

Art. 170. Provinces and cities where officially observed. - (1) Muslim holidays shall be
officially observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur,
Maguindanao, North Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such
other Muslim provinces and cities as may hereafter be created; (2) Upon proclamation
by the President of the Philippines, Muslim holidays may also be officially observed in
other provinces and cities.

The foregoing provisions should be read in conjunction with Article 94 of the Labor
Code, which provides:

Art. 94. Right to holiday pay. –

a) Every worker shall be paid his regular daily wage during regular holidays, except
in retail and service establishments regularly employing less than ten (10)
workers;
b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate.

Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that "the
provisions of this Code shall be applicable only to Muslims." However, there should be
no distinction between Muslims and non-Muslims as regards payment of benefits for
Muslim holidays. Wages and other emoluments granted by law to the working man are
determined on the basis of the criteria laid down by laws and certainly not on the basis
of the worker’s faith or religion. In addition, the 1999 Handbook on Workers’ Statutory
Benefits, categorically stated: Considering that all private corporations, offices, agencies,
and entities or establishments operating within the designated Muslim provinces and
cities are required to observe Muslim holidays, both Muslim and Christians working

129 | P a g e
within the Muslim areas may not report for work on the days designated by law as
Muslim holidays.

On the question regarding the jurisdiction of the Regional Director Allan M. Macaraya,
Article 128, Section B of the Labor Code, as amended by Republic Act No. 7730,
provides: Article 128. Visitorial and enforcement power. -

(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to
ISSUE compliance orders to give effect to the labor standards provisions of this Code
and other labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of the inspection. The
Secretary or his duly authorized representative shall ISSUE writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the
employer contests the findings of the labor employment and enforcement officer and
raises ISSUEs supported by documentary proofs which were not considered in the
course of inspection.

In the case before us, Regional Director Macaraya acted as the duly authorized
representative of the Secretary of Labor and Employment and it was within his power to
ISSUE the compliance order to SMC. In addition, the Court agrees with the Solicitor
General that the petitioner did not deny that it was not paying Muslim holiday pay to its
non-Muslim employees. Indeed, petitioner merely contends that its non-Muslim
employees are not entitled to Muslim holiday pay. Hence, the ISSUE could be resolved
even without documentary proofs. In any case, there was no indication that Regional
Director Macaraya failed to consider any documentary proof presented by SMC in the
course of the inspection.

Anent the allegation that petitioner was not accorded due process, the court finds that
SMC was furnished a copy of the inspection order and it was received by and explained
to its Personnel Officer. Further, a series of summary hearings were conducted by DOLE
on 19 November 1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC could not
claim that it was not given an opportunity to defend itself.

130 | P a g e
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE COURT
OF APPEALS, respondents.
[G.R. No. 151228. August 15, 2002.]

DOCTRINE: Four fold test, “control test”, termination of employment; Just causes; Mere
absence is not a sufficient proof, illegal dismissal

FACTS:

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general
manager of Crown and Empire Theaters in Butuan City. Private respondent
LeovigildoLagrama is a painter, making ad billboards and murals for the motion pictures
shown at the Empress, Supreme, and Crown Theaters for more than 10 years, from
September 1, 1988 to October 17, 1998.

On October 17, 1998, Lagrama's employment was terminated by Tan for allegedly
urinating inside the work area. Lagrama denied the charge against him. He filed a
complaint for illegal dismissal with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City.

Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an
independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof.

The labor arbiter ruled that Lagrama was illegally dismissed. Tan appealed to the NLRC
Fifth Division, Cagayan de Oro City, which rendered a decision finding Lagrama to be an
independent contractor, and for said reason the decision of the Labor Arbiter was
reversed and set aside.

Respondent Lagrama filed a motion for reconsideration, but it was denied by the NLRC
for lack of merit. Lagrama then filed a petition for certiorari with the Court of Appeals.
The Court of Appeals found that petitioner exercised control over Lagrama's work by
dictating the time when Lagrama should submit his billboards and murals and setting
rules on the use of the work area and rest room. Although it found that Lagrama did
work for other cinema owners, the appellate court held it to be a mere sideline
insufficient to prove that he was not an employee of Tan.

The appellate court also found no evidence of any intention on the part of Lagrama to
leave his job or sever his employment relationship with Tan. Petitioner moved for a
reconsideration, but the Court of Appeals denied his motion for lack of merit. Hence,
the present petition for review on certiorari.

131 | P a g e
ISSUES:

Whether an employer-employee relationship existed between petitioner and private

respondent

Whether petitioner is guilty of illegally dismissing private respondent.

RULING:

Yes, there exist an employer-employee relationship between petitioner and private

respondent. In determining whether there is an employer-employee relationship, the SC
have applied a "four-fold test," to wit: (1) whether the alleged employer has the power
of selection and engagement of employees; (2) whether he has control of the employee
with respect to the means and methods by which work is to be accomplished; (3)
whether he has the power to dismiss; and (4) whether the employee was paid wages.
These elements of the employer-employee relationship are present in this case.

It was petitioner who engaged the services of Lagrama without the intervention of a
third party. Petitioner's control over Lagrama's work extended not only to the use of the
work area, but also to the result of Lagrama's work, and the manner and means by
which the work was to be accomplished. Also the fact that Lagrama worked for at least
3 to 4 days a week proves regularity in his employment by petitioner. That Lagrama
worked for Tan on a fixed piece-work basis is of no moment. Payment by result is a
method of compensation and does not define the essence of the relation. It is a method
of computing compensation, not a basis for determining the existence or absence of
employer-employee relationship.

The Court also stressed that the primary standard for determining regular employment
is the reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. In this case, there is
such a connection between the job of Lagrama painting billboards and murals and the
business of petitioner. To let the people know what movie was to be shown in a movie
theater requires billboards. Petitioner in fact admitted that the billboards are important
to his business.

Yes, Lagrama was illegally dismissed by petitioner Tan. It is claimed that Lagrama
abandoned his work. There is no evidence to show this. Abandonment requires two
elements: (1) the failure to report for work or absence without valid or justifiable
reason, and (2) a clear intention to sever the employer-employee relationship, with the
second element as the more determinative factor and being manifested by some overt
acts. Mere absence is not sufficient. What is more, the burden is on the employer to

132 | P a g e
show a deliberate and unjustified refusal on the part of the employee to resume his
employment without any intention of returning. In the case at bar, the Court of Appeals
correctly ruled: Neither do we agree that Petitioner abandoned his job. In order for
abandonment to be a just and valid ground for dismissal, the employer must show, by
clear proof, the intention of the employee to abandon his job. . . . In the present
recourse, the Private Respondent has not established clear proof of the intention of the
Petitioner to abandon his job or to sever the employment relationship between him and
the Private Respondent. On the contrary, it was Private Respondent who told Petitioner
that he did not want the latter to draw for him and thereafter refused to give him work
to do or any mural or billboard to paint or draw on. More, after the repeated refusal of
the Private Respondent to give Petitioner murals or billboards to work on, the Petitioner
filed, with the Sub-Regional Arbitration Branch No. X of the National Labor Relations
Commission, a Complaint for "Illegal Dismissal and Money Claims."

133 | P a g e
LAMBO AND BELOCURA VS. NLRC AND J.C. TAILOR SHOP AND/OR JOHNNY CO.
G.R. NO. 111042 OCTOBER 26, 1999

DOCTRINE: Mere absence is not enough to constitute abandonment.

Abandonment is a matter of intention; it cannot be inferred or presumed from
equivocal acts.

FACTS:
Petitioners AvelinoLambo and Vicente Belocura were employed as tailors by
private respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985
and March 3, 1985, respectively. They worked from 8:00 a.m. to 7:00 p.m. daily,
including Sundays and holidays. Petitioners were paid on a piece-work basis,
according to the style of suits they made. Regardless of the number of pieces
they finished in a day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents
for illegal dismissal and sought recovery of overtime pay, holiday pay, premium
pay on holiday and rest day, service incentive leave pay, separation pay, 13th
month pay, and attorney’s fees.
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty
of illegal dismissal and accordingly ordered them to pay petitioners’ claims
except premium pay on holiday and rest day and service incentive leave pay, for
the total of P210, 212.64.
On appeal by private respondents, the NLRC reversed the decision of the Labor
Arbiter. It found that petitioners had not been dismissed from employment but
merely threatened with a closure of the business if they insisted on their
demand for a "straight payment of their minimum wage”. According to the
NLRC, during that meeting, the employees voted to maintain the company policy
of paying them according to the volume of work finished. Only petitioners
allegedly insisted that they be paid the minimum wage and other benefits. The
NLRC also held petitioners guilty of abandonment of work and accordingly
dismissed their claims except that for 13th month pay.
Hence, this petition. Petitioners deny that they abandoned their work.

ISSUES:
1. Whether or not Lambo and Belocura were regular employees.
2. Was there abandonment of work by Lambo and Belocura?

RULING:

First ISSUE: YES.

134 | P a g e
  There is no dispute that petitioners were employees of private respondents
although they were paid not on the basis of time spent on the job but according
to the quantity and the quality of work produced by them. There are two
categories of employees paid by results: (1) those whose time and performance
are supervised by the employer. (Here, there is an element of control and
supervision over the manner as to how the work is to be performed. A piece-
rate worker belongs to this category especially if he performs his work in the
company premises.); and (2) those whose time and performance are
unsupervised. (Here, the employer’s control is over the result of the work.
Workers on pakyao and takay basis belong to this group.) Both classes of
workers are paid per unit accomplished. Petitioners belong to the first category.
 In this case, private respondents exercised control over the work of petitioners.
As tailors, petitioners worked in the company’s premises from 8:00 a.m. to 7:00
p.m. daily, including Sundays and holidays. The mere fact that they were paid on
a piece-rate basis does not negate their status as regular employees of private
respondents.  Payment by the piece is just a method of compensation and does
not define the essence of the relations.  Nor does the fact that petitioners are
not covered by the SSS affect the employer-employee relationship.
 Indeed, the following factors show that petitioners, although piece-rate
workers, were regular employees of private respondents: (1) within the
contemplation of Art. 280 of the Labor Code, their work as tailors was necessary
or desirable in the usual business of private respondents, which is engaged in
the tailoring business;(2) petitioners worked for private respondents throughout
the year, their employment not being dependent on a specific project or season;
and,(3) petitioners worked for private respondents for more than one year.

Second ISSUE: NONE.

