2. Philippine Spring Water Resources vs.

Mahilum

FACTS: Petitioner Philippine Spring Water Resources, Inc. (PSWRI), (PSWRI), engaged in the business
of engaged in the business of manufacturing, selling and distributing bottled mineral water, hired Mahilum
as Vice President for Sales and Marketing for the Bulacan-South Luzon Area.

In an inaugural speech supposedly headed by Mahilum, he was required to explain why Lua, President
and Chief Executive Officer (CEO), to Bulacan plant, was not recognized and made to deliver his speech.
He was unable to attend because he had a meeting with his client and he requested Evangelista to take
charge of the meeting for the inauguration. At the same time, he was placed under preventive suspension
for thirty (30) days. When his 30-day suspension ended, Mahilum reported for work but was prevented
from work but was prevented from entering the workplace. He received a copy of the Memorandum,
terminating his services effective the next day effective the next day a clearance certificate was issued to
Mahilum.

Mahilum filed a complaint for illegal dismissal with prayer for reinstatement, prayer for reinstatement,
payment of back wages and damages. He argued that he was illegally suspended and, thereafter,
dismissed constructively from the service. He also dismissed constructively from the service. He also
claimed that he was forced to sign the waiver and quitclaim.

LA dismissed Mahilum’s complaint for lack of merit on the ground that the quitclaim he had executed
barred his right to question his dismissal under the principle of estoppel. NLRC ruled in his favor on the
ground that the subject quitclaim did not bar the institution of the case for illegal dismissal. NLRC held that
Mahilum was illegally dismissed by PSWRI. Although he shared a substantial part of it, Mahilum could not
be entirely blamed for the fiasco. Hence, ordering petitioner to pay the respondent for the separation pay
and salar. In addition, respondent should pay petitioner moral and exemplary damages.

CA reverse the decision of NLRC and ruled that Mahilum’s conduct during the inauguration did not
constitute willful disobedience or breach of trust, hence, rendering his termination as illegal and without
cause.

ISSUE:

1.) Mahilum is a contractual employee and the period of probation depended on the stipulation of the
Memorandum of Agreement entered into by the parties.

2.) Both substantive and procedural due process was observed in Mahilum’s termination from
employment with PSWRI.

3.) It was error to award the 0.25% commission on the cash sales of the company up to the finality of the
decision. A commission is an incentive and must be earned. It is not a benefit that is mandated. The
commission is given to salesmen and other officials as incentive, out of the liberality and generosity of the
employer.

4.) The award of moral and exemplary damages has no basis.

RULING:

Mahilum was a regular employee who was entitled to security of tenure

Respondent Mahilum was working for the petitioner for 8 months before he was dismissed. Pursuant to
Article 281 of LC: Probationary employment shall not exceed six (6) months from the date the employee
started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may be terminated for a just
cause or when he fails to qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a regular employee. Thus, the services of an
employee who has been engaged on probationary basis may be terminated for any of the following: (1) a
just or (2) an authorized cause and (3) when he fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer.

Under the circumstances, the petitioners may not be permitted to belatedly harp on its choice not to
extend his alleged probationary status to regular employment as a ground for his dismissal. Besides,
having been allowed to work after the lapse of the probationary period, Mahilum became a regular
employee. He was hired in June 2004 and was dismissed on February 5,2005. Thus, he served the
company for eight (8) months. This is in consonance with CALS Poultry Supply Corporation v.
Roco, where the Court ruled that the computation of the 6-month probationary period was reckoned from
the date of appointment up to the same calendar date of the 6th month following.

Malihum was illegally dismissed

The Court ruled that Mahilum was illegally dismissed as his terminations was not among the authorize
causes prescribed by law. Mahilum’s designation as the chairman of the whole affair did not form part of
his duty as a supervisor. Mahilum was engaged to supervise the sales and marketing aspects of PSWRI’s
Bulacan Plant. The charge of loss of trust and confidence had no leg to stand on, as the act complained
of was not work-related. Simply put, the petitioners were not able to prove that Mahilum was unfit to
continue working for the company.