 To justify a finding of abandonment of work, there must be proof of a deliberate

and unjustified refusal on the part of an employee to resume his employment.
The burden of proof is on the employer to show an unequivocal intent on the
part of the employee to discontinue employment.  Mere absence is not
sufficient. It must be accompanied by manifest acts unerringly pointing to the
fact that the employee simply does not want to work anymore.
 Private respondents did not adduce other proof of overt acts of the petitioners
showing their intention to abandon their work other than the self-serving
affidavits of the two employees. On the contrary, the evidence shows that
petitioners lost no time in filing the case for illegal dismissal against private
respondent. This fact negates any intention on their part to sever their
employment relationship.
 Private respondents invoke the compromise agreement between them and
petitioner Lambo, whereby in consideration of the sum of P10,000.00, that
petitioner absolved private respondents from liability for money claims or any

135 | P a g e
 other obligations. To be sure, not all quitclaims are per se invalid or against
public policy. But those (1) where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person or (2) where the terms of
settlement are unconscionable on their face are invalid. In these cases, the law
will step in to annul the questionable transaction. However, considering that the
Labor Arbiter had given petitioner Lambo a total award of P94,719.20, the
amount of P10,000.00 to cover any and all monetary claims is clearly
unconscionable.
 Except for the award of attorney’s fees in the amount of P19,110.24, the above
computation is affirmed. The award of attorney’s fees should be disallowed, it
appearing that petitioners were represented by the Public Attorney’s Office.
With regard to petitioner AvelinoLambo, the amount of P10,000.00 paid to him
under the compromise agreement should be deducted from the total award of
P94,719.20.

WHEREFORE, the decision of the National Labor Relations Commission is SET ASIDE and
another one is RENDERED ordering private respondents to pay petitioners the total
amount of One Hundred Eighty-One Thousand One Hundred Two Pesos and 40/100
(P181,102.40).

136 | P a g e
R&E TRANSPORT VS. LATAG
G.R. No. 155214. February 13, 2004.

DOCTRINE: Employees are generally entitled to retirement pay pursuant to RA 7641

otherwise known as the Retirement Pay Law.

FACTS:

Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. However,
he was transferred to the petitioner R & E Transport, Inc. upon cessation of La
Mallorca’s business operations. In January 1995, he got sick and was forced to apply for
partial disability with the SSS, which was then granted. Upon recovery, he reported back
to work in September 1998 but was no longer allowed on account of his old age. Latag
asked the petitioner, through its administrative officer for his retirement pay pursuant
to Republic Act 7641 but he was ignored. Latag filed a case for payment of his
retirement pay before the NLRC.

Upon Pedro Latag’s death on April 30, 1999, he was substituted by his wife, the
respondent Avelina Latag. Labor Arbiter rendered a decision in favour of Latag.
Petitioner filed the quitclaim and motion to dismiss where the Labor Arbiter ISSUEd an
order for Writ of Execution. Petitioners interposed an appeal before NLRC. Appeal was
dismissed for failure to post a cash or surety bond, as mandated by law.

ISSUE:

Whether or not Latag is entitled to retirement benefits considering he signed a waiver of

quitclaim.

RULING:

The Supreme Court ruled that the respondent is entitled to retirement benefits despite
of the waiver of quitclaims.This is not to say that all quitclaims are invalid per se. Courts,
however, are wary of schemes that frustrate workers' rights and benefits, and look with
disfavor upon quitclaims and waivers that bargain these away.

Undisputably, Pedro M. Latag was credited with 14 years of service with R & E
Transport, Inc. Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30
provides: Retirement. — In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an employee upon reaching the
age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in said

137 | P a g e
establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year. Unless the parties provide for broader inclusions,
the term one half-month salary shall mean fifteen (15) days plus one-twelfth (1/12) of
the 13th month pay and the cash equivalent of not more than five (5) days of service
incentive leaves.

The rules implementing the New Retirement Law similarly provide the above-mentioned
formula for computing the one-half month salary. Since Pedro was paid according to the
"boundary" system, he is not entitled to the 13th month 32 and the service incentive
pay; hence, his retirement pay should be computed on the sole basis of his salary.

It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in
excess of the "boundary" or fee they pay to the owners or operators of their vehicles.
Thus, the basis for computing their benefits should be the average daily income. In this
case, the CA found that Pedro was earning an average of five hundred pesos (P500) per
day. We thus compute his retirement pay as follows: P500 x 15 days x 14 years of
service equals P105,000. Hence, it is clear that the late Pedro M. Latag is entitled to
retirement benefits.

138 | P a g e
ASIAN TRANSMISSION VS. CA
G.R. No. 144664. March 15, 2004.

DOCTRINE: “Holiday pay is a legislated benefit enacted as part of the Constitutional

imperative that the State shall afford protection to labor. Its purpose is not merely "to
prevent diminution of the monthly income of the workers on account of work
interruptions. In other words, although the worker is forced to take a rest, he earns
what he should earn, that is, his holiday pay."

FACTS:

The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano

B. Trajano, ISSUEd an Explanatory Bulletin dated March 11, 1993 wherein it clarified,
inter alia, that employees are entitled to 200% of their basic wage on April 9, 1993,
whether unworked, which[,] apart from being Good Friday [and, therefore, a legal
holiday], is also Araw ng Kagitingan [which is also a legal holiday].

Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy
Thursday and Araw ng Kagitingan.

Despite the explanatory bulletin, petitioner, Asian Transmission Corporation, opted to

pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent
Bisig ng Asian Transmission Labor Union (BATLU) protested.

The Voluntary Arbitrator favored the Bisig ng Asian Transmission Labor Union (BATLU),
and held that Article 94 of the Labor Code provides for holiday pay for every regular
holiday, the computation of which is determined by a legal formula which is not
changed by the fact that there are two holidays falling on one day, like on April 9, 1998
when it was Araw ng Kagitingan and at the same time was Maundy Thursday.

In the assailed decision, the Court of Appeals upheld the findings of the Voluntary
Arbitrator.

ISSUE:

Whether or not daily-paid employees are entitled to be paid for two regular holidays
which fall on the same day.

RULING:

139 | P a g e
The Court dismissed the petition and ruled that petitioners should pay its employees
“200% and not just 100% of their regular daily wages for the unworked April 9, 1998
which covers two regular holidays, namely, Araw ng Kagitingan and Maundy Thursday.”

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that
the State shall afford protection to labor. Its purpose is not merely "to prevent
diminution of the monthly income of the workers on account of work interruptions. In
other words, although the worker is forced to take a rest, he earns what he should earn,
that is, his holiday pay."

The provision is mandatory, regardless of whether an employee is paid on a monthly or

daily basis. Unlike a bonus, which is a management prerogative, holiday pay is a
statutory benefit demandable under the law.

140 | P a g e
AUTOBUS TRANSPORT SYSTEM V BAUTISTA
GR No. 156364
DOCTRINE: According to Article 82 of the Labor Code, field personnel shall refer to non-
agricultural employees who regularly perform their duties away from the principal place
of business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty.

FACTS
Bautista, a driver-conductor of Autobus Transport, was paid on commission basis. After
his bus was damaged in an accident caused by him, Autobus disallowed him to work
until he paid the amount demanded for the cost of repair, and was eventually
terminated.
Bautista complained for illegal dismissal with money claims for nonpayment of 13th
month pay and service incentive leave pay against Autobus, while Autobus argued that
Bautista’s employment was replete with offenses involving reckless imprudence, gross
negligence, and dishonesty. Furthermore, Autobus avers that in the exercise of its
management prerogative, Bautista’s employment was terminated only after the latter
was provided with an opportunity to explain his side regarding the accident.

ISSUE: W/N Bautista is entitled to service incentive leave.

RULING
Yes. Petitioner’s contention that Bautista is not entitled to service incentive leave
because he is paid on a purely commission basis must fail. The phrase following “Field
personnel” should not be construed as a separate classification of employees but is
merely an amplification of the definition of field personnel defined under the Labor
Code.

Bautista does not fall under the category of field personnel. Bus companies have ways of
determining the hours worked by their drivers and conductors with reasonable
certainty. The courts have taken judicial notice of the following:

1. Along the routes traveled, there are inspectors assigned at strategic places who
board the bus to inspect the passengers, the punched tickets, and the
conductor’s reports;
2. There is a mandatory once-a week car barn or shop day, where the bus is
regularly checked;
3. The drivers and conductors must be at specified place and time, as they observe
prompt departure and arrival;

141 | P a g e
 4. At every depot, there is always a dispatcher whose function is to see to it that
the bus and crew leaves and arrives at the estimated proper time.

By these reasons, drivers and conductors are therefore under constant supervision
while in the performance of their work.

SAN MIGUEL CORPORATION VS. DEL ROSARIO, GR NO. 176985

DOCTRINE: Minimum standard benefits-computation of retirement benefits on the
ground of consistent company practice.
FACTS:
Respondent was employed by petitioner as key account specialist. On March 9,
2001, petitioner informed respondent that her probationary employment will be
severed at the close of the business hours of March 12, 2001. On March 13, 2001,
respondent was refused entry to petitioner’s premises.
Respondent filed a complaint against petitioner for illegal dismissal and
underpayment/non-payment of monetary benefits alleging that petitioner feigned an
excess in manpower because after her dismissal, it hired new recruits and re-employed
2 of her batch mates.
The company anticipated an increase in sales volume, petitioner hired
respondent as an account specialist on a probationary status but expected business
growth did not materialize. A restructuring occured which led to an initial excess of 49
regular employees, who were redeployed to other positions, including the one occupied
by respondent. Her employment was thus terminated effective March 12, 2001.
Labor Arbiter declared respondent a regular employee because her employment
exceeded six months and that she was illegally dismissed there being no authorized
cause for termination. Petitioner appealed to the NLRC which set aside illegal
termination and reinstatement. Complainant’s dismissal is valid but ineffectual due to
lack of the 30-day notice to the employee and to DOLE
CA reinstated with modification the Labor Arbiter’s decision finding her to be an
illegally dismissed regular employee, but deleted the award for holiday pay for lack of
basis also and affirmed NLRC’s decision
ISSUEs:
(1) whether or not respondent is a regular employee of petitioner
(2) whether or not respondent was illegally dismissed
(3) if so, whether or not respondent is entitled to any monetary benefit

RULING:
First ISSUE
The best proof that petitioner should have presented to prove the probationary
status of respondent is her employment contract. None, having been presented, the
continuous employment of respondent as an account specialist for almost 11 months
means that she was a regular employee and not a temporary reliever or a probationary
employee. The Payroll Authorities offered by petitioner do not constitute substantial
evidence.

142 | P a g e
 By way of exception, the period of probationary employment may exceed six
months when (1) the parties so agree, like being established by company policy, or (2)
when it is required by the nature of the work. None of these exceptional circumstance
were proven thus, respondent is undoubtedly a regular employee of petitioner.
Having ruled that respondent is a regular employee, her termination from
employment must be for a just or authorized cause, otherwise, her dismissal would be
illegal.