In the words of the CA: Even as jurisprudence has distinguished the treatment of managerial employees
or employees occupying positions of trust and confidence from that of rank-and-file personnel, insofar as
the application of the doctrine of trust and confidence is concerned, such is inapplicable to the instant
case since as above-stated, private respondent’s lapse was justified, unintentional, without deliberate
intent and unrelated to the duty for which he was engaged. Likewise, the quitclaim executed by Mahilum
did not operate to bar a cause of action for illegal dismissal. That the amounts received by Mahilum were
only those owing to him under the law and the subject quitclaim may not be considered as a valid and
binding undertaking.

Entitlement to monetary claims

Due to the strained relations of the parties, however, the payment of separation pay has been considered
an acceptable alternative, when reinstatement is no longer desirable or viable. Mahilum, as a regular
employee at the time of his illegal dismissal, is entitled to separation pay and backwages , computed from
the time of his dismissal up to the finality of the decision. As correctly ruled by the NLRC, reinstatement is
no longer viable considering the circumstances of animosity between Mahilum and Lua.

Propriety of awarding commissions and damages

The Court resolves to delete the inclusion of 0.25% commission on cash and delivery sales as part of
Mahilum’s backwages.

Backwages are granted on grounds of equity to workers for earnings lost due to their illegal dismissal
from work. They represent reparation for the illegal dismissal of an employee based on earnings which
the employee would have obtained, either by virtue of a lawful decree or order, as in the case of a wage
increase under a wage order, or by rightful expectation, as in the case of one’s salary or wage. The
outstanding feature of backwages is the degree of assuredness to an employee that he would have had
them as earnings had he not been illegally terminated from his employment.

the determination of whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment. In Phil Duplicators, Inc. v. NLRC, the Court held that
commissions earned by salesmen form part of their basic salary. The salesmen’s commissions,
comprising a predetermined percentage of the selling price of the goods sold by each salesman, were
properly included in the term basic salary for purposes of computing the 13th month pay. The salesmen’s
commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit, but a
portion of the salary structure which represents an automatic increment to the monetary value initially
assigned to each unit of work rendered by a salesman.

On the other hand, in Boie-Takeda Chemicals, Inc. v. De la Serna, the so-called commissions paid to or
received by medical representatives were excluded from the term basic salary because these were paid
to the medical representatives and rank-and-file employees as productivity bonuses, which were
generally tied to the productivity, or capacity for revenue production, of a corporation and such bonuses
closely resemble profit-sharing payments and had no clear direct or necessary relation to the amount of
work actually done by each individual employee.

Phil. Duplicator case cannot be automatically applied without considering his position as Vice-President
for sales and marketing. Mahilum’s 0.25% commission based on the monthly sales and 0.25%
commission for cash payments are not sales commission. The latter is not properly includable in the basic
salary as it must be earned by actual market transactions attributable to the claimant. Mahilum is not a
salesman who directly effected any sale of a product, the commission embodied in the agreement partook
of the nature of profit-sharing business based on quota. Mahilum’s backwages must be pegged at his
basic salary, excluding the commissions. The award of backwages shall earn legal interest at the rate of
six percent (6%) per annum in accordance with prevailing jurisprudence.

Award of exemplary and moral damages is deleted

Finally, the Court resolves to delete the award for moral and exemplary damages in favor of Mahilum.
Worth reiterating is the rule that moral damages are recoverable where the dismissal 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. Likewise, exemplary damages may be awarded if the
dismissal was effected in a wanton, oppressive or malevolent manner.

WHEREFORE, the petition is PARTIALLY GRANTED. Decision of CA affirmed w/ modification.

4. DAVID v. MACASIO

FACTS: In January 2009, Macasio filed before the LA a complaint against petitioner Ariel L. David, doing
business under the name and style “Yiels Hog Dealer,” for non-payment of overtime pay, holiday pay,
holiday pay and 13th month pay. He also claimed payment for moral and exemplary damages, attorney’s
fees, and service incentive leave (SIL). Macasio claimed that he had been working for David since 1995;
that the latter exercises control over his performance of work and the work tools and equipment used by
Macasio was owned by David and that the latter employs 25 butchers and delivery drivers. In defense,
David claimed that he started his hog dealer business in 2005 and that he only has ten employees. That
he hired Macasio as a butcher or chopper on “pakyaw” or task basis.

LA ruled in favor of petitioner and that Macasio is not entitled to overtime, holiday, SIL and 13th month
pay. The NLRC affirmed the LA decision. CA ruled that Macasio is entitled to his monetary claims
following the doctrine laid down in Serrano v. Severino Santos Transit. The CA explained that as a task
basis employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay only if he is
likewise a “field personnel.”

ISSUE: Whether or not Macasio is entitled to overtime pay, holiday pay, 13th month and payment for
service incentive leave.

RULING:

Macasio is David’s employee as Er-Ee relationship exists.

The Court disagrees with David’s contention, the latter confuses engagement on "pakyaw" or task basis
with the lack of employment relationship. Impliedly, David asserts that their "pakyawan" or task basis
arrangement negates the existence of employment relationship. The Court stated that engagement on
"pakyaw" or task basis does not characterize the relationship that may exist between the parties.

Article 97(6) of the Labor Code defines wages as "xxx the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for services
rendered or to be rendered." In relation to Article 97(6), Article 101 of the Labor Code speaks of workers
paid by results or those whose pay is calculated in terms of the quantity or quality of their work output
which includes "pakyaw" work and other non-time work.

Applying the four-fold test: First, David was the one who hired Macasio as a butcher or chopper. Second,
David paid Macasio’s wages for the amount of Php 700 each day after the latter finished the day’s task.
Third, the power to dismiss is also apparent, David could regulate Macasio’s work and could even refuse
to give him any assignment and thereby, dismissing him. Foruth, David has the right to control over the
means and method of Macasio’s work. In sum, the totality of the surrounding circumstances of the
present case sufficiently points to an employer-employee relationship existing between David and
Macasio.

Macasio is engaged on "pakyaw" or task basis

In a task-basis work, the emphasis is on the task itself, in the sense that payment is reckoned in terms of
completion of the work, not in terms of the number of time spent in the completion of work. Once the work
or task is completed, the worker receives a fixed amount as wage, without regard to the standard
measurements of time generally used in pay computation. In this case, Macasio would receive the fixed
amount of ₱700.00 once he had completed his task regardless of the total hours that he spent at the
workplace.

(MAIN ISSUE) On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay

Under the provisions of LC, the general rule is that holiday and SIL pay provisions cover all employees.
To be excluded from their coverage, an employee must be one of those that these provisions expressly
exempt, strictly in accordance with the exemption. Under the IRR, exemption from the coverage of holiday
and SIL pay refer to "field personnel and other employees whose time and performance is unsupervised
by the employer including those who are engaged on task or contract basis." Note that unlike Article 82 of
the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged on task basis" as a
separate and distinct category from employees classified as "field personnel." Rather, these employees
are altogether merged into one classification of exempted employees.

However, in the case of Cebu Institute of Technology v. Ople, "those who are engaged on task or contract
basis" in the rule has already been interpreted to mean as follows: the phrase should however, be related
with "field personnel" applying the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow xxx Clearly, petitioner's teaching personnel
cannot be deemed field personnel which refers "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. [Par. 3, Article 82, Labor Code of the
Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave
benefit cannot therefore be sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from
the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the
holiday and SIL pay) only if they qualify as "field personnel."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista: Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase
"other employees whose performance is unsupervised by the employer" must not be understood as a
separate classification of employees to which service incentive leave shall not be granted. Rather, it
serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as
those "whose actual hours of work in the field cannot be determined with reasonable certainty."

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of
granting Macasio’s petition. In Serrano, the Court, applying the rule on ejusdem generis declared that
"employees engaged on task or contract basis xxx are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field personnel." The Court explained
that the phrase "including those who are engaged on task or contract basis, purely commission basis"
found in Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification
of employees to which SIL shall not be granted. Rather, as with its preceding phrase - "other employees
whose performance is unsupervised by the employer" - the phrase "including those who are engaged on
task or contract basis" serves to amplify the interpretation of the Labor Code definition of "field personnel"
as those "whose actual hours of work in the field cannot be determined with reasonable certainty."

Entitlement to holiday pay and 13th month pay, and definition of field personnel.

In determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL pay, the
presence (or absence) of employer supervision as regards the worker’s time and performance is the key:
if the worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a
holiday pay and SIL pay unless exempted from the exceptions specifically provided under Article 94
(holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or
task basis also falls within the meaning of "field personnel" under the law, then he is not entitled to these
monetary benefits.