Second ISSUE
It is evident that the criterion allegedly used by petitioner in reorganizing its
sales unit was the employment status of the employee. However, petitioner erroneously
classified respondent as a probationary employee, resulting in the dismissal of the latter.
The absence of criteria and the erroneous implementation of the criterion selected
rendered invalid the redundancy because both have the ultimate effect of illegally
dismissing an employee.
The alleged redundancy was militated by the failure to refute respondent’s
assertion that after her dismissal, it hired new recruits and re-employed two of her
batch mates. Petitioner was not able to discharge the burden of proving that the
dismissal of respondent was valid.
Third ISSUE
Article 279 of the Labor Code, provides:
In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up
to the time of his actual reinstatement.
Respondent entitled not only to reinstatement but also to payment of full
backwages, computed from the time her compensation was actually withheld from her
on March 13, 2001, up to her actual reinstatement. As a regular employee of petitioner
from the date of her employment on April 17, 2000, she is likewise entitled to other
benefits, i.e., service incentive leave pay and 13th month pay computed from such date
also up to her actual reinstatement.
Respondent however is not entitled to holiday pay because the records reveal
that she is a monthly paid regular employee.
WHEREFORE, the petitions are DENIED. The January 7, 2005 Decision and the
June 16, 2005 Resolution of the Court of Appeals in CA-G.R. No. SP No. 83725 which
affirmed the December 30, 2003 Resolution of the NLRC in NLRC NCR CA No. 036413-03
declaring that the dismissal of respondent Caroline C. Del Rosario, a regular employee of
petitioner, was valid but ineffectual; and the February 23, 2005 Decision and the May
13, 2005 Resolution and of the Court of Appeals in CA-G.R. No. SP No. 84081 which
reinstated with modification the June 16, 2003 Decision of the Labor Arbiter in NLRC-

143 | P a g e
NCR-00-04495-2002, holding that respondent is an illegally dismissed regular employee
of petitioner, are AFFIRMED with MODIFICATIONS.

As MODIFIED, the employment status of respondent is declared regular, and her

dismissal from employment, illegal. Petitioner is ordered to immediately reinstate
respondent as a regular employee to her previous position, unless such position no
longer exists, in which case she shall be given a substantially equivalent position,
without loss of seniority rights. Petitioner is further ordered to pay respondent
backwages, computed from the time her compensation was actually withheld on March
13, 2001, up to her actual reinstatement, plus service incentive leave, 13th month pay
and attorney’s fees equivalent to 10% of the total monetary award. For this purpose,
the case is ordered REMANDED to the Labor Arbiter for the computation of the amounts
due respondent.

144 | P a g e
PENARANDA VS. BAGANGA PLYWOOD CORPORATION, GR NO. 159577
DOCTRINE: Article 82 of the Labor Code exempts managerial employees from the
coverage of labor standards. Labor standards provide the working conditions of
employees, including entitlement to overtime pay and premium pay for working on rest
days.

FACTS:
Sometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee
of Baganga Plywood Corporation (BPC) to take charge of the operations and
maintenance of its steam plant boiler. In May 2001, Peñaranda filed a Complaint for
illegal dismissal with money claims against BPC and its general manager, Hudson Chua,
before the NLRC. He alleges that his services were terminated without the benefit of
due process and valid grounds in accordance with law. Furthermore, he was not paid his
overtime pay, premium pay for working during holidays/rest days, night shift
differentials and finally claimed for payment of damages and attorney's fees having
been forced to litigate the present complaint.
Respondents: Complainant's separation from service was done pursuant to Art. 283 of
the Labor Code. The respondent BPC was on temporary closure due to repair and
general maintenance and it applied for clearance with the Department of Labor and
Employment, Regional Office No. XI to shut down and to dismiss employees (par. 2
position paper). And due to the insistence of herein complainant he was paid his
separation benefits. Consequently, when BPC partially reopened in January 2001,
Peñaranda failed to reapply. Hence, he was, not terminated from employment much
less illegally. He opted to severe employment when he insisted payment of his
separation benefits. Furthermore, being a managerial employee he is not entitled to
overtime pay and if ever he rendered services beyond the normal hours of work, there
was no office order/or authorization for him to do so.

ISSUE: What is the nature of the employment? WON petitioner is entitled to the
benefits he seeks.

RULING:
Article 82 of the Labor Code exempts managerial employees from the coverage
of labor standards. Labor standards provide the working conditions of employees,
including entitlement to overtime pay and premium pay for working on rest days. Under
this provision, managerial employees are "those whose primary duty consists of the
management of the establishment in which they are employed or of a department or
subdivision."
Managerial employees (IRR of the Labor Code)

145 | P a g e
 (1) Their primary duty consists of the management of the establishment
in which they are employed or of a department or subdivision thereof;
(2) They customarily and regularly direct the work of two or more
employees therein;
(3) They have the authority to hire or fire other employees of lower rank;
or their suggestions and recommendations as to the hiring and firing and as to
the promotion or any other change of status of other employees are given
particular weight.
The Court disagrees with the NLRC's finding that petitioner was a managerial
employee. However, petitioner was a member of the managerial staff, which also takes
him out of the coverage of labor standards. Like managerial employees, officers and
member of the managerial staff are not entitled to the provisions of law on labor
standards.
Petitioner supervised the engineering section of the steam plant boiler. His work
involved overseeing the operation of the machines and the performance of the workers
in the engineering section. This work necessarily required the use of discretion and
independent judgment to ensure the proper functioning of the steam plant boiler. As
supervisor, petitioner is deemed a member of the managerial staff.
On the basis of the foregoing, the Court finds no justification to award overtime
pay and premium pay for rest days to petitioner.

146 | P a g e
LEYTE IV ELECTRIC COOPERATIVE, INC. VS. LEYECO IV EMPLOYEES UNION-ALU, G.R.
NO. 157775

DOCTRINE: The wage orders ISSUEd by the Regional Tripartite Wages and Productivity
Board (RTWPB) could be reviewed by the National Wages Productivity Commission
(NWPC) motuproprio or upon appeal.

FACTS:
The RTWPB-NCR ISSUEd Wage Order No. NCR-07 on October 14, 1999 imposing
an increase of P25.50/day on the wages of all private sector workers and employees in
the NCR and pegging the minimum wage rate in the NCR at 223.50/day. However,
Section 2 and Section 9 of Wage Order No. NCR-07 exempted certain sectors and
industries from its coverage: Section 2 (A) Workers in the following sectors which were
granted corresponding wage increases on January 1, 1999 as prescribed by Wage Order
No. NCR-06 and Workers in small establishments employing less than ten (10) workers.
Section 9 (2) Exporters including indirect exporters with at least 50% export sales and
with forward contracts with their foreign buyers/principals entered into on or twelve
(12) months before the date of publication of this Order may be exempt during the
lifetime of said contract but not to exceed twelve (12) months from the effectivity of this
Order.

Feeling aggrieved by the non-coverage by the wage adjustment, the respondents

filed an appeal with the NWPC assailing Section 2 (A) and Section 9 (2) of Wage Order
No. NCR-07. They contend that neither NWPC nor the RTWPB-NCR had the authority to
expand the non-coverage and exemptible categories under the wage order; hence, the
assailed sections of the wage order should be voided.

The NWPC upheld the validity of Section 2 (A) and Section 9 (2) of Wage order
No. NCR-07. It observed that the RTWPB’s power to determine exemptible categories
was adjunct to its wage fixing function conferred by Article 122 (e) of the Labor code, as
amended by Republic Act No. 6727; that such authority of the RTWPB was also
recognized in NWPC Guidelines No. 01, Series of 1996. The NWPC denied the appeal of
APL and TNMR for its lack of merit and denied their motion for reconsideration.

The Court of Appeals granted the petition for certiorari, holding that the powers
and functions of the NWPC and RTWPB-NCR as set forth in Republic Act No. 6727 did
not include the power to grant additional exemptions from the adjusted minimum
wage; that an administrative rule or regulation must be in harmony with the enabling
law; and that the statutory grant of power could not be extended by implication beyond
what was necessary for their just and reasonable execution. The CA denied their motion
for reconsideration.

147 | P a g e
ISSUE: WON the RTWPB-NCR had the authority to provide additional exemptions from
the minimum wage adjustments embodied in Wage Order No. NCR-07 specifically
Sections 2 (A) and 9 (2).

RULING:
Yes, The NWPC had the authority to prescribe the rules and guidelines for the
determination of the minimum wage and productivity measures, and the RTWPB-NCR
had the power to ISSUE wage orders.

The CA reversed the decisions of the NWPC on the ground that the Wage Order
No. NCR-07, specifically its Section 2 (A) and Section 9 (2), had not been reviewed or
approved by the NWPC. However, the NWPC stated that it had reviewed and approved
the challenged sections when it upheld the validity of Wage Order No. NCR-07 in its
decisions of February 28, 2000 and July 17, 2000.

The wage orders ISSUEd by the RTWPBs could be reviewed by the NWPC
mutoproprio or upon appeal. Any party aggrieved by the wage order ISSUEd by the
RTWPBs could appeal. The respondents appealed on October 26, 1999, submitting to
the NWPC precisely the ISSUE of the validity of the Section 2 (A) and Section 9 (2) of
Wage Order No. NCR-07. The very fact that the validity of the assailed sections of Wage
Order No. NCR-07 had been already passed upon and upheld by NWPC meant that the
NWPC had already given the wage order its necessary legal imprimatur. Accordingly, the
requisite approval or review was complied with.

148 | P a g e
BAHIA SHIPPING SERVICES INC V REYNALDO CHUA
GR NO. 162195

DOCTRINE: MINIMUM LABOR STANDARD BENEFITS- Entitlement of OT pay which was

incorporated in his award for the unexpired portion of the contract

FACTS:
Reynaldo Chua was hired by the petitioner as a waiter on board a luxury cruise ship
pursuant to Philippine Overseas Employment Administration for a period of nine
months.
On February 1997, respondent reported 1 hr and 30 mins late. HE was then sent an
official warning-termination which was unsigned and undated. A month after, Captain
Fleten, investigated the incident which resulted to the respondent’s termination.

The respondent filed for a complaint for illegal dismissal and other monetary claims. The
respondent also alleged that he was underpaid. He was only paid for $300/month
instead of the stipulated $410 for five months. His salary was also deducted $20 for
union fees even though he isn’t part of any union.

The petitioners contend that they received a copy of an addendum to the CBA from the
petitioner’s principal. Also they alleged that the petitioner requested permission from
POEA to amend the salary scale to $300/ month. They also said that the respondent had
been habitually delinquent by being always late.