Macasio does not fall under the definition of "field personnel." The CA’s finding in this regard is supported
by the established facts of this case: first, Macasio regularly performed his duties at David’s principal
place of business; second, his actual hours of work could be determined with reasonable certainty; and,
third, David supervised his time and performance of duties. Since Macasio cannot be considered a "field
personnel," then he is not exempted from the grant of holiday, SIL pay even as he was engaged on
"pakyaw" or task basis.

P.D. No. 851 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section
3(e), "employers of those who are paid on xxx task basis, and those who are paid a fixed amount for
performing a specific work, irrespective of the time consumed in the performance thereof" are exempted.
Thus, Macasio is not entitled to 13th month pay.

WHEREFORE, petition is partially granted. The decision of CA is affirmed with modification with respect
13th month pay.

6. ECOP vs. NWPC, RTWP-NCR and TUCP

FACTS: ECOP questioned the validity of the wage order issued by the RTWPB, increasing the minimum
the minimum wage by P17.00/day in NCR. Purusant to RA 6727, the Board issued Wage Order No. NCR-
01-A amending Wage Order No. NCR-01, as follows:

Section 1. Upon the effectivity of this Wage Order, all workers and employees in the private
sector in the National Capital Region already receiving wages above the statutory minimum wage rates
up to one hundred and twenty-five hundred and twenty-five pesos (P125.00) per day shall also receive an
increase of seventeen pesos (P17.00) per day.
The wage order was made applicable to all workers and employees in the private employees in the
private sector, including those who are paid above the statutory wage rate. The NWPC dismissed
ECOP’s rate. The NWPC dismissed ECOP’s petition. Hence, the matter was elevated to the Supreme
Court.

ECOP assails the board's grant of an "across-the-board" wage increase to workers already being paid
more than existing minimum wage rates (up to P125. 00 a day) as an alleged excess of authority, and
alleges that under the Republic Act No. 6727, the boards may only prescribe "minimum wages," not
determine "salary ceilings." ECOP likewise claims that Republic Act No. 6727 is meant to promote
collective bargaining as the primary mode of settling wages, and in its opinion, the boards cannot preempt
collective bargaining agreements by establishing ceilings. ECOP prays for the nullification of Wage Order
No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.

Solicitor General commented that the RTWPB may fix minimum wages according to the salary method,
while ECOP insisted that the RTWPB may do so only by adjusting floor wages. ECOP insists, in its reply,
that wage is a legislative function, and Republic Act No. 6727 delegated to the regional boards no more
than the power to grant minimum wage adjustments and in the absence of clear statutory authority, the
boards may not adjust "floor wages."

ISSUE: Whether the wage order is valid?

RULING:

The Court agreed with the Government. In the National Wages and Productivity Commission's Order, the
Commission noted that the determination of wages has generally involved two methods, the "floor-wage"
method and the "salary-ceiling" method. As quoted by the SC, “Historically, legislation involving the
adjustment of the minimum wage made use of two methods. The first method involves the fixing of
determinate amount that would be added to the prevailing statutory minimum wage. The other involves
"the salary-ceiling method" whereby the wage adjustment is applied to employees receiving a certain
denominated salary ceiling.” The shift from the first method to the second method was brought about by
labor disputes arising from wage distortions, a consequence of the implementation of the said wage
orders. Apparently, the wage order provisions that wage distortions shall be resolved through the
grievance procedure was perceived by legislators as ineffective in checking industrial unrest resulting
from wage order implementations. With the establishment of the second method as a practice in minimum
wage fixing, wage distortion disputes were minimized.

ART. 124. Standards / Criteria for Minimum Wage Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the
minimum standards of living necessary for the health, efficiency and general well-being of the employees
within the framework of the national economic and social development program. In the determination of
such regional minimum wages, the Regional Board shall, among other relevant factors, consider the
following:

(a) The demand for living wages;

(b) Wage adjustment vis-a-vis the consumer price index;

(c) The cost of living and changes or increases therein;

(d) The needs of workers and their families;

(e) The need to induce industries to invest in the countryside;

(f) Improvements in standards of living;

(g) The prevailing wage levels;

(h) Fair return of the capital invested and capacity to pay of emphasis employers;

(i) Effects of employment generation and family income; and

(j) The equitable distribution of income and wealth along the imperatives of economic and social
development.