The Labor Arbiter decided that the petitioners are guilty of illegal dismissal but
dismissing the other money claims of respondent for lack of factual and legal basis. The
decision was affirmed by the NLRC and CA with some modifications on the unexpired
portion of the contract. All three decided to award the “guaranteed overtime” pay
amounting to $197/month which is included in his salary.

ISSUE: WON Chua is entitled for OT pay despite not having rendered OT work as
incorporated in the award

SC RULING:

Not entitled to overtime pay

According to Art 87, an overtime pay is a compensation added to the “regular wage”.
The Supreme Court said as decided in Cagampan v NLRC, although an overseas
employment contract may guarantee the right to overtime pay, entitlement to such
benefit must first be established, otherwise the same cannot be allowed.

Hence, it being improbable that respondent rendered overtime work during the
unexpired term of his contract, the inclusion of his "guaranteed overtime" pay into his

149 | P a g e
monthly salary as basis in the computation of his salaries for the entire unexpired period
of his contract has no factual or legal basis and the same should have been disallowed.
Based on respondent's Position Paper filed with the Labor Arbiter, his basic monthly
salary is $213.00.

150 | P a g e
PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS
ORGANIZATION
G.R. No. 171231

DOCTRINE: Collective Bargaining Agreement; “if the terms of a CBA are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall prevail”

FACTS:
Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers'
Organization (PSTMSDWO) is a labor union duly registered with the Department of
Labor and Employment (DOLE). Respondent PNCC Skyway Corporation is a corporation
duly organized and operating under and by virtue of the laws of the Philippines. On
November 15, 2002, petitioner and respondent entered into a Collective Bargaining
Agreement (CBA) incorporating the terms and conditions of their agreement which
included vacation leave and expenses for security license provisions.

A memorandum was passed by the respondents scheduling the leaves of the laborers.
Petitioner objected to the implementation of this memorandum and contended that
their union members have the preference in scheduling their vacation leave. On the
other hand, respondent argued that Article VIII, Section 1 (b) gives the management the
final say regarding the vacation leave schedule of its employees. Respondent may take
into consideration the employees' preferred schedule, but the same is not controlling.

ISSUE:
Whether or not it is the prerogative of PNCC to schedule leaves of its employees.

RULING:
Yes. The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic FACTS or aids. The
intention of the parties must be gathered from that language, and from that language
alone. Stated differently, where the language of a written contract is clear and
unambiguous, the contract must be taken to mean that which, on its face, it purports to
mean, unless some good reason can be assigned to show that the words used should be
understood in a different sense.

In the case at bar, the contested provision of the CBA is clear and unequivocal. Article
VIII, Section 1 (b) of the CBA categorically provides that the scheduling of vacation leave
shall be under the option of the employer. The preference requested by the employees
is not controlling because respondent retains its power and prerogative to consider or
to ignore said request. Thus, if the terms of a CBA are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall prevail. In
fine, the CBA must be strictly adhered to and respected if its ends have to be achieved,
being the law between the parties.

151 | P a g e
RADIO MINDANAO NETWORK, INC ET AL VS. YBAROLA, JR.
G.R. No. 198662

DOCTRINE: OTHER SPECIAL BENEFITS

FACTS: Respondents Ybarola Jr. and Rivera Jr. were hired on 1977 and 1983 respectively
and eventually became managers who solicit advertisements and servicing various
clients of RMN (Radio Mindanao Network). In Sept 2002, due to RMN’s restructuring,
the respondents were terminated and were given their separation pay – P631,250 for
Ybarola and P481,250 for Rivera. Sometime in Dec 2002, they executed
release/quitclaim affidavits.
Aggrieved, they filed separate complaints which were later consolidated against RMN
and its President, Canoy, for illegal dismissal with several money claims. They indicated
that their salary rates were P60,000 for Ybarola and P40,000 for Rivera.
The respondents argued that the release/quitclaim they executed should not be a bar to
the recovery of the full benefits due them; while they admitted that they signed release
documents, they did so due to dire necessity.
The petitioners denied liability contending that the amounts the respondents received
represented a fair and reasonable settlement of their claims, as attested to by the
release affidavits which they executed freely and voluntarily. They belied the
respondent’s claimed salary rates, alleging that they each received a monthly salary of
P9,177, as shown by the payrolls.
The Labor Arbiter dismissed the illegal dismissal complaint, but ordered the payment of
additional separation pay to the respondents – P490,066 for Ybarola and P429,517.55
for Rivera.
Petitioners appealed to the NLRC(National Labor Relations Commission) which set aside
the LA’s (Labor Arbiter) decision and dismissed the complaint for lack of merit. It ruled
that the withholding tax certificate cannot be the basis of the computation of the
respondent’s separation pay as the tax document included the the respondents’ cost-of-
living allowance and commissions; as a general rule, commissions cannot be included in
transactions attributable to the respondents. From the NLRC, the respondents sought
relief from the CA through a petition for certiorari under Rule 65 of the Rules of Court.
The CA granted the petition and set aside the assailed NLRC dispositions. It reinstated
the LA’s separation pay award, rejecting the NLRC’s RULING that the respondents’
commissions are not included in the computation of their separation pay. It pointed out
that in the present case, the respondents earned their commissions through actual
market transactions attributable to them; these commissions, therefore, were part of
their salary.
The appellate court declared the release affidavits executed by the respondents invalid
for being against public policy, citing two reasons: (1) the terms if the settlements are
unconscionable; the separation pay the respondents received was deficient by at least
P400,000 for each of them; and (2) the absence of the voluntariness when the
respondents signed the document, it was their dire circumstances and inability to
support their families that finally drove them to accept the amount the petitioners

152 | P a g e
offered. Significantly, they dallied and it took them 3 months to sign the release
affidavits.

ISSUE:
Whether or not the release/quitclaim affidavits are invalid for being against
public policy.

RULING:
The release/quitclaim affidavits are invalid for being against public policy for two
reasons: the terms are unconscionable; the separation pay for the termination due to
restructuring was deficient by P400,000 for each employee; they were given only half o f
the amount they were legally entitled to; and (2) the absence of voluntariness when the
employees signed the document, it was their dire circumstances and inability to support
their families that finally drove them to accept the amount offered. Without jobs and
with families to support, they dallied in executing the quitclaim instrument, but were
eventually forced to sign given their circumstances. To be sure, a settlement under
these terms is not and cannot be a reasonable one, given especially the respondents’
length of service – 25 years for Ybarola and 19 years for Rivera.

153 | P a g e
ROBINA FARMS CEBU VS. VILLA, GR NO. 175869, APRIL 18, 2016

FACTS: Employer Robina Farms is appealing the decision of the NLRC making it liable
forillegal dismissal of Elizabeth Villa. Respondent Villa brought an action against
petitioner Robina Farms for illegal suspension, illegal dismissal, nonpayment of overtime
benefits and nonpayment of service incentive leave.

Respondent was a sales clerk with the company since August 1981. In the later part of
2001, petitioner enticed her to avail of the company’s special retirement program. On
March 2, 2002 she received a memorandum from Lily Ngochua requiring her to explain
her failure to ISSUE invoices for unhatched eggs for the months of January and February
of that year. She explained that the delivery receipts were delayed and overlooked;
despite her explanation she was suspended for 10 days of March 8, 2002 to March 19,
2002.

When she returned, she was advised to cease working because her application for
retirement had been approved; and then subsequently disapproved; and she was then
advised to tender her resignation with a request for financial assistance. She manifested
her intention to return to work, but petitioner company had replaced her with another
employee, confiscated her gate pass and prevented her from entering the premises ever
again.

The petitioner asserts that she violated the company rule on “timely issuance of the
invoices”. She was suspended because the delay resulted in a delay of payment by the
buyers, which depended on the receipt of the invoices. Her application for retirement
was denied because “management did not approve the benefits equivalent to 86%
ofher salary rate she applied for, but only 1/2 month for every year of service. Hence
theoriginal action.

ISSUE: Whether Villa was (1) illegally dismissed, (2) entitled to overtime, and (3)
entitledto service incentive leave.

RULING:

(1) Illegal Dismissal: YES

The advice of Ngochua and De Guzman for Villa to resign and instead to request for
financial assistance was a strong and unequivocal indication of the petitioners desire to
sever the employer-employee relationship.

The desire of Villa to retire does not evidence of her intention to sever the relationship
as it was enticed to her as a promo. In that she believed she receive a greater benefit
from petitioner company’s offer. Hence, her consent cannot be deemed to have been
knowingly and freely given.

154 | P a g e
(2) Overtime Pay: NO

Entitlement to overtime pay must be “established by proof” that overtime work was
actually performed. The burden of proving rests on the employee. Daily Time Records
(DTR) does not substantially prove actual performance beyond eight (8) hours. There
must be “prior authorization“, without which invalidates the claim to the benefit

Section 4 (c) Omnibus Rules Implementing the Labor Code; “If the work performed was
necessary, or if benefitted the employer, or the employee could not abandon his work
at the end of normal working hours because he had no replacement, all the time spent
forsuch work shall be considered as hours worked, if work was with the knowledge of
the employer or his immediate supervisor.”

(3) Service Incentive Leave: YES

Grant of vacation or sick eave with pay of at least five days could be credited as
compliance with the duty to pay service incentive leave. However, the employer must
still prove it fully paid the accrued service incentive leave pay.

Evidence of the pay should have been presented at before the decision of the Labor
Arbiter, not after it of during appeal. Such practice is not tolerated. Costs against the
petitioner.

155 | P a g e
DE LA SALLE ARANETA UNIVERSITY VS. BRENARDO
GR 190809

DOCTRINE: Article 302, as amended by RA 7641, reads that “Any employee may be
retired upon reaching the age established in the collective bargaining agreement or
other applicable employment contract.” In case of retirement, the employee shall be
entitled to receive such retirement benefits as he may have earned under existing laws
and any collective bargaining agreement and other agreements. Provided however, that
an employee’s retirement benefits under any collective bargaining and other agreement
shall not be less that those provided by law.

FACTS: Bernardo (respondent) filed a complaint against DLS-AU (petitioner) for payment
of retirement benefits. Bernardo alleged that he started working as a part-time
professional lecturer at DLS-AU, where his teaching contract was renewed at the start of
every semester and summer. However, on November 8, 2003, DLS-AU informed
Bernardo that he could not teach at the school anymore as the school was
implementing the retirement age limit for its faculty members. As he was already 75
years old, Bernardo had no choice to retire. He immediately sought advice from DOLE,
which opined that he was entitled to receive benefits under RA 7641 (New Retirement
Law).

Dr. Bautista, owner/manager of DLS-AU argues that Bernardo was not entitled to any
kind of separation pay or benefits, explaining that the school’s policy and CBA only
covers full-time permanent faculty for at least 5 years immediately preceding the
termination of their employment.

ISSUES: (1) Are part-time employees excluded from the coverage of those entitled to
retirement benefits under RA 7641?
(2) Has a claim for retirement benefits filed beyond the period provided for
under Art. 291 of the Labor Code prescribed?

RULING:(1) Yes.Bernardo’s employment with DLS-AU had always been for a fixed-term
and his contracts of employment with the school were valid, legal, and binding. Based
on RA 7641, its Implementing Rules and Secretary Quisumbing’s Labor Advisory,
Bernardo, as a part-time employee of DLS-AU, is entitled to retirement benefits. The
general coverage of RA 7641 is broad enough to encompass all private sector
employees, and part-time employees are not among those specifically exempted from
the law.

(2) Bernardo’s right to retirement benefits and the obligation of DLS-AU to pay such
benefits are already established under Article 302 [287] of the Labor Code, as amended
by RA 7641. However, there was a violation of Bernardo’s right only after DLS-AU
informed him that the university no longer intended to offer him another contract of
employment, and already accepting his separation from service, Bernardo sought his

156 | P a g e
retirement benefits, but was denied by the school. Therefore, the cause of action for
Bernardo’s retirement benefits only accrued after the refusal of DLS-AU to pay him the
same, clearly expressed in Dr. Bautista’s letter dated February 12, 2004. Hence,
Bernardo’s complain, filed with the NLRC on February 26, 2004, was filed within the
three-year prescriptive period provided under Article 291 of the Labor Code.

157 | P a g e
 OTHER SPECIAL BENEFITS

ROGELIO REYES v. NLRC,

G.R. No. 160233

DOCTRINE: overriding commissions received which is not regularly received and does
not form part of his salary structure should not be included as part of his basic salary in
the computation of his retirement benefit

FACTS:Reyes was employed as a salesman at private resp’s Grocery Division in Davao

City in 1977 where he was eventually appointed as unit manager until his retirement in
1997. Thereafter, he was sent a computation for his retirement pay pursuant to
company policy and practice. Reyes insisted that his retirement pay and 13 th month pay
must be based on the average monthly salary which consists of his basic salary and
average monthly commission.

ISSUE:W/N the average monthly sales commission should be included in the

computation of his retirement benefits and 13th month pay

RULING: No. In this case, Reyes was receiving a monthly sum as salary corresponding to
his position as Unit Manager and the “overriding commission” paid to him could not
have been “sales commissions” because Unit Managers are not salesmen as they do not
effect any sale of article a at all. Any commission which they receive is certainly not the
basic salary which measures the standard or amount of work. Accordingly, the
additional payments made to Reyes were not in fact sales commissions but rather
partook of the nature of profit-sharing business.

Moreover, the disputed commissions were not regularly received by him. Hence, it does
not form part of his salary structure but were profit-sharing payments and had no clear,
direct and necessary relation to the amount of work he actually performed.

Under Art 287 of the Labor Code, “xxx the term one half month salary shall mean fifteen
days plus one twelfth of the 13th month pay and the cash equivalent of not more than 5
days of service incentive leaves. “

And in Sec 5 of Rules Implementing the New Retirement Law which provides, “the term
one-half month salary does not include cost of living allowance, profit-sharing payments
and other monetary benefits which are not considered as part of or integrated into the
regular salary of the employees”

Hence, such commissions should not be included as part of Reyes’ basic salary in the
computation of his retirement benefits.

158 | P a g e
ARCO METAL PRODUCTS, CO. v. SAMAHAN NG MGA MANGGAGAWA SA ARCO
METAL-NAFLU (SAMARM-NAFLU), G.R. No. 170734

DOCTRINE: Jurisprudence is replete with cases which recognize the right of employees
to benefits which were voluntarily given by the employer and which ripened into
company practice. Jurisprudence has not laid down any rule specifying a minimum
number of years with which a company practice must be exercised in order to constitute
voluntary company practice. It can be 6 years, 3 years, or even as short as 2 years.

FACTS: In December 2003, Arco Metal Products, Co. paid the 13th month pay, bonus
and leave encashment of 3 union members in amounts proportional to the services they
actually rendered in a year which was less than a full year. SAMARM-NAFLU protested
and claimed that in the years prior, the company (in 1992, 1993, 1994, 1996, 1999 &
2003) did not prorate the payment of the same benefits to 7 employees who had not
served for the full 12 months. Thus, SAMARM-NAFLU filed a complaint before the NCMB
for voluntary arbitration.

The Voluntary Arbitrator ruled in favor of the company and said that the giving of the
contested benefits in full irrespective of the actual service rendered within a year has
not ripened into a company practice.

However, the Court of Appeals reversed the VA decision and said that the company had
an existing voluntary practice of paying the aforesaid benefits in full to its employees.
The CA rejected the company’s contention that it erred in paying full benefits to the 7
employees raised by SAMARM-NAFLU and questioned why it took the company 11 years
before discovering the alleged error.

ISSUE: IN THIS CASE, Whether or not the company’s grant of 13th month pay, bonus and
leave encashment in full regardless of the actual service rendered in a year of an
employee has constitutes a voluntary act of the employer and thus ripened into a
company practice?

RULING: YES. Any benefit and supplement being enjoyed by employees cannot be
reduced, diminished, discontinued or eliminated by the employer.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, Arco Metal Products, Co. adopted a
policy of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. Despite the fact that there were only a
total of seven employees who benefited from such practiced, it was an established
practice nonetheless. The company cannot shirk away from its responsibility by merely
claiming that it was mistake or an error, supported only by an affidavit of its
manufacturing group head.

159 | P a g e
If the company wanted to prove it merely erred in giving full benefits, instead of the
affidavit presented, it could have presented names of other employers who did not fully
serve for one year and were subsequently given a prorated benefits. But, the company
did not do so.

Thus, the Supreme Court denied the petition of Arco Metal Products, Co., and affirmed
the CA RULING.

160 | P a g e
UNIVERSAL ROBINA SUGAR MILLING CORPORATION v. AGRIPINO CABALLEDA,
G.R. No. 156644

DOCTRINE: In the absence of any provision on optional retirement in a collective

bargaining agreement, other employment contract, or employer's retirement plan, an
employee may optionally retire upon reaching the age of 60 years or more, but not
beyond 65 years, provided he has served at least five years in the establishment
concerned.

FACTS: Agripino Caballeda worked as welder for URSUMCO from March 1989 until June
23, 1997 while Alejandro Cadalin worked for URSUMCO as crane operation from 1976
up to June 15, 1997. John Gokongwei, Jr. President of URSUMCO ISSUEd a
memorandum establishing the company policy on Compulsory Retirement. All
employees corporate-wide who attain 60 years of age on or before April 30, 1991 shall
be considered retired on May 31, 1991.

Subsequently, on December 9, 1992, Republic Act No. 7641 was enacted into law and it
took effect on January 7, 1993, amending Article 287 of the Labor Code. Agripino and
Alejandro having reached the age of 60, were allegedly forced to retire by URSUMCO.
They both accepted their retirement benefits.

Later on, Agripino led a complaint for illegal dismissal because his compulsory
retirement was in violation of the provisions of RA 7641 and, was in effect, a form of
illegal dismissal.

ISSUEs: (1) Whether or not RA 7641 can be given retroactive effect?; and
(2) Whether or not Agripino Caballeda and Alejandro Cadalin voluntarily retired from
the service?

RULING: (1) The ISSUE of retroactivity has long been settled in the case of Enriquez
Security Services, Inc. vs. Cabotaje.

RA 7641 is undoubtedly a social legislation. The law has been enacted as a labor
protection measure and as a curative statute that absent a retirement plan devised by,
an agreement with, or a voluntary grant from, an employer can respond, in part at least,
to the financial wellbeing of workers during their twilight years soon following their life
of labor. There should be little doubt about the fact that the law can apply to labor
contracts still existing at the time the statute has taken effect, and that its benefits can
be reckoned not only from the date of the law's enactment but retroactively to the time
said employment contracts have started.

This DOCTRINE has been repeatedly upheld and clarified in several cases. Pursuant
thereto, this Court imposed two (2) essential requisites in order that R.A. 7641 may be
given retroactive effect: (1) the claimant for retirement benefits was still in the employ

161 | P a g e
of the employer at the time the statute took effect; and (2) the claimant had complied
with the requirements for eligibility for such retirement benefits under the statute.

When respondents were compulsorily retired from the service, RA 7641 was already in
full force and effect. The petitioners failed to prove that the respondents did not comply
with the requirements for eligibility under the law for such retirement benefits. In sum,
the aforementioned requisites were adequately satisfied, thus, warranting the
retroactive application of R.A. 7641 in this case.

(2) Retirement is the result of a bilateral act of the parties, a voluntary agreement
between the employer and the employee whereby the latter, after reaching a certain
age, agrees to sever his or her employment with the former.

The age of retirement is primarily determined by the existing agreement between the
employer and the employees. However, in the absence of such agreement, the
retirement age shall be fixed by law. Under Art. 287 of the Labor Code as amended, the
legally mandated age for compulsory retirement is 65 years, while the set minimum age
for optional retirement is 60 years.

In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely
provides that the retirement benefits accorded to an employee shall be in accordance
with law. Thus, we must apply Art. 287 of the Labor Code.

The Court understands that such a risk of not receiving anything whatsoever, coupled
with the probability of not immediately getting any gainful employment or means of
livelihood in the meantime, constitutes enough pressure upon anyone who is asked to
sign a release and quitclaim in exchange of some amount of money which may be way
below what he may be entitled to based on company practice and policy or by law.

Absent any convincing proof of voluntariness in the submission of the documentary

requirements and the execution of the quitclaim, we cannot simply assume that
respondents were not subjected to the very same pressure.

Respondents vigorously pursued this case all the way up to the Supreme Court. Without
doubt, this is a manifestation that respondents had no intention of relinquishing their
employment, wholly incompatible to petitioners' assertion that respondents voluntarily
retired. Respondents did not voluntarily retire but were forced to retire, tantamount to
illegal dismissal.

162 | P a g e
LOURDES CERCADO VS UNIPROM INC.
G.R. NO. 188154 October 13, 2010

DOCTRINE:

Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age, agrees
to sever his or her employment with the former.

FACTS:

Petitioner Lourdes cerdaco was an employee of UNIPROM Inc. for 22 years since
December 15, 1978. When respondent came up with a retirement plan, sometime in
1980 and then amended in 2001, which provides that any employee with a minimum
of 20 years of service,

regardless of age, may be retired at the option of the employer. In December 2000,
UNIPROM implemented a company-wide retirement program, including herein
petitioner. She was offered an early retirement package amounting to P171, 982.90 but
Cercado rejected the offer. UNIPROM exercised its option under the retirement plan
and decided to retire petitioner effective February 15, 2001 so she was no longer given
any work assignment after the said date. This prompted the petitioner to file a
complaint for illegal dismissal before the Labor Arbiter, alleging that UNIPROM did not
have abona fide retirement plan, and even if there was, she didn’t consent thereto.
Respondent averred that Cercado was automatically covered by the retirement plan
when she agreed to the company’s rules and regulations, and that her retirement was
an exercise of management prerogative.