The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an
across-the-board hike, performed an unlawful act of legislation. It is true that wage-fixing, like rate
constitutes an act Congress; it is also true, however, that Congress may delegate the power to fix
rates provided that, as in all delegations cases, Congress leaves sufficient standards. As this Court has
indicated, it is impressed that the above-quoted standards are sufficient, and in the light of the floor-wage
method's failure, the Court believes that the Commission correctly upheld the Regional Board of the
National Capital Region.

It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to rationalize
wages, that is, by having permanent boards to decide wages rather than leaving wage determination to
Congress year after year and law after law. The Court is not of course saying that the Act is an effort of
Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the question of wages to
the expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of specialized activities and
their attendant peculiar problems, the national legislature has found it more necessary to entrust to
administrative agencies the power of subordinate legislation' as it is caned."

The concept of "minimum wage" is, however, a different thing, and certainly, it means more than setting a
floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies the effort of
the State, as Republic Act No. 6727 expresses it, "to promote productivity-improvement and gain-sharing
measures to ensure a decent standard of living for the workers and their families; to guarantee the rights
of labor to its just share in the fruits of production; to enhance employment generation in the countryside
through industry dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth," and as the Constitution expresses it, to affirm "labor as a primary social economic
force." As the Court indicated, the statute would have no need for a board if the question were simply
"how much". The State is concerned, in addition, that wages are not distributed unevenly, and more
important, that social justice is subserved.

WHEREFORE, petition is denied.

8. NWPC and RTWPB vs. APL

FACTS: On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to rationalize wages
throughout the Philippines, Republic Act No. 6727 created the NWPC and the RTWPBs of the different
regions.

Article 121 of the Labor Code, as amended by Section 3 of Republic Act No. 6727, empowered the
NWPC to formulate policies and guidelines on wages, incomes and productivity improvement at the
enterprise, industry and national levels; to prescribe rules and guidelines for the determination of
appropriate minimum wage and productivity measures at the regional, provincial or industry levels; and to
review regional wage levels set by the RTWPBs to determine whether the levels were in accordance with
the prescribed guidelines and national development plans, among others. On the other hand, Article
122(b) of the Labor Code, also amended by Section 3 of Republic Act No. 6727, tasked the RTWPBs to
determine and fix minimum wage rates applicable in their region, provinces or industries therein; and to
issue the corresponding wage orders, subject to the guidelines issued by the NWPC. The RTWPBs were
also mandated to receive, process and act on applications for exemption from the prescribed wage rates
as may be provided by law or any wage order.
Consequently, 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 P223.50/day. However, Section 2 and Section 9 of Wage
Order No. NCR-07 exempted certain sectors and industries from its coverage:

Under Section 2, the adjustment in this Order does not cover the following:Agricultural Workers
(plantation and non-plantation), cottage/handicraft industry, private hospitals with bed capacity of 100 or
less, and retail/service establishments employing 11-15 workers and employing not more than 10
workers, and workers in small establishments employing less than 10 workers.

Under Section 9, distressed establishments, and 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 their non-coverage by the wage adjustment, the Alliance of Progressive Labor (APL)
and the Tunay na Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with the NWPC assailing
Section 2(A) and Section 9(2) of Wage Order No. NCR-07. They contended that neither the 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.

NWPC upheld the validity of Section 2(A) and Section 9(2) of Wage Order No. NCR-07. NWPC denied
the appeal of APL and TNMR for its lack of merit. The NWPC took cognizance of the precarious situation
in the Philippines in 1997 because of the Asian economic turmoil that had prompted the RTWPB-NCR to
issue Wage Order No. NCR-06 to prescribe a staggered amount of wage increases for the said exempted
workers. It noted that the effects of that economic turmoil were still felt in the NCR when Wage Order No.
NCR-07 was issued and the said order was only temporary. On appeal, CA 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;
and declaring Sec 2 and 9(2) of the wage order null and void. Hence, the petition.