ISSUES:

1. Whether or not UNIPROM has a bona fide retirement plan

2. Whether or not petitioner was validly retired pursuant thereto.

RULING:

1. Yes, UNIPROM had a bona fide retirement plan. Article 287 of the Labor Code, as
amended by R.A 7641, pegs the age for compulsory retirement at 65 years old,
while the minimum age for optional retirement is set at 60 years. However, an
employer is free to impose a retirement age earlier than the foregoing
mandates. This has been upheld in numerous cases as a valid exercise of
management prerogative.

In this case, petitioner was retired by UNIPROM at the age of 47, after having
served the company for 22 years, pursuant to the company’s retirement plan,

163 | P a g e
 which provides that employees who have rendered at least 20 years of service
can be retired at the option of the copany. Respondent’s retirement plan can be
expediently stamped with validity and justified under the all encompassing
phrase “management prerogative”.

2. No, petitioner was not validly retired. Jurisprudence has upheld that it is
axiomatic that a retirement plan giving the employer the option to retire its
employees below below the ages provided by law must be assented to and
accepted by the latter, otherwise its adhesive imposition will amount to a
deprivation of property without due process. In decided cases, the retirement
plans were either embodied in the CBA, or established after consultations and
negotiations with the emplyees’ bargaining representative. The cnsent of the
employees to be retired even before the statutory retirement age of 65 years
was thus clear and unequivocal. Acceptance by the employees of an early
retirement age must be explicit, voluntary, free and uncompelled.

WHEREFORE, petition is granted.

164 | P a g e
RADIO MINDANAO NETWORK, INC ET AL VS. YBAROLA, JR.
G.R. No. 198662

DOCTRINE: OTHER SPECIAL BENEFITS

FACTS: Respondents Ybarola Jr. and Rivera Jr. were hired on 1977 and 1983 respectively
and eventually became managers who solicit advertisements and servicing various
clients of RMN (Radio Mindanao Network). In Sept 2002, due to RMN’s restructuring,
the respondents were terminated and were given their separation pay – P631,250 for
Ybarola and P481,250 for Rivera. Sometime in Dec 2002, they executed
release/quitclaim affidavits.
Aggrieved, they filed separate complaints which were later consolidated against RMN
and its President, Canoy, for illegal dismissal with several money claims. They indicated
that their salary rates were P60,000 for Ybarola and P40,000 for Rivera.
The respondents argued that the release/quitclaim they executed should not be a bar to
the recovery of the full benefits due them; while they admitted that they signed release
documents, they did so due to dire necessity.
The petitioners denied liability contending that the amounts the respondents received
represented a fair and reasonable settlement of their claims, as attested to by the
release affidavits which they executed freely and voluntarily. They belied the
respondent’s claimed salary rates, alleging that they each received a monthly salary of
P9,177, as shown by the payrolls.
The Labor Arbiter dismissed the illegal dismissal complaint, but ordered the payment of
additional separation pay to the respondents – P490,066 for Ybarola and P429,517.55
for Rivera.
Petitioners appealed to the NLRC(National Labor Relations Commission) which set aside
the LA’s (Labor Arbiter) decision and dismissed the complaint for lack of merit. It ruled
that the withholding tax certificate cannot be the basis of the computation of the
respondent’s separation pay as the tax document included the the respondents’ cost-of-
living allowance and commissions; as a general rule, commissions cannot be included in
transactions attributable to the respondents. From the NLRC, the respondents sought
relief from the CA through a petition for certiorari under Rule 65 of the Rules of Court.
The CA granted the petition and set aside the assailed NLRC dispositions. It reinstated
the LA’s separation pay award, rejecting the NLRC’s RULING that the respondents’
commissions are not included in the computation of their separation pay. It pointed out
that in the present case, the respondents earned their commissions through actual
market transactions attributable to them; these commissions, therefore, were part of
their salary.
The appellate court declared the release affidavits executed by the respondents invalid
for being against public policy, citing two reasons: (1) the terms if the settlements are
unconscionable; the separation pay the respondents received was deficient by at least
P400,000 for each of them; and (2) the absence of the voluntariness when the
respondents signed the document, it was their dire circumstances and inability to
support their families that finally drove them to accept the amount the petitioners

165 | P a g e
offered. Significantly, they dallied and it took them 3 months to sign the release
affidavits.

ISSUE:
Whether or not the release/quitclaim affidavits are invalid for being against
public policy.

RULING:
The release/quitclaim affidavits are invalid for being against public policy for two
reasons: the terms are unconscionable; the separation pay for the termination due to
restructuring was deficient by P400,000 for each employee; they were given only half o f
the amount they were legally entitled to; and (2) the absence of voluntariness when the
employees signed the document, it was their dire circumstances and inability to support
their families that finally drove them to accept the amount offered. Without jobs and
with families to support, they dallied in executing the quitclaim instrument, but were
eventually forced to sign given their circumstances. To be sure, a settlement under
these terms is not and cannot be a reasonable one, given especially the respondents’
length of service – 25 years for Ybarola and 19 years for Rivera.

166 | P a g e
PADILLO VS RURAL BANK OF NABUNTURAN
G.R. No. 199338
January 21, 2013

FACTS:
Eleazar Padillo (Padillo) herein petitioner, deceased and represented by his heirs, was an
employed by Rural Bank of Nabunturan Inc. (RBNI) herein respondent, as its
Bookkeeper. Thereafter, on 2007, Padillo suffered a mild stroke due to hypertension
which consequently impaired his ability to effectively pursue his work. On September 10
2007 he wrote a letter addressed to Mark Oropeza (Oropeza) President of RBNI
expressing his intention to avail of an early retirement package. However despite
several follow-ups, Padillo’s request remained unheeded. Thus, on October 3, 2007,
Padillo was separated from employment due to his poor and failing health. Not having
received his claimed retirement benefits, Padillo filed a complaint for recovery of unpaid
retirement benefits.

The LA dismissed the complaint of Padillo. On appeal with the NLRC, the NLRC reversed
and set aside the decision of the LA. Subsequently, the CA reversed the RULING of the
NLRC and affirmed the decision of the LA. Among others, Padillo avers that the act of
RBNI and Oropeza in ignoring his request for the early retirement package constitutes
bad faith and thus susceptible for the damages. Hence this petition.

ISSUE:
Whether or not the Labor Code provision on termination on the ground of disease
under Article 297 applies on this case

RULING:
At the outset, it must be maintained that the Labor Code provision on termination on
the ground of disease under Article 2972does not apply in this case, considering that it
was the petitioner and not the Bank who severed the employment relations. As borne
from the records, the clear import of Padillos September 10, 2007 letter and the fact
that he stopped working before the foregoing date and never reported for work even
thereafter show that it was Padillo who voluntarily retired and that he was not
terminated by the Bank.

As held in Villaruel, a precedent which the CA correctly applied, Article 297 of the Labor
Code contemplates a situation where the employer, and not the employee, initiates the
termination of employment on the ground of the latter’s disease or sickness.

A plain reading of the Article 297 of the Labor Code clearly presupposes that it is the
employer who terminates the services of the employee found to be suffering from any
disease and whose continued employment is prohibited by law or is prejudicial to his
health as well as to the health of his co-employees. It does not contemplate a situation
where it is the employee who severs his or her employment ties. This is precisely the

167 | P a g e
reason why Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor
Code, directs that an employer shall not terminate the services of the employee unless
there is a certification by a competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period of six (6) months even
with proper medical treatment.
Thus, given the inapplicability of Article 297 of the Labor Code to the case at bar, it
necessarily follows that petitioners claim for separation pay anchored on such provision
must be denied.

168 | P a g e
GRACE CHRISTIAN HIGH SCHOOL V. LAVANDERA
G.R. No. 177845
August 20, 2014

DOCTRINE:
With regard to retirement pay, one-half (1/2) month salary means 22.5 days. 15 days
plus 2.5 days representing one-twelfth (1/12) of the 13th month pay and the remaining
5 days for SIL.

FACTS:
Filipinas was employed by petitioner Grace Christian High School (GCHS) as high school
teacher since June1977, with a monthly salary of 18,662.00 as of May 31, 2001.
On August 30, 2001, Filipinas filed a complaint for illegal (constructive) dismissal, non-
payment of service incentive leave (SIL) pay, separation pay, service allowance,
damages, and attorney’s fees against GCHS and/or its principal, Dr. James Tan. She
alleged that on May 11, 2001, she was informed that her services were to be terminated
effective May 31, 2001, pursuant to GCHS’ retirement plan which gives the school the
option to retire a teacher who has rendered at least 20 years of service, regardless of
age, with a retirement pay of one-half (½) month for every year of service. At that time,
Filipinas was only 58 years old and still physically fit to work. She pleaded with GCHS to
allow her to continue teaching but her services were terminated, contrary to the
provisions of Republic Act No. (RA) 7641, otherwise known as the “Retirement Pay Law.”
The LA dismissed the illegal dismissal case but found the retirement benefits payable
under GCHS plan to be deficient.
The NLRC reversed LA’s award and held that retirement pay should be computed based
on her monthly salary at the time of her retirement.
The CA modified NLRC’s decision and ruled that the computation of “one-half month
salary” by equating it to”22.5 days”.

ISSUE:
W/N the multiplier of “22.5” days is to be used in computing the retirement pay.

RULING:

Yes, RA 7641, which was enacted on December 9, 1992, amended Article 287 of the
Labor Code, providing for the rules on retirement pay to qualified private sector
employees in the absence of any retirement plan in the establishment. The said law
states that “an employee’s retirement benefits under any collective bargaining
agreement (CBA)]and other agreements shall not be less than those provided” under
the same – that is, at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year – and that “unless
the parties provide for broader inclusions, the term one-half (1/2) month salary shall
mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.”

169 | P a g e
This provision is applicable where (a) there is no CBA or other applicable aggrement
providing for retirement benefits to employees, or (b) there is a CBA or other applicable
agreement providing for retirement benefits but it is below the requirement set by law

The court reiterated its RULING in the case of Elegir v. Philippine Airlines in which it
affirmed that “one-half (1/2) month salary means 22.5 days: 15 days plus 2.5 days
representing one-twelfth (1/12) of the 13th month pay and the remaining 5 days for SIL”
The Court sees no reason to depart from this interpretation. GCHS’ argument therefore
that the 5 days SIL should be likewise pro-rated to their 1/12 equivalent must fail.
In passing, the Court held that the award of legal interest at the rate of 6% per annum
on the amount of P68,150.00 representing the retirement pay differentials due Filipinas
should be reckoned from the rendition of the LA’s Decision on March 26, 2002 and not
from the filing of the illegal dismissal complaint.

170 | P a g e
GOODYEAR PHILIPPINES, INC v. ANGUS
G.R. No. 185449

DOCTRINE: “In the absence of an express or implied prohibition against it, collection of
both retirement benefits and separation pay upon severance from employment is
allowed. This is grounded on the social justice policy that doubts should always be
resolved in favor of labor rights.”

FACTS:
Angus was employed by Goodyear on November 16, 1966 and occupied the position of
Secretary to the Manager of Quality and Technology.

In order to maintain the viability of its operations in the midst of economic reversals,
Goodyear implemented cost-saving measures which included the streamlining of its
workforce. Angus’ position was declared as redundant or “no longer necessary”

In a letter sent to her by the HR: “As Company practice, termination due to redundancy
or retrenchment is paid at 45 days' pay per year of service. Considering, that you have
rendered 34.92 years of service to the Company as of October 18, 2001, and have
reached the required minimum age of 55 to qualify for early retirement, Management
has decided to grant you early retirement benefit at 47 days' per year of service.”

“The Company will pay you the following termination benefits on October 18, 2001: 47
days' pay per year of service (which will come from the Pension Fund), fractions of 13th
and 14th months pay, longevity pay, emergency leave and any earned and unused
vacation and/or sick leave. The refund of your contributions to the Goodyear Savings
Plan, as well as the Company's share will be handled separately by Security Bank
Corporation, the Administrator of said Plan.”

Upon receipt, Angus responded through a letter of even date;

Dear Sirs:
With reference to the attached letter dated September 18, 2001, I accept Management
decision to avail early retirement benefit. However, I do not agree on the terms stated
therein. I suggest I be given a premium of additional 3 days for every year of service
which is only 6.3% or a total of 50 days. I gathered it is Philippine industry's practice to
give premium to encourage employees to avail of the early retirement benefit.
Acceptance of this proposal will make my separation from Goodyear pleasant.

On November 20, 2001, Angus accepted the checks which covered payment of her
retirement benefits computed at 47 days' pay per year of service and other company
benefits. However, she put the following annotation in the acknowledgement receipt
thereof:

171 | P a g e
Received under protest — amount is not acceptable. Acceptance is on condition that I
will be given a premium of additional 3 days for every year of service.

Since my service was terminated due to redundancy, I now claim my separation pay as
mandated by law. This is a separate claim from my early retirement benefit.
Allegedly because of the above-quoted annotation, and also of Angus' refusal to sign a
Release and Quitclaim, petitioners took back the checks.

In response, Ramos wrote her a letter explaining that the company has already offered
her the most favorable separation benefits due to redundancy, that is, 47 days' pay per
year of service instead of the applicable rate of 45 days' pay per year of service.
Angus reiterated her claim for both termination pay and early retirement benefits.

On January 17, 2002, Angus finally accepted a check in the amount of P1,958,927.89
purportedly inclusive of all termination benefits computed at 47 days' pay per year of
service. She likewise executed a Release and Quitclaim in favor of Goodyear.

On February 5, 2002, Angus filed with the Labor Arbiter a complaint for illegal dismissal
with claims for separation pay, damages and attorney's fees against petitioners.

In her Position Paper, Angus claimed that her termination by reason of redundancy was
effected in violation of the Labor Code for it was not timely reported to the DOLE and no
separation pay was given to her; that the separation pay to which she is entitled by law
is entirely different from the retirement benefits that she received; that nothing in the
company's Retirement Plan under the CBA, the CBA itself or the Employment Contract
prohibits the grant of more than one kind of separation pay; and, that she was only
forced to sign a quitclaim after accepting her retirement benefits.

On the other hand, petitioners asseverated in their Position Paper that Angus was
validly dismissed for an authorized cause; that she voluntarily accepted her termination
benefits and freely executed the corresponding quitclaim; that her receipt of early
retirement benefits equivalent to 47 days' pay for every year of service, which amount is
higher than the regular separation pay, had effectively barred her from recovering
separation pay due to redundancy.

ISSUE:
Is the petitioner entitled to separation pay AND early retirement benefit?

RULING:
Angus is entitled to both separation pay and early retirement benefit due to the absence
of a specific provision in the CBA prohibiting recovery of both.
An employee is entitled to recover both separation pay and retirement benefits in the
absence of a specific prohibition in the Retirement Plan or CBA. An employee's right to

172 | P a g e
receive separation pay in addition to retirement benefits depends upon the provisions
of the company's Retirement Plan and/or CBA.
Petitioners allege that there is a provision in the last CBA against the recovery of both
retirement benefits and separation pay. To support their claim, petitioners submitted a
copy of what appears to be a portion of the company CBA entitled "Retirement Plan,
Life Insurance, Physical Disability Pay and Resignation Pay." Section 1, Article XI thereof
provides that the availment of retirement benefits precludes entitlement to any
separation pay.
Angus presented the parties' 2001-2004 CBA, it did not contain any restriction on the
availment of benefits under the company's Retirement Plan AND of separation pay.
The amount Angus received from petitioners represented only her retirement pay and
not separation.
Petitioners also argue that Angus is not entitled to retirement pay because she does not
meet the requirements enumerated in the Retirement Plan provision of the CBA. The
Court disagrees. While it is obvious that Angus is not entitled to compulsory retirement
as she has not yet reached the age of 60, there is no denying, that she is qualified for
early retirement. Under the provision of the Retirement Plan of the CBA, a worker who
is at least 50 years old and with at least 15 years of service, and who has been
recommended by the President of the Union for early retirement and duly approved by
the Human Resources Director, shall be entitled to lump sum retirement benefits.
Angus has met all these requirements.
Retirement benefits and separation pay are not mutually exclusive. Retirement benefits
are a form of reward for an employee's loyalty and service to an employer and are
earned under existing laws, CBAs, employment contracts and company policies.
Separation pay is that amount which an employee receives at the time of his severance
from employment, designed to provide the employee with the wherewithal during the
period that he is looking for another employment and is recoverable only in instances
enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal cases
when reinstatement is not feasible. In the case at bar, Article 283 clearly entitles Angus
to separation pay apart from the retirement benefits she received from petitioners.

173 | P a g e
BANCO DE ORO UNIBANK VS. SAGAYSAY
GR No. 214961
DOCTRINE: OTHER SPECIAL BENEFITS
By accepting the employment offer of BDO, Sagaysay was deemed to have assented to
all existing rules, regulations and policy of the bank, including the retirement plan.

FACTS:

On May 16, 2006, respondent Guillermo Sagaysay (Sagaysay) was hired by petitioner
Banco De Oro Unibank, Inc., (BDO) as Senior Accounting Assistant in its San Jose, Nueva
Ecija, branch as a result of a merger with United Overseas Bank (UOB), with BDO as the
surviving bank. Sagaysay was previously employed in UOB from 2004 to 2006 or for two
(2) years. Prior thereto, he worked for Metropolitan Bank and Trust Co. (Metrobank)
from 1976 to 2004 for a period of twenty-eight (28) years.

In a letter, 6 dated January 8 2010, BDO informed Sagaysay that, pursuant to the
retirement policy of the bank which mandated its retirement age to be sixty (60), he
would be formally retired effective September 1, 2010, a few days after his 60th
birthday. The normal or compulsory retirement age of the bank was based on its
retirement plan 7 which was implemented on July 1, 1994, Section 1, Article V.

In an e-mail, 9 dated July 27, 2010, Sagaysay wrote that, although the time had come
that the BDO Retirement Program would be implemented to those reaching the age of
sixty (60), he requested that his services be extended because he had an outstanding
loan and his children were still in college. He assured BDO that he was healthy and
could still perform his duties in the branch. BDO denied Sagaysay' s request.

In another e-mail, dated August 19, 2010, Sagaysay appealed to BDO to extend his
service for 8.5 months or up to May 16, 2011 so that he could render at least ve (5)
years of employment which would entitle him to 50% of his basic pay for every year of
service upon his retirement. BDO denied Sagaysay's appeal and retired him on
September 1, 2010. As of his last day of work, he was earning a monthly salary of
P28,048.00.

Sagaysay then signed the Release, Waiver and Quitclaim (quitclaim), dated October 22,
2010, for and in consideration of P98,376.14. The quitclaim stated, among others, that
in consideration of the foregoing payment, Sagaysay released and discharged the bank,
its afliates and its subsidiaries from any action, suit, claim or demand in connection with
his employment.

On January 10, 2011, Sagaysay led a complaint 12 for illegal dismissal with prayer for
reinstatement and payment of backwages, moral damages, exemplary damages, and
attorney's fee against BDO before the Labor Arbiter (LA). He claimed that despite his
appeal, BDO compulsory retired him on September 1, 2010. As a result, he and his

174 | P a g e
family suffered damages in the amount of P2,225,403.00 which he would have received
if he was made to retire at the age of sixty-five (65).

LA: Ruled that Sagaysay was illegally dismissed because he was forced to avail of an
optional retirement at the age of sixty (60) which was contrary to the provisions of
Article 287 of the Labor Code. he was terminated on the basis of a provision in a
retirement plan to which he did not freely assent. BDO took advantage of his
predicament and made him sign a quitclaim in exchange for a small consideration.

NLRC: Reversed and set aside the RULING of the LA. BDO's retirement plan, which
mandated a normal or compulsory retirement date at the age of sixty (60), was effective
as early as June 1, 1994. The plan was renamed Banco de Oro Multiemployer
Retirement Plan on July 1, 2004, but the compulsory retirement age of sixty (60) was
preserved. When Sagaysay was employed on May 16, 2006, the retirement plan was
already in full force and effect. Thus, the NLRC concluded that when he accepted his
employment with BDO, he assented to the provisions of the retirement plan.

CA: Reversed the NLRC RULING. Ruled that a retirement plan with no voluntary
acquiescence on the part of the employee was ineffective.

ISSUE: W/N a retirement plan adopted before the employment of an employee is

deemed binding on the latter.