ISSUE:

WoN the RTWPB-NCR had the authority to provide additional exemptions from the minimum wage
adjustments embodied in Wage Order No. NCR-07;

WoN Wage Order No. NCR-07 complied with the requirements set by NWPC Guidelines No. 01, Series of
1996.

RULING: The petition is meritorious.

1.) Indisputably, the NWPC had the authority to prescribe the rules and guidelines for authority to
prescribe the rules and guidelines for the determination of the minimum wage the determination of the
minimum wage and productivity measures, and the RTWPB-NCR had the power to issue wage
orders.

SECTION 2. CATEGORIES OF EXEMPTIBLE ESTABLISHMENTS (NWPC Guidelines No. 001-95)

Exemption of establishments from compliance with the wage increases and cost of living allowances
prescribed by the Boards may be granted in order to (1) assist establishments experiencing temporary
difficulties due to losses maintain the financial viability of their businesses and continued employment of
their workers; (2) encourage the establishment of new businesses and the creation of more jobs,
particularly in areas outside the National Capital Region and Export Processing Zones, in line with the
policy on industry dispersal; and (3) ease the burden of micro establishments, particularly in the retail and
service sector, that have a limited capacity to pay.
Pursuant to the above, the following categories of establishments may be exempted upon application with
and as determined by the Board, in accordance with applicable criteria on exemption as provided in this
Guidelines; provided further that such categories are expressly specified in the Order.

1.Distressed establishments

2.New business enterprises (NBEs)

3.Retail/Service establishments employing not more than ten (10) workers

4.Establishments adversely affected by natural calamities

Exemptible categories outside of the abovementioned list may be allowed only if they are in
accord with the rationale for exemption reflected in the first paragraph of this section. The
concerned Regional Board shall submit strong and justifiable reason/s for the inclusion of such
categories which shall be subject to review/approval by the Commission.

Pursuant to NWPC Guidelines No. 001-95, the RTWPBs could issue exemptions from the application of
the wage orders as long as the exemptions complied with the rules of the NWPC. In its rules, the NWPC
enumerated four exemptible establishments, but the list was not exclusive. The RTWPBs had the
authority to include in the wage orders establishments that belonged to, or to exclude from the four
enumerated exemptible categories.

On the other hand, if the exemption was outside of the four exemptible categories, like here, the
exemptible category should be: (1) in accord with the rationale for exemption; (2) reviewed/approved by
the NWPC; and (3) upon review, the RTWPB issuing the wage order must submit a strong and justifiable
reason or reasons for the inclusion of such category. It is the compliance with the second requisite that is
at issue here. 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.

2.) The Court ruled in favor of the petitioners. The wage orders issued by the RTWPBs could be
reviewed by the NWPC motu proprio or upon appeal. RTWPB-NCR had substantial and justifiable
reasons in exempting the sectors and establishments enumerated in Section 2(A) and Section 9(2)
based on the public hearings and consultations, meetings, social-economic data and informations
gathered prior to the issuance 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 the
NWPC meant that the NWPC had already given the wage order its necessary legal imprimatur.
Accordingly, the requisite approval or review was complied with.

In Employers Confederation of the Phils. v. National Wages and Productivity Commission, this Court all
too clearly pronounced that Congress meant the RTWPBs to be creative in resolving the annual question
of wages without Labor and Management knocking on the doors of Congress at every turn. The RTWPBs
are the thinking group of men and women guided by statutory standards and bound by the rules and
guidelines prescribed by the NWPC. In the nature of their functions, the RTWPBs investigate and study
all the pertinent facts to ascertain the conditions in their respective regions. Hence, they are logically
vested with the competence to determine the applicable minimum wages to be imposed as well as the
industries and sectors to exempt from the coverage of their wage orders.

Lastly, the presumption of validity is made stronger by the fact that its validity was upheld by the NWPC
upon review.

WHEREFORE, the petition is granted. The decision of NWPC is reinstated.

10. SHS PERFORATED MATERIALS vs. DIAZ

FACTS: Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and existing
under the laws of the Republic of the Philippines and registered with the Philippine Economic Zone
Authority. Petitioner Winfried Hartmannshenn (Hartmannshenn), a German national, is its president, in
which capacity he determines the administration and direction of the day-to-day business affairs of SHS.
Petitioner Hinrich Johann Schumacher (Schumacher), also a German national, is the treasurer and one of
the board directors. Schumacher is also the Executive Vice-President of the European Chamber of
Commerce of the Philippines (ECCP) which is a separate entity from SHS. Thus, the wages of SHS
employees are paid out by ECCP, through its Accounting Services Department headed by Juliet
Taguiang (Taguiang).

Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business Development on
probationary status from, with a monthly salary of P100,000.00. Respondents duties, responsibilities, and
work hours were described in the Contract of Probationary Employment.

Hartmannshenn was often abroad and, because of business exigencies, his instructions to respondent
were either sent by electronic mail or relayed through telephone or mobile phone. During meetings with
the respondent, Hartmannshenn expressed his dissatisfaction over respondent’s poor performance.
Respondent allegedly failed to make any concrete business proposal or implement any specific measure
to improve the productivity of the SHS office and plant or deliver sales except for a meagre P2,500.00 for
a sample product. In numerous electronic mail messages, respondent acknowledged his poor
performance and offered to resign from the company. Respondent, however, denied sending such
messages but admitted that he had reported to the SHS office and plant only eight (8) times from July 18,
2005 to November 30, 2005.

Hartmannshenn arrived in the Philippines from Germany and notified respondent of his arrival through
electronic mail messages and advised him to get in touch with him. Respondent claimed that he never
received the messages. Hartmannshenn instructed Taguiang not to release respondent’s salary. Later
that afternoon, respondent called and inquired about his salary. Taguiang informed him that it was being
withheld and that he had to immediately communicate with Hartmannshenn. Again, respondent denied
having received such directive.

The next day, respondent served on SHS a demand letter and a resignation letter. Petitioners counsel
advised respondents counsel by telephone that a check had been prepared in the amount of P50,000.00,
and was ready for pick-up. On the same date, a copy of the formal reply letter relating to the prepared
payment was sent to the respondent’s counsel by facsimile transmission. Despite being informed of this,
respondent never picked up the check.

Respondent countered that his counsel received petitioners formal reply letter only on December 20,
2005, stating that his salary would be released subsequent to the turn-over of all materials owned by the
company in his possession which he had already returned and which was duly received by Taguiang.
Respondent filed a Complaint against the petitioners for illegal dismissal; non-payment of salaries/wages
and 13thmonth pay with prayer for reinstatement and full backwages; exemplary damages, and attorneys
fees, costs of suit, and legal interest.

LA rendered his decision declaring complainant as having been illegally dismissed and further ordering
his immediate reinstatement without loss of seniority rights and benefits. It is also ordered that
complainant be deemed as a regular employee. On appeal, the NLRC reversed the decision of the LA.
The CA reversed the NLRC resolutions.

ISSUES:

1.) Whether or not the temporary withholding of respondent’s salary/wages by petitioners was a valid
exercise of management prerogative; and
2.) Whether or not respondent voluntarily resigned.
RULING:

1.) Although management prerogative refers to “the right to regulate all aspects of employment,” it
cannot be understood to include the right to temporarily withhold salary/wages without the consent of
the employee. To sanction such an interpretation would be contrary to Article 116 of the Labor Code,
which provides:

ART. 116. Withholding of wages and kickbacks prohibited. – It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part
of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s
consent.

 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 set forth below:

ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:

a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and 
c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.

Absent a showing that the withholding of complainant’s wages falls under the exceptions provided in
Article 113, the withholding thereof is thus unlawful.

Petitioners argue that Article 116 of the Labor Code only applies if it is established that an employee is
entitled to his salary/wages and, hence, does not apply in cases where there is an issue or uncertainty as
to whether an employee has worked and is entitled to his salary/wages, in consonance with the principle
of “a fair day’s wage for a fair day’s work.” Petitioners contend that in this case there was precisely an
issue as to whether respondent was entitled to his salary because he failed to report to work and to
account for his whereabouts and work accomplishments during the period in question.