RULING:

Sagaysay was sufficiently informed of the retirement plan and had consented to the
retirement plan of BDO before his compulsory retirement because the retirement plan
was established 12 years before Sagaysay was employed and no employee had
earnestly questioned the retirement plan. By accepting the employment offer of BDO,
Sagaysay was deemed to have assented to all existing rules, regulations and policy of
the bank, including the retirement plan. BDO ISSUEd a memorandum regarding the
implementation of its retirement program, reiterating that the normal retirement date
was the first of the month following the employee’s sixtieth birthday addressed to all
employees and officers. By this time Sagaysay was already an employee and he did not
deny being informed of such memorandum. For four years, from the time he was
employed until his retirement, yet he did not express his dissent. Sagaysay earlier
acknowledged the retirement program of BDO and even requested for an extension of
service. Moreover, he signed a quitclaim for and in consideration of P98,376.14 which
discharged the bank, its affiliates and its subsidiaries from any action, suit, claim or
demand in connection with his employment. When it is shown that the person
executing the waiver did so voluntarily, with full understanding of what he was doing,
and the consideration for the quitclaim was credible and reasonable, the transaction
must be recognized as a valid and binding undertaking. Court is of the view that the
quitclaim was validly executed. WHEREFORE, the petition is GRANTED

175 | P a g e
PEREZ VS. COMPARTS INDUSTRIES INC. GR NO. 197557

DOCTRINE: Entitlement to Retirement Pay

FACTS:
[Perez] started her employment with [CII] on 16 July 1988 and became a regular
employee thereof on 01 September 1988. After years of working and after several
promotions, she was eventually appointed as Marketing Manager. She held this position
from 1998 up to 10 January 2009, the date when she resigned from her work.
[CII] has a retirement program for its managerial employees or officers covered
by "Comparts Industries, Inc. Employees Retirement Plan" (Retirement Plan) that took
effect on 01 June 1999 and was amended on 25 January 2001. Included therein are
provisions relating to optional or early retirement and optional retirement benefits.
Prior to her resignation, [Perez] manifested to [CII] sometime in November 2007
her intention to avail of the optional retirement program since she was already qualified
to retire under it. Her application was denied. In January 2008, while vacationing in the
United States of America (USA), she again filed an application for optional retirement to
take advantage of a job offered to her in the said country. Still, her application was
denied. [CII] justified its denial of [Perez's] application saying that, under the Retirement
Plan, it has the option to grant or deny her application for optional retirement and
considering that it is experiencing financial crisis, it has no choice but to disallow her
intention.
 Perez maintains that she is entitled to separation pay: (1) primarily through the
optional retirement program under the Retirement Plan having rendered more than
twenty (20) years of service to CII, (2) through a similar optional retirement program
under the CBA which has been likewise extended to other managerial/middle
management employees in several instances, or (3) a retrenchment program
undertaken by CII because of the global financial crisis.

ISSUE:
Whether or not petitioner is entitled to optional retirement program.

RULING:
First and foremost, we emphasize that termination of employment by the
employee, as in this instance, does not entitle the employee to separation
pay. Separation pay is that amount which an employee receives at the time of his
severance from employment, designed to provide the employee with the wherewithal
during the period that he is looking for another employment and is recoverable only in
instances enumerated under Articles 283 and 284 of the Labor Code or in illegal
dismissal cases when reinstatement is not feasible.
Second, in the matter of Perez's entitlement to optional retirement benefits, we
agree with the NLRC and the appellate court that as a managerial employee, she is
covered by the Retirement Plan for CII Officers which took effect in 1999 and was
amended in 2001.

176 | P a g e
 A Retirement Plan in a company partakes the nature of a contract, with the
employer and the employee as the contracting parties. It creates a contractual
obligation in which the promise to pay retirement benefits is made in, consideration of
the continued faithful service of, the employee for the requisite period. Being a
contract, the employer and employee may establish such stipulations, clauses, terms
and conditions as they may deem convenient.
Observably, as stipulated in the Retirement Plan, it is not enough that an
employee of [CII] who wants to optionally retire meets the conditions for optional
retirement. [CII] has to give its consent for the optional retirement to operate. In this
case, [Perez's] application for optional retirement was denied several times as CII still
needs her services. [Perez's] unilateral act of retiring without the consent of [CII] does
not bind the latter with the provisions of the Retirement Plan. Therefore, [CII] is not
liable to give [Perez] the optional retirement benefits provided therein.
Clearly, the age of retirement is primarily determined by the existing agreement
or employment contract. In the absence of such agreement, the retirement age shall be
fixed by law. Under the law, the mandated compulsory retirement age is set at 65 years,
while the minimum age for optional retirement is set at 60 years.

177 | P a g e
CATOTOCAN V. LOURDES SCHOOL OF QUEZON CITY, G. R. NO. 213486, APRIL
26, 2017
Doctrine: Retirement Plans

FACTS:
Petitioner Catotocan started her employment in Lourdes School of Quezon City
(LSQC) in 1971 as a music teacher. By the school year 200-2006, she had already
served for 35 years.
LSQC has a retirement plan providing for retirement at 60 years old or separation
pay depending on the number of years of service. In relation to its retirement
policy, LSQC issued Administrative Order No. 2003-004. The said order provides
that “An employee may apply for retirement or be retired by the school when
he/she reaches the age of sixty (60) years or when he/she completes thirty (30)
years of service, whichever comes first.”
Petitioner and other co-employees assailed the said order. They argued that they do
not deserve to be retired and be rehired when they are, in fact, very much capable of
doing their duties and responsibilities.
LSQC retired Petitioner sometime in June 2006 after completing 35 years of service.
Full retirement benefits were given to her computed based on the latest salary
multiplied by the total years of service. Under the school's retirement policy, 60% of
her retirement benefit was paid in lump sum by the trustee bank, and the balance
was to be paid in equal monthly pensions over the next three (3) years.

60% of that amount, or Five Hundred Seventy-One Thousand Seven Hundred and
One Philippine Pesos (Php571,701.00) was credited to her savings account, which
she opened in accordance with the school's retirement policy.

Petitioner was told that if she desires, she may signify in writing her intent to
continue serving the school on a contractual basis. She responded by submitting a
"Letter of Intent" on February 14, 2006.

Petitioner was rehired for two school years as a guidance counselor. When she re-
applied for the third time, LSQC no longer considered her application.

Petitioner filed a complaint for illegal dismissal.

Both LA and NLRC dismissed Catotocan’s complaint. Likewise, the CA dismissed the
petition.

ISSUES:

WON the receipt of Catotocan of her retirement benefits will not stop her from
pursuing an illegal dismissal complaint against LSQC.

178 | P a g e
SC/HELD:

SC denied the petition.

LSQC’s retirement plan is not per se repugnant to the constitutional guaranty of

security of tenure. By its express language, the Labor Code permits employers and
employees to fix the applicable retirement age at 60 years or below, provided that
the employees' retirement benefits under any CBA and other agreements shall not
be less than those provided therein.

Catotocan's subsequent actions after her "retirement" are actually tantamount to

her consent to LSQC's retirement policy of retiring her from service upon serving
the school for at least thirty (30) continuous years.

(1) after being notified that she was being retired from service by LSQC, she
opened a savings account with BDO, the trustee bank;

(2) she accepted all the proceeds of her retirement package: the lump sum
and all the monthly payments credited to her account until June 2009; and

(3) upon acceptance of the retirement benefits, there was no notation that
she is accepting the retirement benefits under protest or without prejudice to
the filing of an illegal dismissal case.

Moreover, petitioner’s correspondence with the respondent following her

"retirement” shows her voluntary assent to the latter’s retirement policy. Said letter
stipulates that “re-hiring was exclusive only for those employees who have availed
of the retirement benefits or who have been retired by the school but who has not
yet reached 65 years of age.

Thus, since petitioner has availed of this contractual employment which is

exclusively offered only to LSQC's qualified retirees for three (3) consecutive years
following her retirement, she can no longer dispute that she has indeed legitimately
retired from employment, and was not illegally dismissed.

Furthermore, petitioner’s availment of the re-hiring program of LSQC for qualified

retirees for 3 consecutive years is a supervening event that would reveal that she
has already voluntarily and freely signified her consent to the retirement policy
despite her initial opposition to it.

179 | P a g e
PHILIPPINE AIRLINES INC. VS. ARJAN T. HASSARAM
G.R. No. 217730

FACTS: Hassaram filed a case against PAL for illegal dismissal and the payment of
retirement benefits, damages, and attorney's fees. He claimed that he had applied for
retirement from PAL in August 2000 after rendering 24 years of service as a pilot, but
that his application was denied. Instead, PAL informed him that he had lost his
employment in the company as of 9 June 1998, in view of his failure to comply with the
Return to Work Order ISSUEd by the Secretary of Labor against members of the Airline
Pilots Association of the Philippines (ALPAP) on 7 June 1998. Hassaram argued that he
was not covered by the Secretary's Return to Work Order; hence, PAL had no valid
ground for his dismissal. In the course of the trial it was found that Hassaram's
purported receipt of retirement benefits in the amount of P4,456,817.75 pursuant to
the PAL-ALPAP Plan.  PAL likewise alleged that, as a consequence of this newly
discovered payment, any claim made by Hassaram for retirement benefits should be
deemed extinguished.

ISSUE: Whether the amount received by Hassaram under the PAL-ALPAP

Retirement Plan should be deemed part of his retirement pay together with
PAL Pilots' Retirement Benefit Plan which is another retirement plan aside
from PAL-ALPAP
 Whether Hassaram is entitled to receive retirement benefits under Article 287
of the Labor Code.
RULING: The Supreme Court ruled that Hassaram is entitled to both retirement
plans but seeing Hassaram has received his benefits under the Plan, he is now
entitled to claim only his remaining benefits under the CBA, i.e., the amount of
P120,000 (24 years x P5,000) for his 24 years of service to the company. Since
the PAL-ALPAP retirement fund raised from contributions exclusively
from [PAL] of amounts equivalent to 20% of each pilot's gross monthly pay,
pilot gets an amount equivalent to 240% of his gross monthly income for every
year of service he rendered to petitioner. This is in addition to the amount of
not less than P100,000.00 that he shall receive under the 1967 Retirement Plan

As to the ISSUE of whether or not Hassaram is entitled to receive

retirement benefits under Article 287 of the Labor Code, the petitioner would
only be receiving a retirement pay equivalent to at least one-half (1/2) of his
monthly salary for every year of service, a fraction of at least six (6) months
being considered as one whole year. Which means that, one-half (1/2) month
salary means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12)
of the 13th month pay and the remaining 5 days for service incentive leave.
Comparing the benefits under the two (2) retirement schemes, it can readily be
perceived that the 22.5 days’ worth of salary for every year of service provided
under Article 287 of the Labor Code cannot match the 240% of salary or almost
two and a half worth of monthly salary per year of service provided under the

180 | P a g e
PAL Pilots' Retirement Benefit Plan, which will be further added to the
P125,000.00 to which the petitioner is entitled under the PAL-ALPAP
Retirement Plan. Clearly then, it is to the petitioner's advantage that PAL's
retirement plans were applied in the computation of his retirement benefits

181 | P a g e