The Court finds petitioners’ evidence insufficient to prove that respondent did not work from November 16
to November 30, 2005. As can be gleaned from respondent’s Contract of Probationary Employment and
the exchanges of electronic mail messages between Hartmannshenn and respondent, the latter’s duties
as manager for business development entailed cultivating business ties, connections, and clients in order
to make sales. Such duties called for meetings with prospective clients outside the office rather than
reporting for work on a regular schedule. In other words, the nature of respondent’s job did not allow close
supervision and monitoring by petitioners. Neither was there any prescribed daily monitoring procedure
established by petitioners to ensure that respondent was doing his job. Therefore, granting that
respondent failed to answer Hartmannshenn’s mobile calls and to reply to two electronic mail messages
and given the fact that he admittedly failed to report to work at the SHS plant twice each week during the
subject period, such cannot be taken to signify that he did not work from November 16 to November 30,
2005.

Although it cannot be determined with certainty whether respondent worked for the entire period from
November 16 to November 30, 2005, the consistent rule is that if doubt exists between the evidence
presented by the employer and that by the employee, the scales of justice must be tilted in favor of the
latter

2.) Respondent was forced to resign and was, constructively dismissed.

In Duldulao v. Court of Appeals, it was written: There is constructive dismissal if an act of clear
discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it would foreclose any choice by him except to forego his continued employment. It exists
where there is cessation of work because continued employment is rendered impossible, unreasonable or
unlikely, as an offer involving a demotion in rank and a diminution in pay. 

What is significant is that the respondent prepared and served his resignation letter right after he was
informed that his salary was being withheld. It would be absurd to require respondent to tolerate the
unlawful withholding of his salary for a longer period before his employment can be considered as so
impossible, unreasonable or unlikely as to constitute constructive dismissal. 

Petitioners cite the case of Solas v. Power & Telephone Supply Phils., Inc. to support their contention that
the mere withholding of an employee’s salary does not by itself constitute constructive dismissal.
Petitioners are mistaken in anchoring their argument on said case, where the withholding of the salary
was deemed lawful. In the above-cited case, the employee’s salary was withheld for a valid reason - it
was applied as partial payment of a debt due to the employer, for withholding taxes on his income and for
his absence without leave. The partial payment of a debt due to the employer and the withholding of taxes
on income were valid deductions under Article 113 paragraph (c) of the Labor Code.

Respondent was constructively dismissed and therefore, illegally dismissed. Although respondent was a
probationary employee, he was still entitled to security of tenure. This means that probationary employees
cannot be dismissed except for cause or for failure to qualify as regular employees.

Respondent is entitled to other privileges as well as to full backwages, inclusive of allowances, and other
benefits. However, reinstatement is no longer feasible as antagonism has caused a severe strain in their
working relationship. Hence, separation pay equivalent to at least one month pay should be granted.
Hartmannshenn and Schumacher are only solidarily liable with the corporation for termination of
employment of corporate employees if effected with malice or in bad faith.

WHEREFORE, CA affirmed w/ modification. (COMPARE TO MILAN vs. NLRC)

In MILAN vs. NLR, an employer is allowed to withhold terminal pay and benefits pending the employee's
return of its properties.

Petitioners are respondent Solid Mills, Inc. (Solid Mills) employees. As Solid Mills’ employees, petitioners
and their families were allowed to occupy SMI Village, a property owned by Solid Mills, this was "out of
liberality and for the convenience of its employees and on the condition that the employees would vacate
the premises anytime the Company deems fit." Solid Mills cease to operate due to business losses and
sent to petitioners individual notices to vacate SMI Village. However, the petitioners refused to vacate the
said premises.

RULING: Institution of clearance procedures has legal bases. Requiring clearance before the release of
last payments to the employee is a standard procedure among employers, whether public or private.
Clearance procedures are 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.

As a general rule, pursuant to Art. 116 of LC, employers are prohibited from withholding wages from
employees. However, our law supports the employers’ institution of clearance procedures before the
release of wages. As an exception to the general rule that wages may not be withheld and benefits may
not be diminished, the Labor Code provides:

Art. 113. Wage deduction.No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except: (1) In cases where the worker is insured with his
consent by the employer, and the deduction is to recompense the employer for the amount paid by him as
premium on the insurance; (2) For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by the individual worker
concerned; and (3) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor and Employment.

The return of the property’s possession became an obligation or liability on the part of the employees
when the employer-employee relationship ceased. Thus, respondent Solid Mills has the right to withhold
petitioners’ wages and benefitsbecause of this existing debt or liability.